Will Open Innovation benefit my competitors?

by Yann Cramer

Robert Shelton published an enlightening article about the three levels of open innovation maturity. But for most companies, open innovation raises instinctive fears that their ideas will leak out to their competitors and destroy any competitive advantage they would have hoped to get from their innovation.


Three levels of Open Innovation

• Level 1: aware & adhoc - Companies are aware of the need to open up to external sources of ideas and to leverage external capabilities. They build adhoc partnerships with suppliers and customers along their tradtional value chain.


• Level 2: pro-active & systematic - Companies set up an explicit goal that a significant portion of their new developments will come from outside and they organise themselves to attract outside input. P&G's programme Connect&Develop provides a case in point.


• Level 3: confident & natural - Companies orchestrate a multilateral collaboration network (Shelton says "an eco-system") of companies and talent. They are not directly involved in all interactions that happen throughout the network. They let interactions happen in a natural way at the most appropriate level. They are confident that the value generated in any part of the network will directly or indirectly benefit the whole network and them in it.

A management-style analogy would be the evolution from directive to participative to delegative.

A question I often get is:


"How can I be sure that innovation that springs in such an open environment (Level 2 or 3) will benefit my company and not my competitors?"


The answer is time-to-market: more specifically, developing the capability and reputation for taking innovation to market faster than the competition. This comes from gradually pushing the company out of its comfort zone.

• Level-1 companies operate within the comfort zone of developing new products with their traditional suppliers and customers. They have processes and tools designed to drastically reduce risk (risk of innovation failure, risk of IP leaking to their competitors). They need to relinquish some level of control on the risks where it enables the most significant gains on the time-to-market metric.


• Level-2 companies, having efficient time-to-market processes, become the partner of choice of suppliers who want to get revenue (or recognition) as fast as possible, and of customers who want to enjoy the use of new products before their competitors. But they still operate within the comfort zone of controlling most information flows, in the sense that they are either at the receiving or at the transmitting end of information. To reach Level-3 they need to relinquish that sense of security and trust that having built that position of partner-of-choice innovation will come to them first rather than to the competition.

With innovation coming to them first and superior time-to-market processes, Level-3 companies can therefore build a significant lead to cash-in on innovation and grab market share before the pack of competitors joins in.


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

You Don't Grow a Plant by Pulling On It

by Yann Cramer

The Work Foundation published the results of an interesting study: Exceeding Expectation: the principles of outstanding leadership. Amongst the differences that make the difference between good and great leadership, I picked this distinction: Delegate task v. Delegate space for autonomy

The distinction most definitely applies to innovation leadership. You do not grow a plant by instructing it to do so, or worse by pulling on it. You do not get people to innovate by tasking them with innovating. You grow a plant by providing the Soil, the Space, the Sun... and letting it happen. You foster innovation by providing:

• The Soil - access to internal and external knowledge and experiences where people can extend their roots,


• The Space - the autonomy, as opposed to breathing down their neck,


• The Sun - letting people draw their energy from their own passions,


• The Strategy - direction and challenge.

... and letting it happen.

Great leadership in general and innovation leadership in particular call for leaders to invest their energy and trust in people, not in action lists and delegation tracking systems.


"Not everything that counts can be counted and not everything that can be counted counts." - Albert Einstein.


An executive summary of the study can be found at the Work Foundation.


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

Importance of Storytelling to Innovation

Equipping new ideas to survive the journey through the corporation

by Yann Cramer

The word storytelling immediately evokes the past: "Once upon a time" is after all how traditional childhood stories (used to) begin. But for a story to become inspirational it's got not only to be deeply rooted but also to connect with what we can do now to reach a better future.

Henry V inspires his men by telling them what, in the future, they will be able to tell their children about what they are going to accomplish today:


"This story shall the good man teach his son [...] (And) we in it shall be remembered, we few, we happy few, we band of brothers. For he today that sheds his blood with me shall be my brother."


What does this have to do with innovation?

Well, new ideas typically face a long and arduous journey through the organizations they are born into and that to some extent they need. At every turn of the road there will be a well-intentioned devil's advocate ready to deal a fatal blow, there will be legions of giant worms clustering around the idea to caution it and slow it down, there will be armies marching in a different direction and pressing more men into their ranks. There will be the nights of self-doubt when even the innovator feels like abandoning the field.

A good story is what will sustain the innovator's morale, convince people to follow, slice through the worms, and tell the devil's advocate to go to hell.

The ingredients of a good story are:

• The characters, people with qualities, limitations, a past with its successes and failures, humans rather than super-heroes
  
• A fix, a happy past that has gradually or suddenly been marred with a growing problem that is now casting too long a shadow to be ignored
  
• A dark vision of how worse the future will be if the problem is not addressed
  
• The key, the magic formula that will change the course of history
  
• A bright vision of how great the future will be if indeed we put the key to good use
  
• A road map for the next steps of the journey.

Storytelling is not just a skill for captains to inspire their troops. Individuals who want their ideas to survive the journey towards a business home where they can settle and thrive, have to get them on the back of stories that will carry them through the long and arduous journey across the corporation. And in the end,


"He that outlives this day and comes safe home, will stand a-tiptoe when this day is named... Then shall our names, familiar in his mouth as household words,... Be in their flowing cups freshly remembered."


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

Who cares if it is an innovation?

by Yann Cramer

I sometimes hear argument about whether this or that proposition represents an innovation or not: to which extent is it really new? How do we know we are the first? How different is it from this other proposition?

Who cares? If it creates value, it's worth pursuing. It may not be new-to-the-world, but if it is new-to-my-corner-of-the-world it is innovation all right.

40 years ago, in "Diffusion of Innovations", Everett Rogers described the life-cycle of an innovation as it journeys from innovators to early adopters, early majority, late majority, to finally reach laggards. As long as there is a market segment to be reached and value to be made from it, the innovation is alive and kicking. It may not be as exciting as it reaches the late stages of the journey, but innovation it remains. As a matter of fact, some small incremental innovations may have to be added to the initial one to make it more easily adopted by the late majority. For instance, while early adopters of the iPhone were prepared to put off with the short battery autonomy, the late majority will certainly require this and other teething problems to be fixed before taking the plunge.

Every second spent debating the nature of the beast is a second lost: while you talk about it, others who have a greater sense of urgency are doing it.

In "The Ten Faces of Innovation", Tom Kelley provides one of the best illustrations I have ever heard of: that of Tellme's VP of Caller Experience, Gary Clayton, receiving during a business dinner feedback from a prospect about an issue with Tellme software platform, placing a discrete phone call to his staff, and getting it fixed before dessert! Arguably such performance had never been seen by the prospect before and in that sense was an innovation in its own right, but that is not the point.

The point is: don't debate it, just do it, innovate today!


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

Amazon - Make Kindle Open Source to Beat Apple iPad

by Yann Cramer

Independent research boutique ChangeWave surveyed 3,171 consumers and found that, amongst respondents planning to buy an e-book reader in the next 90 days, a towering 40% favor Apple's iPad, with Amazon's Kindle attracting only 28%. While the marked preference for the iPad may be temporarily over-inflated by the hype surrounding its launch, there is no doubt that Apple's entry in this market is a threat to Amazon. What should Amazon's next move be?

Acknowledge. The first step is to recognise a few hard truths:

1. That the main threat is not the iPad selling better than the Kindle, but the iBook business model seriously denting Amazon's e-book retailing market share (currently estimated at 90%).


2. That in spite of its heavy investment and outstanding achievement in developing and launching the Kindle, Amazon is not an electronic goods company, let alone a technology leader.


3. And therefore that having the Kindle as one of the very few devices that can read e-books sold on Amazon will become a serious handicap to Amazon's mainstream business which is to sell books. There is no way back: the e-book market is rapidly growing and consumers will not settle for second best e-readers. If the Kindle becomes technically unable to compete with the iPad (or any other future new entrant), the barrier that Amazon has created by restricting the number of devices that can read e-books sold on its website will not hold for long.

Unlock the innovation potential of the Kindle. In a head-to-head confrontation on technological innovation, Amazon stands little chance to come on top of Apple. To unlock the innovation potential of the Kindle Amazon needs to take a path that Apple is reluctant to walk: open innovation, or, more radically, open source.

Open innovation would see Amazon orchestrate a network of lead-user enthusiasts, electronic good suppliers keen to win new business, and geeks with outside-the-box ideas. It would still require Amazon to retain a core capability to sieve, internalise, connect and integrate the input from this network, but it would tap into an enormous innovation work force that even Apple could not match.

Open source would be a more radical step. By letting other manufacturers adopt its e-book standard, Amazon would create immediately an intense competition for its Kindle but such competition would have two major advantages:

1. Growing dramatically the offer of Amazon-compatible e-book readers would push the prices down, win over new customers to the e-book technology and overall grow the e-book 'cake'. Amazon's Kindle would enjoy only a share of that cake, but it would be a share of a much bigger cake.


2. It is likely that Amazon would be able to tap into Kindle's competitors for technology improvements to be applied to the Kindle itself, therefore keep up with the pack instead of inexorably falling behind.

Even in the worst case scenario that would see this newly created e-book reader competition completely outclass the Kindle, Amazon's e-book retailing business would not be threaten but rather boosted.

The question is whether Jeff Bezos, who is reported to have invested a lot of passion and personal energy in the Kindle, can take the bold step of unleashing competition on it for the sake of reaping larger benefits in Amazon's mainstream


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

Innovation a Top 3 Priority - What about Metrics?

by Yann Cramer

According to yearly McKinsey surveys, innovation is one of the Top 3 priorities for around two-thirds of companies. It is a critical enabler of differentiation and growth. To create a sense of urgency, align individual performance contracts, and convincingly communicate with investors about innovation, companies need to assess the effectiveness of and return on their innovation investment.

A question I am often asked is:


"Sure, but what metrics can we actually use?"


Looking at it from the investor's perspective, outcome-oriented metrics focus on what innovation delivers to today's and tomorrow's bottom-line and, from there, to shareholder value:

• Revenue growth from new products/services
  
• Customer satisfaction with new products/services
  
• Return on investment (ROI) in new products/services
  
• Percentage of sales from new products/services
  
• Number of new products/services launched

What new is

For most of these metrics the company has to define what "new" means, in other words set the time period following launch during which the product will be regarded as new. Such time period may vary considerably by sector, as a function of the typical development time of products and their typical longevity in the market. For example, a pharmaceutical company may consider a product to be new up to 5 or 10 years after its launch, while a consumer-electronics company will probably regard a product as no-longer new after 1 or 2 years.


What is new

More fundamentally, the company also has to define what is new. Measuring revenue of new products and services comes straight out of the basic Management Information system. But innovation can be about process (eg a cheaper way of sourcing/manufacturing a product) or about business model (eg Apple's shift from just selling devices to selling devices and content such as music or books). Setting up the system to apply the above metrics to process innovation or business model innovation will usually require some work, but it is essential if the company wants to:

• Harness the value-creation potential of staff that are working outside the product development/marketing/sales circle (they too can create shareholder value!)
  
• Be mindful of radical innovation opportunities that new business models often provide

Driving innovation

As in most activities, there are also useful process metrics to track in order to provide levers on the outcome-oriented metrics. R&D spending as a percentage of sales will provide a measure of the investment in innovation and sustainability. It is also one of the few ratios that is typically not too difficult to benchmark against competitors.

Other process metrics include:

• Number of ideas in the pipeline
  
• Number of ideas sourced from outside the organisation
  
• Number of products/services in each stage of the idea-to-commercialisation pipeline as a percentage of the total number of ideas in the pipeline
  
• End-to-end time-to-market
  
• Time in each stage of the pipeline

These indicators will be useful to identify where the blockers are be in the pipeline and provide managers with insights into how they can make the innovation process more fluid and fast.

McKinsey Global Survey Results about assessing innovation can be found at McKinsey Quarterly.


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

What does Apple do when it all goes pear-shaped?

by Yann Cramer

Most CEOs would say that innovation is critical to their companies' success. Loads of people would like to exercise their creativity and innovate, but whether at the corporate or at the individual level, something holds everyone back: risk. "What if it all goes wrong?" This can be more or less marked depending on the degree of acceptance of trial-and-error as a learning process, but to some extent it exists in all cultures, countries and companies.

What can we do about it? There are process answers around framing the project and keeping it focused, rapid prototyping different versions of the product or piloting in the market. But most importantly there is a mindset answer which is both accept it and don't accept it.


Accept It

Forbes provides an interesting list of Apple failures: a few forgotten computers such as the Lisa, the Mac portable, the Taligent, the power mac G4 cube, and a raft of other products that most people may be surprised to hear about: the Newton PDA, the Quicktake digital camera, the Macintosh TV, the Pippin video-game console, the Motorola Rokr mobile phone/mp3 (Apple developed with Motorola).

For all its resounding successes from the Apple II to the iPhone, Apple has not been immune to failure. The difference that makes the difference is that they accept that there will be some failures along the way. They have a portfolio mindset: they continuously scan the environment, they identify potential opportunities, they try, they go for it. When it does not work they pull the plug decisively, but when it works: bingo!


Don't Accept It

Apple may have failed with the Newton, the Quicktake and the Rockr but they have remained true to their multi-media vision, they sticked to the strategic challenge they had set for themselves to get into the handheld market, and ultimately they found "the magic number" to succeed with the iPod and the iPhone.

Accepting failures does not mean accepting that these mark the end of the road. Too often, a company's response to a few innovation failures is to abandon the field and shift strategic priorities in another direction. As they do so, they actually reduce the relevance of what they have learned (or should have learned) from their failures, they land themselves in a new field where they need to learn everything, and their chances of success are actually lower than if they had sticked to their initial strategic priority.


So, accept that you will be thrown off-balance along the way, but don't accept being blown off-course.


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

Reverse Innovation a Popular Trend

The Rise of Simplicity - The Reason Behind the Success of Reverse Innovation

by Yann Cramer

Thanks to a number of spectacular successes obtained by blue-chip companies in recent years, Reverse Innovation is becoming a popular trend. Examples include GE's portable ultra-sound equipment designed in China and sold worldwide, LG's low cost air conditioner designed in India and sold worldwide, Renault's Logan low-cost model designed for Eastern European markets and now selling on Western Europe, etc.

In an enlightening article, Vijay Govindarajan outlines a historical perspective from globalisation to reverse innovation, and highlights the key driver behind this evolution: the revenue gap between developed and emerging markets. But there are other drivers that may be less visible but no less powerful.


The Road to Reverse Innovation

In his article What is Reverse Innovation, Vijay Govindarajan outlines the following historical phases:

1. Globalisation: companies designing and manufacturing in developed markets products that are "de-featured" for export to emerging markets that can't afford the fully featured original product.


2. Glocalisation: companies still de-featuring products from developed markets but now localising production in emerging markets to take advantage of lower labour costs.


3. Local innovation: companies now designing in emerging markets products that are directly suited to the local needs. (Manufacturing continues to take place locally for costs reasons.)


4. Reverse innovation: companies designing and manufacturing in emerging markets for local use AND export to the developed markets (with or without some level of scaling-up).

It is obvious that the evolution up to phase 3 is driven by the revenue gap between developed and emerging markets, hence the need to scale-down the product features and leverage lower labour costs in order to reach the emerging market affordability threshold. But something almost invisible, just below the waterline, happens during the shift from phase 2 to 3: that is the realisation that there is only so much you can achieved by scaling down.


Simplifying Does Not Necessarily Make it Simple

When the beast is too complicated - some would rather present it more positively as 'sophisticated' - getting to something that is simple enough, may require to start from scratch rather than incrementally shave off features from the beast. This is an experience we all make every so often: the need to start afresh from a clean sheet of paper. When shifting to phase 3, companies realise that the incremental cost reductions achieved by scaling down products are reaching a plateau, and they take the radical step of starting from scratch and designing afresh in emerging markets for emerging markets.


We Do Not Need All This C**p

The driver that leads from local innovation to reverse innovation is even less visible - almost taboo. It is the realisation that customers in developed markets have been stuffed with increasingly complex product features that they actually do not need! The policy has enabled companies to maintain healthy unit margins in the face of intense competition, but an increasingly powerful undercurrent in developed markets pushes simplicity to emerge as something that is not just cheaper but also more reliable, more effective, more authentic, more beautiful, in short: desirable.

This trend is now making companies who have banked their success on high cost/high margin products vulnerable to potential new entrants that would disrupt the established cost structure paradigm. The success of low cost cars in developed markets - Renault's Logan today and Tata's Nano tomorrow - is there to demonstrate that radical simplicity appeals to a significant and likely growing market segment.


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

eBay France Tackles Challenger Head-on

by Yann Cramer

Visit eBay.fr and next to the traditional eBay homepage building blocks you will see a map of France that you can browse regionally to find local ads from sellers close to your home. If you fancy something, you can then contact and meet the seller face-to-face to see the item and agree a price. This looks completely at odds with eBay's core values of driving price transparency through online auctions and virtually connecting buyers and sellers across the global village. Are eBay prototyping a new offering? Not quite. Actually, they are merely reacting to an unexpectedly powerful local threat.


What happened?

Three years ago leboncoin.fr was created after observing that, while enjoying the online access to the dozens of offers that eBay can display for any given item search, a large number of customers would prefer to physically see and try the item before buying. The start-up made the bold assumption that there is enough truly local just-round-the-corner offer to continue meet the customer's appetite for choice while addressing the need to see the item and meet the seller. In some respect it was an old idea: local free-ad newspapers have existed for decades. Leboncoin used the associating skill of making old with new to connect that old idea with the power of online technology.

Today it boasts 9 million free ads on its website and over 2 million daily visits. Google Trends rank them above eBay.fr who have felt compelled to react by copying what they see as a potentially disruptive innovation in a field they themselves disrupted more than 10 years ago to become the dominant player.

Of course the threat is only local at this time and eBay as a global coorporation remains immensely more powerful. But leboncoin.fr business model could be replicated in any country to become a major headache for eBay.


What next then?

eBay may well end up buying leboncoin.fr but it cannot kill a business model that others could then easily resurrect to meet what appears to be a genuine customer need for proximity.

So, it may turn out that - even if they did not come up with the idea - eBay.fr copying of leboncoin.fr is some sort of rapid prototyping of a business model that we will see eBay roll out globally in the months to come.


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.