Innovation. Innovation. Innovation. We keep hearing about it, but why does it matter?
I guess we should first explain what “open innovation” is before we just dive right in. Although the idea of it dates back to the 60s, especially in terms of R&D, “open innovation” was a term recently coined by Henry Chesbrough in 2003 in a book he then wrote surrounding the concept.
It basically insists that businesses can and should use internal and external ideas to drive revenue. It’s the concept of sourcing the crowd, whether it’s through more traditional mediums of gaining customer feedback such as calling, surveys, suggestion boxes, etc. or via online social networks, software enabled technologies and so forth. It’s the idea that by gaining the input of the crowd and sourcing the customer, a business can make a product or a service better, more desirable and thus, a business more profitable and thus, successful.
And here’s why it matters:
- Research says so. Pricewaterhouse Coopers recently released its 14th Annual Global Survey, which took a close look at emerging markets, innovation, talent and globalization. With CEOs still recovering from the worst economic crisis in 75 years, a strong focus in approaching business growth in the year ahead will be innovation. Since 2007, it has been reported that the single best opportunity for growth lay in better penetration of existing markets, meaning giving customers what they want.
PwC found just that. CEOs are bringing innovation closer to their customers by giving them a say in the design of the offerings. Some call it a suggestion box, others call it crowdsourcing. Either way you look at it, it’s ultimately being coined as ‘open innovation’, meaning employees, partners and customers all have a say in the new product development process.
- The bottom line no longer matters. The best, most desirable products and services will determine the financial success and longevity of a product, a brand, a company. Today, it’s not so much about downsizing; it’s about being on top of the game, or better yet, ahead of it. In order to do that, companies need to produce products that their customers want to buy right now. The easiest, cheapest, most effective way to do that is to go to them directly and hear what they have to say. R&D is the talk of the town.
Just ask President Obama, who allocated $147.9 billion to research and development in the coming fiscal year in his proposed 2012 federal budget.
- The big shots are doing it. Apple, Cisco, VMWare, Tibco and even the City of New York have adopted ideation software like Spigit or Brightidea, Inc. to capture audience ideas, or have implemented more robust solutions known as innovation management software, like Accept Corporation’s Accept360 to help put customer ideas to good use. Companies like Starbucks, Procter & Gamble and Dell have created idea portals that allow their customer to provide feedback and so far, the results have been strong.
I.B.M., for example, conducts online brainstorming sessions it calls Jams. The company used one session to guide its strategy for investing in new growth fields. About 150,000 employees, clients, business partners and academics participated. Management sifted through the ideas and committed $100 million to invest in several opportunities to apply technology innovations to energy saving, health care, and smart electricity grids.
Making sense of ideas is a new area, but one that investors and companies around the world are finding promise in. Open innovation is no hoax. Just check out a recent article in Inventors Digest, looking at how open innovation is helping businesses get products to market smarter and faster.
To spell it out, yes, innovation is key in driving revenue; yes, engaging the customer means soliciting their feedback through open innovation; and yes, it works!
Christine Crandell is the senior vice president of marketing at Accept Corporation, which offers products to manage open innovation.