Open Innovation – Crazy Brave, or Just Plain Smart?

Lego design

I finished reading Henry Chesbrough’s book Open Innovation recently, and I have to say it makes sense.  But it’s also a little bit scary.  Here’s why.

Innovation is a balancing act.  It’s a balance between creating a great idea that could change the world with creating an idea that can actually be implemented.  It’s about spending cash to develop that idea, with preserving some of that cash for the long and winding road that’s yet to come.  And it’s a balance between keeping an idea secret for a time and sharing it so that others can help make that idea even better.

And it’s this last balancing act that can lead to problems.  I’ve been in a number of situations where the balance has tipped too far towards the secrecy side of things that there is a real reluctance to bring new people in on the idea at all.  Perhaps even worse is the situation where the innovator has become so convinced that they are the only ones that can solve the problem that they actively discourage ideas from others, even within the same company.

I guess another motivation for not wanting to bring others in on an idea is that it’s much easier to innovation in private, where no one can see you fail.  It’s pretty well recognised that failure is a big part of learning, particularly when it comes to innovation, but it’s not always an easy thing to accept that as an individual.  Your competence is on the line, perhaps your reputation and definitely your pride.

So the idea of Open Innovation can be a bit scary.  If you’re not familiar with the concept, Open Innovation involves partnering with others to give life to an idea.  Among other things, this can involve sourcing ideas from the outside, on the basis that not all the smartest people work for you.  It takes a really pragmatic view of the creative process and promotes an agnostic approach to sourcing ideas.  That is, it doesn’t matter where an idea comes from: if you can find it, and use it, then don’t bother creating it yourself.  And you don’t need to totally own an idea to benefit from it.  There’s lots of other ways to extract value from the ideas of others.

Open Innovation is often contrasted with the process of industrial innovation that dominated the 20th century.  In that distant past (!) large corporations owned ideas, from basic research all the way through to commercialisation and sale.  It resulted in some truly brilliant outcomes, but it also restricted the range of innovations that could be created.  After all, when innovation involves the combination of existing ideas in novel ways, why would you restrict the range of ideas to the ones you can generate yourself?  If we all behaved that way, Steve Jobs may never have breathed life into the mouse (amongst other things) by licencing the idea from Xerox!

So Open Innovation makes sense.  Why recreate the wheel when you can licence the idea from someone else?  And you see some great ideas coming out of this approach.  My favourite is Lego.

Lego has had its ups and downs, but one turning point for them was the release of the Mindstorms range of modular, programmable robotic Lego.  When they released Mindstorms, they found that people started hacking the basic code.  Initially that concerned them, but they soon realised that this hacking was creating features that Lego’s development team hadn’t even thought of themselves.  And it made the product better!

This was a serious learning event for Lego and led to some really interesting approaches to innovation.  At one stage Lego would let anyone create a new Lego design and they would build, package and ship it to you.  That was probably unsustainable, but what that program morphed into was the Lego Ideas program. This program allows anyone to design new Lego products based on existing Lego pieces.  These designs can be posted onto the Lego Ideas website and if they receive 10,000 votes, Lego will put the idea into production.

The brilliance of this approach is that it leverages the creative minds of millions of Lego fans around the world, a much more powerful proposition than the limited capacity of their own design teams.  It also ensures that there’s a market for a new idea before it goes into production, really de-risking the product development process.  Quite frankly, that’s both incredibly smart and just outright cool!

But that sort of approach is also pretty brave.  You need to be able to acknowledge that you aren’t the smartest person around (ouch!), that you don’t have all the answers (ouch!) and that you may need to share your idea to really give it wings (scary…!).  To a lot of people that may not sound like a big problem at all, but let me tell you, I’ve seen plenty of examples where that kind of openness to outside ideas simply wouldn’t only not be accepted, but it would be actively discouraged!  Even worse, I’ve seen situations where a company actively rejects the ideas of new employees, simply because they thought they had all the answers already.

As always, I try to think how these ideas would work if I were in the driver’s seat.  In this case that’s pretty easy, as I have a start-up and there’s no way I can bring the idea to market without using other people’s ideas. But it’s still a little confronting.  But open innovation makes sense to me (and to Lego!), but sometimes it can feel crazy brave to share your idea with the world before you’re convinced it’s even ready for to be released into the wild…

My Start-up Journey – Episode II

Startup Journey

Last week I kicked off this series of blog entries about a start-up I’ve created with a co-founder. The idea is to share what I learn on the journey, but before I start doing that, I’ll provide some background to the venture.  That way, future blogs will make a little more sense.

The idea for the start up had been rattling around in my head for over 20 years. Or to be more precise, the problem that led to the start-up product had been rattling around in my head for 20 years.  What changed more recently was that all of a sudden the problem could be solved in a much more elegant way  than it could two decades ago. Back in the 1990s I had a hardware solution in mind, but it was clunky and only solved the problem indirectly.  However, last year I realized that I could solve it through a combination of hardware, software and some smart analytics, all wrapped up into a package that I think will solve the  same problem for other people as well.  And in fact, my rather unscientific survey of friends, associates and other random people suggests that not only is this the case, but the number of people for whom it may solve the problem is big enough to support a business – or start-up in the entrepreneurial vernacular.

So that’s a good start, yes?  A realizable idea and a target market that just might be interested enough to buy it in volumes that make it commercially viable. Cool!

That was the easy part thought, the ‘ideation’ as it were.  Given that I know very little about hardware, or software, but something about the analytics, I needed to find someone to help bring the idea to market.  This, then,  presented me with my first significant decision; whether to find a co-founder, or simply pay someone to do what needed to be done.  The problem, of course, is that I didn’t know what needed to be done, so it could end up being a very open check book indeed. So I went looking for a co-founder to share the load.

That wasn’t an easy process though.  When I first had the idea for the product, I was lucky enough to have some people around me who had the skills I needed to get the start-up off the ground.  But skills aren’t the only thing that a co-founder needs to bring to the table; they also need to bring some passion and drive to the endeavor, otherwise they’re not really a co-founder at all.  More like an unpaid employee.  And that’s where I started – with an unpaid employee as a co-founder. That wasn’t what i needed, so I went looking for another co-founder.  Some networking led me to a suitable candidate, this time with the skills and the enthusiasm, but not the time (despite what I thought was the obvious financial appeal of the venture).  So that partnership died before it started. Finally a friend pointed me to a mutual (although old and slightly tenuous) acquaintance.  But this time it stuck.  Skills + enthusiasm + time = co-founder! And away we go!

Getting back to some of the basics of the startup, what I can also tell you is that the product could be said to be part of the ‘internet of things’; that is, it uses a wireless sensor and some smart analytics to provide decision making information to the user in a way that simply hasn’t been possible in the past. That’s kind of cool, as it’s a product of the times.

The product also has a very niche market.  This makes the potential sales volumes relatively small (although there are a number of market or product extensions that can expand this) but large enough to create a break even volume relatively easily.  The upside of targeting a niche nature is that there is no similar product out there.  There’s lots of products that almost compete with it, but not quite.  So there’s some market building to be done, but that should be relatively easy (you’ll have to trust me on that for now).

Another consequence of the market size is that it’s no Nest we’re creating here. But all going well, it will be profitable and more importantly, provide a platform for bringing other products to market. This is an idea suggested to me by an adviser to the venture and I think it’s a good one.  The first product builds a partnership, along with trust, skills, capability and a supply chain that can be leveraged into other ideas in the future. That’s the reason for the start-up’s name – Smart Sensor Technologies.  The ambition is to keep the risk low by starting with a single product, and leveraging the success of that one into others.  No success, no other products.  Not shooting for the stars, but not a risk free adventure either!

Which leads me to the penultimate I want to make – that I am a highly pragmatic about managing risk.  I’m not a dreamer (I’m a 43 MBA/DBA educated civil engineer, in case you want to know, so I’m past wild dreams to some extent…) and while my skills and knowledge are pretty diverse, I also know what I don’t know.  Which makes me very focused on building partnerships that allocate tasks to the people best placed to execute them (or in contract jargon, passing risk to those people who are best placed to manage it).  This might reduce the portion of the pie that my co-founder and I can claim, but it dramatically increases the chances of success in my view.  In some respects, it’s the same philosophy that underpins the idea of ‘open innovation’; that is, ideas can come from anywhere and you don’t need to control them all yourself.  You’ll see this philosophy play out in all sorts of ways as this blog continues over time.

The last point I wanted to make in this post follows on from an awareness of what I don’t know (and the fact that I like to know as much about an undertaking as I can before embarking on it; go figure, I’m an engineer at heart…).  Based on this awareness and a general interest in innovation, I’m going to find and follow a road map.  At this stage, that road map is laid out in Steve Blank‘s Four Step to the Epiphany. It might not be the right map, or perhaps the best one, but it’s the one I’m going to use.  So lots of future blogs will reflect on what’s in that book and whether it’s been useful or not.  Hopefully that ties my own experience to that of others and might even provide some guidance to anyone thinking about the start-up journey themselves.  However, if you know of other, good road maps, let me know!

Till next time…