Product Development With the Help of the Web Community

September 27, 2006 by admin

Frank Piller

Frank Piller

Mr. Piller, would you say that Open Innovation on the Internet has sparked off a new trend for democratizing the innovation process?

Piller: Yes, definitely. And it is based on an ancient principle of successful innovation. Innovation comes about through the re-combining of established knowledge, often from different fields. Karim Lakhani, who is investigating the efficiency of Innocentive as part of his dissertation here at MIT, discovered that around 70 percent of all solutions submitted to Innocentive are based on existing results. And this is precisely where the difficulty lies with the conventional approach to developing innovations – people only look for solutions in the places they assume them to be. Democratizing the search for solutions by issuing an open invitation to tender in which everyone, from Nobel prizewinners to students, has an equal right to participate, removes these mental hurdles. Innocentive’s most important asset is its community. As idea brokers, the Innocentive team has spent a long time traveling all over the world, drumming up support at congresses and universities in order to establish a community that is as heterogeneous and geographically dispersed as possible. Today, an estimated 100,000 scientists belong to this community – no company in the world can afford to maintain such a huge body of researchers internally.

What is the educational background of the participants in these invitations to tender?

Piller: It varies considerably – but most of the members of the Innocentive community work in scientific fields. More than half hold doctorates.

Who decides the prizewinner?

Piller: The person who decides is the researcher who encountered the problem during his or her work. However, the remits at Innocentive are so clearly formulated that it is mostly very easy to judge from technical features who has found the best solution, or at least a solution. In order to represent the interests of the inventors too, a representative of Innocentive also sits on the decision-making committee.

From Open Innovation, it is only a small step to companies developing products with the help of their own customers – New Product Development. Does this mean that manufacturers and customers are once again communicating directly with each other about the products, like in the good old days of the corner shop?

Piller: Yes, but there is a clear distinction. Innocentive is aimed at a large group of experts rather than at customers or users of a company. Other companies, on the other hand, use their customers to obtain input for their innovation processes. The German automotive supplier Webasto is a good example of this redefinition of the customer-manufacturer relationship. Webasto has been organizing Lead-User Workshops for a number of years. By means of a questionnaire, the supplier selects suitable candidates from potential customers, for example all users of a particular model of car. The aim of this is to pinpoint users who have a particular need over-and-above that of the majority of customers or who identify a key trend, and who are also capable of working creatively with Webasto to solve the technical problem. The selected customers take part in the workshops voluntarily with no reward. They are happy that a manufacturer is making the effort to talk to them openly and take their problems seriously. Primarily, this method enables manufacturers to obtain information about newly emerging requirements which they are unable to find out about using conventional market research techniques because they don’t even know what questions they need to ask.

Is it possible to prevent submitted entries, even those that haven’t won, from being used commercially, patented as someone’s own idea or sold on?

Piller: That’s where a broker like Innocentive comes in. Innocentive guarantees anonymity to both the company looking for a solution – the client – and the parties offering solutions. It also guarantees its clients that the idea offered is the intellectual property of the party offering it before the solution is handed over in its entirety to the client, while at the same time providing a contractual guarantee to all participants that their ideas will not be made use of by others.

Isn’t it still more lucrative for someone with good ideas to secure themselves a patent rather than accepting a comparatively small amount of money anonymously from Innocentive?

Piller: Certainly. But Innocentive takes a different approach based on the recycling of established knowledge. Karim Lakhani discovered that many inventors found a solution in just a few days – and 20,000 US Dollars is still a good wage for four days’ work, particularly when the inventors come from India or China and often have no opportunity to communicate their ideas to Western companies.

In cases where customers are involved in the innovation process, frequently no money changes hands at all, like in the example of Webasto. But the trend has started to change. With the first company projects a few years ago, hardly any customers asked for payment. Now, following an explosion of competitions and some very brazen and unethical attempts by companies to appropriate customer input as cheaply as possible, the people coming up with the ideas have become more self-assertive – and quite rightly so, after all, a company pays its internal developers so why not its external ones?

Does Innocentive have a monopoly at the moment or are other companies already copying its business idea?

Piller: Overall, the Innocentive model is still unique, but there are companies with related ideas. NineSigma works in a similar way at first glance, although its main aim is to find experts. Rather than generating direct solutions, the participants demonstrate ideas that might lead to a solution. This is then developed further into a classic R&D cooperation. YourEncore is based on a network of retired experts who can be identified and integrated for short-term jobs. Ideacrossing specializes in the organization of large ideas competitions with end customers. Here too, the focus is less on concrete solutions and more on suggestions and ideas. Hyve AG from Munich, Germany, programs innovation platforms on which manufacturers can organize innovation competitions in cooperation with their customers.

And the market for these applications is growing steadily. Established companies like Audi, Adidas, BMW, Huber Group, Kraft, Lego, Procter&Gamble and Siemens are starting to set up dedicated organizational structures in order to co-develop products with their customers.

How could external and internal innovation specialists usefully share out the work in future?

Piller: Internal departments play a crucial role in another type of innovation: the quality assurance, improvement and production-ready preparation of innovative concepts. The internal research departments coordinate the whole process and search for long-term trends and developments. External sources of innovation mostly contribute other stimuli, such as ideas for functional innovations, transfer of solutions from other disciplines or ideas for adapting existing products to new markets.

Classic market research can complement Open Innovation. It can test whether ideas from innovation-friendly customers also meet with wider approval. It can also carry out tests to systematically identify lead users, recruit those users, or pinpoint general trends and developments within the industry.

Open Innovation has been called the “Ebay of ideas”. Do you see a danger of people’s gift for invention being sold off cheap?

Piller: No. History is full of examples of classic inventors in companies developing a very successful product for their employer, but never profiting from it themselves. Today’s new interaction forums allow inventors to market their ideas profitably more easily than ever before. Previously, there was practically no market for the ideas of creative individuals – today more and more companies are establishing a marketplace for these ideas. Nor has it ever been as easy as it is today to found a company. Almost all the infrastructure can be flexibly sourced online. Resourceful customers and inventors are less and less reliant on established companies – they can simply do it themselves.

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