Posted By Chris Chiappinelli, November 21, 2012 at 1:00 PM, in Category: The Innovative Enterprise
Open innovation works best if it’s closed. This was one of the seemingly paradoxical findings that emerged from the most recent gathering of the Manufacturing Leadership Council, a network of high-level executives who meet monthly to discuss best practices for critical business challenges.
The meeting topic was innovation, and the findings were intriguing. The Council includes businesses from across the industrial spectrum, from pulp and paper manufacturers, to life sciences giants, to consumer products producers. All these executives seemed to share a belief that open innovation—the relatively new concept of manufacturers enlisting outsiders to help design products and processes—works best when it is well-controlled. In something of a rebuke to the free-wheeling nature of the crowdsourcing fad, Manufacturing Leadership Council members seem to be taking a more prescriptive approach to innovation. Instead of hanging out a virtual suggestion box, they are creating agreements with select outside parties, agreeing on the terms of the relationship, and setting a narrow focus on a particular outcome.
One global pharmaceutical company, for instance, practices a blended model of innovation, with approximately half of its product development delivered by partners outside the four walls. Yet nothing about that innovation process is willy-nilly, the company’s collaboration leader said on the call. The company always “know[s] what the destination looks like,” he said, and lays out a plan for what it wants before initiating any outside action.
Another Council Member said his CPG company is moving to a more open innovation model, and that doing so has increased the velocity of its product development. Whereas at this time last year, the company had approximately four new products in the pipeline, this year it has 50. Still, that accomplishment was as much a product of setting the proper ground rules as it was of opening the company to outside ideas.
“If you can get the governance structure clear, the speed of innovation can accelerate quickly,” the CPG executive said.
Key to such governance is the question of which company owns the innovations that arise from the partnership. A Council Member from the pulp and paper industry said that in her company’s relationship with a Fortune 50 CPG manufacturer, it was critical for the partners to establish ownership early on in the collaboration. She also cited her company’s collective imagination as critical to developing new applications of its core competencies. Truly innovative companies, she said, plot out business opportunities on near-term horizons (horizon 1) and longer-term horizons (horizons 2 and 3). The possibility of space tourism taking off might be horizon 3, she said—out where various megatrends are shaping the distant future.
“As you expand into whitespace,” she added, “you assess your core competencies, and you figure out where those can apply beyond your traditional markets.”
That means thinking both short-term and long-term, and spreading the innovative thinking around.
“We have a lot of irons in the fire for every one that we make work,” she explained.
In short, Council Members offered several key insights for manufacturers eager to improve their innovation processes:
- The speed of new product development will increase if a company opens its innovation process to outsiders, but:
- Open crowdsourcing has limited value. More targeted innovation projects, with established partners, tend to produce better results.
- Successful companies explore both near-term consumer tastes and far-off megatrends for product development opportunities.
Manufacturing executives interested in attending the next conference call of the Manufacturing Leadership Council can request information here.
Written by Chris Chiappinelli
Chris Chiappinelli is the online research manager for Manufacturing Leadership. He covers enterprise software, sustainability, economic trends, workforce issues, and emerging technologies.