There was a time, not so long ago, that innovation was something cooked up in corporate secret labs across the globe. It was all hush-hush. The internal workings were closely guarded from a perceived army of corporate spies. Unfortunately, all did not go as planned. In the end, walling up the garden kept as many good ideas out as it kept in.
“There is a realization in corporate management that the current innovation models are unsustainable, and that taking advantage of rapid development and external capabilities is critical for continued growth,” says Chris Maresca, managing partner of Concept32, a consultancy firm. Maresca is a member of Silicon Valley Innovation Executives (SVIE), a group that counts among its members a number of Global 500 companies that regularly address issues such as open innovation.
The Rogue’s Role in R&D
While many quickly point out the difference between invention and innovation (the first is something that never before existed, the later is something simply done better), it is important to point out that typical R&D departments made no such distinction. Yes, there is a wide gulf between the invention of the silicon chip and the innovation of commercially sliced bread. But both invention and innovation came under the province of R&D departments, or in its equivalent: the tiny, closed circles of company thinkers.
The trouble is that ideas, inventions, and innovations trapped in a protective silo can’t always find their true state of profitability. Take for example, the famous Post-it tale. Surely everyone knows this story: Dr. Spencer Silver, a chemist at 3M, developed a weak glue that proved to be pressure-sensitive and reusable – the exact opposite of what he set out to invent. Nonetheless, the good Dr. Silver spent the next five years or so peddling his invention inside 3M’s walls, to no avail. His appeared to be an invention without a problem to solve or a market to exploit. It wasn’t until his colleague, Arthur Fry, needed a bookmark for his church hymnal that the glue found a purpose – and the Post-it note was formed.
What is less commonly known about that innovation story is that the Post-it would not have become the market success story that it is today if 3M had not had a permissive “bootlegging” policy. Bootlegging, you see, is an unstructured, disorganized bottom-up innovation process that happens without official direction from company management but is, nonetheless, for the benefit of the company. In other words, bootlegging is innovation from outside the R&D department and beyond company dictation.
Keep in mind, 3M’s bootlegging policy aided an invention in 1968 to become a marketable product in the 1980s – way earlier than the current trends of crowd-sourcing and open innovation appeared. Tearing down R&D walls to allow innovation room to grow is no new and passing trend. However, it is becoming the rule rather than the exception.
"Modern day innovation needs to be open-sourced and collaborative to be successful in today's environment,” says Billee Howard, managing director of Allison & Partners' Brand Innovation Group (BIG), a lab-type environment that uses communications programs as an innovation for clients such as Pepsi, Samsung, DreamWorks Animation, Honeywell, Best Buy, and MasterCard.
“No longer is innovation a siloed function found at the beginning stages of the supply chain and housed in R&D; it's an attitude and intrinsic part of an organization's culture,” she says.
Does this mean that R&D departments should be dismantled en mass and the innovation process thrown into a free-for-all idea fest? Of course not; chaos does little to move anything forward. “Open innovation is a channel for input, not the channel for input,” says self-proclaimed “anti-futurist” strategist Daniel W. Rasmus, author of Management by Design. “It should be as a complement to other innovation happening inside the firm where people are much more closely tied to the technology, the mission, the constraints, etc. of the organization.”
One of the biggest pitfalls in allowing creativity-run-amok is the cost. Roland Hughes, currently president of Logikal Solutions, recalls a distant open-innovation effort in a landfill management system; it led to disastrous results. At the time, nearly every group at the company had its own PC software based IT group. Each group was tasked with innovating a more profitable company. Each group had its own set of files, servers, and its own favorite PC hacker product to churn out "solutions" in Clipper, FoxPro, PowerBuilder, Turbo Pascal, Clarion, and pretty much every other product on the market at the time, he says. “The licensing and redundancy costs were astronomical.”
Management reacted to the staggering costs as one might expect: by consolidating all the development groups and servers. They tossed many of the software packages to boot. “When they tried to curb the cost of disk storage, the new server managers went around asking who owned what directory,” explains Hughes. “If they got no response within a certain time, they backed it up to tape and nuked the tree. The tapes were recycled after four months.”
Eight months later, Hughes got a frantic call asking if he had a copy of the source code to software that he had developed months ago. “They were in the process of opening up a multi-million dollar transfer station with a completely new scale vendor and they needed to tweak the software to support that brand of scale along with the four brands it currently supported,” he said. “The source code had been in one of the directory trees which got nuked.” While the programmer who put it there was still with the company, he had been moved to a different IT area and thus didn't get the e-mail message about the directory. And a new manager apparently didn't know to ask during the turn over. “I had to recreate the software from a very old listing found on a development machine,” says Hughes.
This was only the tip of that company's problems. “All of those ‘innovative’ applications used data storage methods which couldn't be shared with any other system,” says Hughes. “Most of the jobs were run out of a desk drawer without standardized backup and recovery procedures. Worst of all, upper management, the ultimate decision makers, couldn't look at any of the data.”
The moral of the story is that while ideas must be allowed to flow freely from multiple directions, the workflow must also be managed so that good ideas are not lost and thus do make it to market – and so the company doesn’t go bust in the effort. However, management tools and policies must be streamlined and crafted in such a way as to avoid forming a bottle-neck or, worse still, a stopper for the bottle.
The Pyramid is Melting
Historically, business has been done from the top down. Management sat at the top of the pyramid; orders flowed down to mid-management and to the workers below. Ideas could be developed by those below the lofty peak, but those ideas were usually formed or pursued at the direction of senior management. That is the logic behind the extremely high pay for CEOs and board members: They are compensated for their value as idea generators.
However, somewhere along the timeline of the emergence of enterprise behemoths, the world grew more complex and flatter – meaning the world was more agile, open, and competitive. The field became favorable to nearly all competitors, big and small, thanks to new technologies. One of the many results was that the few people in the top offices of the enterprise giants were no match for the idea generating power of the masses. Making matters worse, top level managers could not see a competitive idea emerging in their arena until it was far too late. Additionally, their own ideas were closed off to the desires of the market, further shutting the company off to new revenue streams that sprung from minds outside company walls. Consider, for example, how many products today are prospering because of third-party apps and modifications.
As a result, the traditional organizational pyramid began to melt. Companies began to flatten, too, in order to leverage all the brain power within, rather than bet the future on a handful of isolated thinkers.
“No longer do we see organizations, with the exception of Apple, headed by a ‘culture of one’ despotic ruler,” explains Howard. “We are increasingly seeing the paradigm change to a ‘culture of many’ innovators.” Samsung and its team of innovators that span the globe, ranging from engineers to academics, she says, is a prime example. “This is a shift that will continue to play out until the seismic balance of power reaches its final evolution."
This shift is hard for large companies to follow; policies, practices, and traditional thinking get in the way. In attempts to repair the lost agility of these lumbering giants, management sometimes actually outsources innovation. PCDWorks (the PCD stands for Product Concept Development), a company of engineers, mathematicians and architects, is just such an “innovation for hire” company. Mike Rainone, IDSA, vice president of PCDWorks often laments in his blog as to why America just can’t seem to innovate to any appreciable degree. He frequently points to blinders built into the very conversation on innovation as to blame.
“In the minds of the svelte and young, it seems technology is only information technology: iPods, iPads, laptops, displays, and cell phones ad nauseam,” he wrote. “The concept of technology that you and I might define as the real iron that once drove this country — motors, valves, machinery, presses — that stuff that required the skills of engineers and craftspeople in this country to design and build, never seemed to cross the minds of the beautiful.”
This is, of course, the great paradox of the innovation process. Innovators tend to think in terms of whatever they are most familiar with. The creative process is then limited by the parameters they unconsciously set. You break this restriction by bringing in other people with comfort zones and interests of a different nature. Increase the number and types of people looking at a problem, an opportunity, or even just at the status quo, and true innovation will emerge because the limits are increasingly removed from the equation.
Successful innovators also tend to solve problems they encounter up close, hence the value of opening the task of innovation to every member of an organization.
“In our day jobs as design consultants for land planning and development, facility energy performance, and property renovation/adaptive-reuse, our staff regularly uncovers opportunities for innovation through our day-to-day interactions on projects,” says Derek Lunde, director of Marketing at BCRA, a design and engineering firm in western Washington State.
“Since our adoption of this new company-wide open innovation process, BCRA currently has two provisional patents on new products and services, with at least a dozen more in the pipeline to be analyzed for their market suitability,” he adds.
The value of the individual in this method of channeling creativity is not diminished by crowd-sourcing or open-innovation. Quite the opposite is true. Individuals have more voice in the process and can participate on more equal footing than their job title alone might afford. Further, individuals are both appreciated and leveraged for more than just their work personas.
“Leading organizations today are mirroring the cultural cues taking place outside the walls of corporate America and recognizing that the newly vocal and emboldened consumer is also the newly able and self-directed employee,” explains Howard.
Innovation, while not a one-man job, is not beyond one man’s reach. But it is the collective that will magnify and improve his efforts and ultimately hone the company’s sharpest competitive edge.