Open Innovation: What Works, What Doesn't and Why?

On Tuesday evening this week I attended the GSB Innovation Roundtable event at the Gleacher Center in downtown Chicago. David Bayless and John Funk from Evergreen IP were there to talk about Open Innovation: What Works, What Doesn't and Why? This was an excellent event. Evergreen IP is the bridge between inventors and the large consumer products companies.

David and John talked first about general developments in Open innovation including what P&G has been up to. They then talked about some of the challenges they’ve seen in trying to work with large consumer products companies. Things like presenting a new invention after the ‘innovation’ budget has already been allocated – “Sorry, it’s not in our budget” or “Our new product queue is already full”. Or working where decision-making authority is not really delegated, or where the company does not really embrace risk. In the case of dealing with risk, they are faced with calls for more prototypes, more focus groups, or more analysis. John and David talked about other ways companies use to validate the market such as DRTV , or Pop-Up Retail, or an on-line launch. They also discussed the difficulty in getting companies to appreciate the product’s value – “The devil is in what you know.” When a product manager becomes deeply invested in the established product, it is sometimes difficult for him or her to see value in an alternative.

I had the opportunity to talk to John Funk after the meeting. Evergreen IP has looked at about 3,000 inventions in the past three years. Using an internal qualitative test, they narrowed the list down to 100 promising products. Then using a tool called Merwyn they determined that 25 of these products were worth pursuing. At that point Evergreen IP has about $1,000 invested in each of the 25. Of the 25, 23 signed a contract. Then, on average, they spend about $25,000 more doing further risk analysis looking into IP issues, manufacturing costs, market price points, threat of competition, etc.,. If the decision is to go no further, the inventor is released and gets to keep the market research gathered to that point. Currently Evergreen IP is pursuing 12 products. Of those one has an annual sales prospect of over $200 million in retail sales. At a 3-5% royalty on net wholesale revenues, that could be $3-5 million to be shared annually by the inventor and Evergreen IP as long as the patents last.
I also talked to John about the background of the inventors. Other research has suggested that discontinuous innovation usually comes from someone who is not an expert in the field, whereas evolutionary innovation comes from the experts. Consistent with this research, in the case of Evergreen IP, 10 of the 12 inventions come from ordinary people who don’t work in the product space and are certainly not experts in the field.

Interdisciplinary Product Development at UIC

A couple of nights ago I attended a University of Chicago GSB Roundtable event on an interesting Product Development curriculum offered by The University of Illinois at Chicago. Two of the professors were there, Stephen Melamed and Dr. Albert Page along with Mike Douglass from ELKAY Manufacturing Company, this year’s program sponsor. The program admits 35-45 students for the yearlong course. The students have to commit to the two semesters knowing that the amount of outside-the-classroom work would be substantial. They are divided into teams from 5-8 students mixed from the schools of Art and Design, Engineering, and Business. The students take on a product development challenge to work from problem to prototype in the 30 weeks.

The sponsor supports the program with an investment of $70k - $100k. A problem is presented to the students and they must develop products that address the problem. The sponsor enjoys all the intellectual property coming from the work of the students. ELKAY found the program so valuable they have asked to be put in the rotation to participate again.
Motorola, who participated as an earlier sponsor, has built a lovely facility for the program nearby the campus in Chicago. The professors were quite animated about the new facility, which they moved into at the beginning of the year.

Knowledge Value and Innovation.

Ongoing innovation is the key to competitive advantage. Successful great companies rely upon the ingenuity of their front line employees to produce the bulk of these innovations. The most prevalent method of innovation in business is synthesis. Synthesis uses metaphors from existing knowledge to create new solutions to problems – innovations. The source of these metaphors is a person’s broad base of knowledge. Pursuing broad knowledge that takes us in new directions can stretch the brain. This kind of exercise enhances brain elasticity. A more elastic brain is better able it is to think in new directions. People are more valuable to the firm as they build up that knowledge base, create new metaphors and keep their brains elastic.
Read more on the White Paper on Knowledge Value and Innovation.

The Information-Age is Over!

The Information-Age is over. The invention of the computer is credited with the birth of the Information-Age. But it didn’t really hit the stratosphere until the Internet became the pantry of information. And early on, that is exactly what the Internet was used for. Companies set up websites to provide information about the company. Individuals put up website that gave information about themselves or about their favorite sports team, or actor, or disease.
Today, thanks to sites like Yahoo and Google, we are using the Internet, not just as an information warehouse, but as a way to share knowledge. As a consequence, the Internet is becoming a crucial tool whenever we have a problem to solve. The most expedient way to solve a problem is to see if someone else has already solved the same problem and adopt that solution. The Internet is a great tool to get instant knowledge to help solve problems. One of humanities great instincts is the instinct to share knowledge. Google, Yahoo, Ask.com, MSN Live Search, AltaVista, and Lycos have ‘shared’ us into the Knowledge-Age.

Neptune's Children

On Friday evening Bonnie Dobkin had her first book signing for her new Young Adult book “Neptune's Children - No parents. No rules. No way out” at the Vernon Hills Barnes and Noble. She’d invited me to stop by so I did and got a copy of her book for my 12 year old. I gave it to him that night and by the next morning he came to me having been unable to put the book down and said “This is the best book ever!” He reads a lot, usually well above his grade level, and is pretty critical of his reading, so his enthusiasm means Bonnie’s book really must be very enjoyable. Way to go Bonnie!

End-of-term project presentations

On Wednesday evening this week I attended Praveen Gupta’s Innovation class for their end-of-term project presentations. Almost all of these Illinois Institute of Technology students were first generation immigrants, mostly from India, China, and Korea. Says a lot about who thinks innovation is important!

Many of the ideas presented centered around changes to existing devices such as cell phones, PDA, Music players, GPS, and remote controls. But there was also an idea to meet the need to identify financial customers remotely using biometrics, an idea for a mag-lev car, and intelligent bed, a transparent refrigerator, and since we’re just coming out of Winter, an ice-melting concept, among others.

I was one of three ‘judges’ tasked with evaluating the presentations and pick the top three. It was a tough choice since quite a few of the ideas were original, clever and insightful. But we gathered as judges outside the classroom, compared our notes and picked three. Third prize went to a technology idea, where your technology components could react to your behavior. Second prize went to an idea to create a tooth brush that would act as the controller on a game and the game would have children play by brushing different parts of their teeth, you could imagine a Nintendo Wii game. But first prize went to an idea around upgrading a universal pointing device which included a phone, a presentation controller, a remote control, and PDA, but with some cool features not found in those devices today.
Praveen gave each of the judges a copy of his book “Business Innovation in the 21st Century: A comprehensive approach to institutionalize business innovation”. It’s a perfect gift for me since I wanted to read it and our local library does not have a copy.