BT Innovation Journal - Current Volume


Innovation at the Speed of Life

Matt Bross - CEO BT Innovate and BT Group Chief Technology Officer


If you feel the world is spinning faster these days, you certainly are not alone.The pace of change is accelerating all the time.

Even in the world's wealthiest countries, it was at least 50 years before the majority of homes were receiving electricity from a main power line.[1] When broadband came along, similar levels of take up were achieved in some countries in less than a decade.[2]

But even these rates of adoption pale into insignificance compared with those for the latest online services. In Korea, Rep., for instance, the Cyworld social networking site counted "almost every Korean in their 20s" among its subscribers by 2005, according to its founder, Yoo Hyun-oh.This astounding achievement took little more than five years.[3]

It is the same story all over the world. Once they have captured the public's imagination, innovations spread like wildfire. It's dizzying, and so too is the rate at which new ideas are reaching market. And innovation is no longer just about new technology. Indeed, innovations in the way firms do business can have a bigger impact on their success than new technology alone.

Whatever its focus, however, innovation is essentially a chain reaction. From the beginning of time, every advance the human race has made has inspired others.

Consider the telecommunications industry, for instance. Oersted's discovery that a wire carrying a current could deflect a magnetized compass needle led to the invention of the electric telegraph.The telegraph led to the phone, which made it much easier for a head office to coordinate the efforts of teams in different factories and offices. In doing so, it paved the way for the multinational, multisite organizations we are familiar with today. It's the same today, but globalization and technology have come together to accelerate every step of the process, stimulating the creation of new ideas and speeding them on their way to market.The ideas then trigger a new cycle of innovation-one that may well progress at an even faster rate.

The result is an explosion of creativity that shows no sign of coming to an end-the Innovation Big Bang, a unique event in human history.[4]


1. The Innovation Big Bang

The past decade has seen tremendous progress in many different areas of information and communication technologies (ICT).The increases in the power of microprocessors, the capacities of disc drives, and the bandwidths of data networks are examples. In each case, performance has advanced at an exponential rate, making a whole lot more possible.

Now imagine each direction of progress as a vector whose length defines what is possible. Imagine further that the set of vectors is arranged as the radii of a sphere of possibilities.This is where the combined impact of all the separate advances becomes obvious. If each radius were to grow by a factor of 10, the sphere that defines what is possible would grow by 100,000 percent!
Depending on how you look at it, this explosion of possibilities presents the world's corporations with one of two things: a major headache or a tremendous opportunity.

Traditionally, firms depended on their in-house research and development (R&D) departments for new ideas and to drive those selected for deployment through to market. Often, these departments were shrouded in secrecy.To maintain the corporation's competitive advantage, ideas had to be kept confidential until they were adequately protected by intellectual property rights, or until products or services were launched. Strict "need to know" policies operated within firms and few outsiders ever got involved.Those who did were required to sign comprehensive nondisclosure agreements up front.

One result of this approach was that the pace of innovation was limited.With fixed team sizes and budgets, only a certain number of ideas could be worked on at any one time. Inevitably, this favored larger firms that could afford to spend more on R&D.
Another-and perhaps more troubling-result was that firms could find it difficult to think "out of the box." Closed communities tend to focus in on themselves, sometimes even developing their own languages to describe technologies or ways of working.This further isolates them from the world at large.
Those managing internal R&D teams can also face a conflict of interest.The budgets on which they depend may come from those whose views and policies need to be challenged. Under those circumstances, it should be no surprise to find in-house researchers who are reluctant to challenge established wisdom, even when that is the right thing to do. Instead, they water their ideas down or hold them back to avoid upset.

These are not new issues, of course.Where they've existed, they have always hampered creativity and weakened competitiveness. Historically, though, the consequences have not been that severe. Research by McKinsey in the 1980s, for example, found that companies that were three to six months late to market could see their profits reduced by between 10 and 33 percent. Although clearly a cause for concern, there was no suggestion that the delays might bring firms to their knees.
The Big Bang has changed all this forever. As far as innovation is concerned, the room for poor performance is already small, and it's vanishing fast. Firms that have too few of the right ideas will soon find business ebbing away. So too will businesses that are slow to turn their ideas into marketable products and services.

The photography industry has provided a graphic example of the consequences.There, makers of film were surprised how quickly digital cameras sold, and how soon people took to swapping photos online.They were not prepared for the new era, so their sales plummeted. Only swift and radical change prevented the firms' collapse.

2. Innovation at the speed of life

The experience of the photography industry also highlights the opportunity the Big Bang has created. If you have a winning idea and can get it to customers quickly enough, the market could well be yours for the taking -even if it's dominated by firms from a completely different industry than your own.

The problem, unfortunately, is that any lead might be short lived. New ideas can come from anywhere at any time-that is, after all, how you "stole" the market in the first place. Add to that the fact that it is getting easier and easier for firms to clone their competitors' products, and it is clear that having one or a few winning ideas is going to be far from good enough.To take and hold the initiative, you need a pipeline that can pour innovations onto the market at what, by yesterday's standards, would be a blistering pace.You may only have a few weeks', or perhaps a few days', head start on your competitors, so there is no chance at all to stand still.

The ideal would be to be able to innovate at the speed of life-that is, to be so at one with your customers' thinking that you consistently deliver the new products and services they are looking for at just the moment they need them, and ensure there never is a gap between what they ask for and what you offer.And what matters is the speed at which customers are able to improve their personal and professional lives, not the speed at which new technologies become available.
As far as customers are concerned, genuine innovation happens only when their daily lives actually get better or their firms achieve greater success as a result.

This is an ideal, of course-a level of performance a business can approach but will never reach. But it is impossible for firms even to get close if they use traditional methods of innovation.To aspire to match the speed of their customers' lives, firms must innovate the way they innovate.

3. Open innovation

Now that the innovation genie is out of the bottle, firms have little alternative but to change their approach.
Those who get it right will reap big returns. According to Arthur D. Little,"Top innovators have 2.5 times more sales and get more than 10 times higher returns from their innovation investments."[5]
But how exactly can firms transform their innovation processes to deliver the throughput they will need in the future?
The answer varies from industry to industry, and from business to business. Central to the success of many firms to date, however, has been the concept of open innovation.

In open innovation, firms invite people from outside their traditional R&D teams to take part in the innovation process.They may be people working in other parts of the company-in sales, marketing, or customer support, for example.They could be university researchers and academics, business partners or suppliers.They could even include the firm's customers and the public at large.
Equally, adopters of open innovation recognize that there are more ways of getting returns on their innovation investment than turning them into products and services or using them to improve their own efficiency. Ideas that are good but don't have a role in their own business can be licensed to other firms, used as the basis of spin-out companies, and so on.

Businesses have been doing such things for many years, of course. Suggestion schemes are hardly new, and firms often trade intellectual property or work together to exploit new opportunities. But it wasn't until Henry Chesbrough established an intellectual framework that brought the elements of the approach together that open innovation attracted significant attention.
Chesbrough is now executive director of the Center for Open Innovation at the University of California at Berkeley, a part of the university's Haas School of Business.While studying Xerox's failure to reap the benefits of ideas pioneered at its Palo Alto Research Center (XEROX PARC), he recognized that this had not been the failure of management that many had suggested. Rather, it was the result of the company's use of the traditional, closed approach to innovation. Like others, Chesbrough noted,"it sought to discover new breakthroughs; develop them into products; build the products in its factories; and distribute, finance and service those products-all within the four walls of the company."[6]

In contrast, open innovation engages a much broader community in the creation and development of ideas, and exploits many more routes to get innovations to market and generate returns.
As Joel West, associate professor at San Jos� State University's College of Business, has noted:"Open innovation means treating innovation like anything else-something that can be bought and sold on the open market, not just produced and used within the boundaries of the firm."[7]
At first sight, this definition looks simply to bring together all the different forms of relationship corporate R&D departments have developed and used to advantage over the years and put them on a more formal footing.
In doing so, however, open innovation has opened the minds of executives all over the world to the possibilities. Why limit suggestion schemes to your employees when you could ask your customers for ideas as well? Why cling to intellectual property you don't have a use for when others could be making money from it and giving you a share of their profits? Once you recognize that innovation is a commodity you can trade, there are all sorts of options to explore.
The question, of course, is whether the business case holds up. Is there money to be made from open innovation?

This is where the move online has had a huge impact.The Internet makes it easy to involve many, many more people in the innovation process-not just business partners and universities, but people companies don't know and have never met. Crucially, it allows this to be done at an acceptable cost. It is this that has taken open innovation that vital stage forward-from being just an idea to being an idea whose time has come.
Toronto-based mining company Goldcorp Inc. provides a dramatic example of what has become possible. Chairman and CEO Rob McEwen was frustrated by the failure of his in-house geologists to find significant new deposits of gold on the firm's 55,000 acre stake in Red Lake, Ontario.The answer, he decided, was to see if anyone else in the world could do better.

To do this, Goldcorp had to take the radical step of making confidential geological data available to outside "prospectors."When the Goldcorp Challenge was launched in 2000, more than 1,400 corporations, consultants, agencies, and universities from 50 countries downloaded it to begin their virtual exploration.
The Challenge's judges were astonished by the creativity of the entries.The winners-Fractal Graphics of Perth, Australia-had worked with Taylor Wall & Associates from Queensland to build a 3-D computer model of the mine and identify probable deposits.The innovative approach worked: by 2002, Goldcorp had drilled four of the winner's five top targets and had struck gold every time.[8]
Others who have benefited by adopting open innovation include the food company Kraft; oil, gas, and chemicals business Shell;[9] aircraft maker Boeing;[10] car maker BMW; electronics giant Philips;[11] and ICT companies such as BT.[12]
BMW is one of many companies to post challenges on its website, enlisting the help of customers and others in coming up with solutions. It received thousands of responses after making a toolset available that allowed customers to design features for cars of the future. Some of those ideas have since been implemented.[13]

Another company to take this approach is Kraft. Its "Innovate with Kraft" website openly welcomes ideas from the public, offering rewards up to US$5,000 for those selected.The first product to reach market as a result of the scheme combined a block of Parmesan cheese with a disposable plastic cheese grater.The idea was submitted to the American firm by a small grocery store in Italy. Open innovation also led Kraft to launch the first-ever microwaveable hot dog and bun.[14]
As Kraft's example demonstrates, open innovation is not just about making big advances. Small ones can just as easily create good revenues and competitive advantage. Nor is open innovation restricted to the areas typically associated with corporate R&D departments- new technologies and their application, for example.

Firms can apply the approach right across their activities, from technological innovation to the delivery of customer service.
And customer service is one of a broad range of areas in which telecommunications company BT has been using open innovation to drive itself forward.The company designed its My Customer program to focus its employees' attention on the importance of customer service and make it clear that everyone in the company has a vital role to play-not just those who work at the customer interface. Each year, a tournament called the Challenge Cup is organized to encourage people from diverse backgrounds to come together and generate ideas that will deliver improvements. In 2006, more than 2,500 people from every part of the company took part in the 319 teams that submitted entries.

Like the other forward-looking companies that have adopted open innovation, BT has been delighted with the results. In addition to achieving advances that have improved customer satisfaction, it has brought many new products and services to market. And to take things further, it has launched a software development kit that puts the opportunity to innovate directly in developers' hands, which has been downloaded more than 3,000 times so far.[15] Taken together, innovations brought in from suppliers, partners, and academia contributed around £ 500 million in potential new product and service revenues between 2002 and 2006.[16]
Little wonder, then, that few regard open innovation as hype. A 2006 survey by the Research & Technology Executive Council found that three-quarters of respondents felt expectations of the approach were realistic or too low.[17]

4. ICT: Fueling open innovation

A feature of open innovation-especially when it is enabled by advanced ICT-is that it has changed how the innovation process works. Ideas no longer flow step by step from research through development and engineering to delivery. In open innovation, the process is generally much more iterative, with users and/or customers being involved at as early a stage as possible so their views can help shape the eventual solution.

Research conducted by Mark Dodgson, David Gann, and Ammon Salter of Imperial College, London, suggests that open innovation involves three overlapping activities.They call them "Think,""Play," and "Do."[18]
Think is the creative process-the activity that generates ideas and finds answers to problems. Play involves the use of rapid prototyping and similar techniques to get feedback from users and/or customers very early in the process. And Do is about making the innovation real- building the version that will be taken to market.

Whether or not you agree with their analysis, it is clear that ICT is playing a central role in broadening participation in the innovation process and accelerating each of the activities involved.

Enabling participation

Something that great innovators have in common is their breadth of knowledge. Because their thinking is not constrained by the artificial boundaries that define subjects such as physics, chemistry, biology, engineering, or the social sciences, they can draw on their understanding of one area to create advances in another.
The same is true of other, perhaps less prominent, people. Studies of scientists and engineers, for instance, have shown that those with access to the widest variety of information are the most creative.[19] This stands to reason: if innovation is a chain reaction, the more ideas someone is exposed to, the more he or she is likely to generate.

In this context, the World Wide Web has had a major impact in enabling many more people to access information and encounter ideas. Knowledge that was once locked up in the libraries of corporate R&D departments is now either freely or readily available to anyone who can get online, regardless of their location and, to an increasing degree, their economic circumstances. As the report produced after the 2005 UN World Summit on the Information Society in Vienna observed:"ICTs triggered the Information Revolution, dissolving the boundaries of material media and setting free human inspiration from most restrictions in form and content."[20]

Other features of modern ICT that have broadened participation in the innovation process are its escalating performance and rapidly reducing cost.When Bill Hewlett and Dave Packard decided to go into the electronics business in 1939, they needed a garage to house the equipment needed to design and test their first product. Now you don't even need that-powerful PCs and global networks serve as a global platform for innovation that is available wherever you happen to be.

In a growing number of cases, products no longer have to be built until the very last minute. Computer models can be built and simulations can be conducted to evaluate the product's likely performance. And there is no need to worry if you need access to an expensive item such as a supercomputer. Increasingly, you can "timeshare" such things over the Internet. People can use Sun's Grid Compute Utility for as little as US$1 per central processing unit (CPU) hour, for example. At that rate, a calculation that needed to use 1,000 CPUs for one minute would cost only US$17.[21]

Life-sciences company Applied Biosystems is among those to have used Sun's facility to accelerate its innovation process. By being able to access a much more powerful computing facility than it could afford to maintain itself, it was able to develop millions of new genomic assays-tools researchers use to characterize variations in human DNA-in a matter of days rather than months.[22]

Dassault, a French aircraft manufacturer, is another striking example.To accelerate the development of its Falcon 7X business jet, Dassault teamed up with IBM to create a virtual development platform that would allow the 27 partners involved in the project to work on the design of the prototype simultaneously and share information in real time. Assembly time and tooling costs were both cut by half as a result of eliminating physical prototypes.[23]

Enabling collaboration

Innovation rarely happens in a vacuum, of course. It is a social activity-even within corporate R&D departments, people like to "bounce ideas off one another," get together to "kick the tires" of their ideas, and so on.
Such interactions are routine when people are located together. But as firms use open innovation to involve more and more people in their innovation process, the likelihood that the people who need to exchange their ideas, work on designs, and so on will be located in the same premises is reducing fast. Chances are they will be on different sides of the world.

Technologies that make it possible for people to collaborate at a distance are therefore of prime importance. Significant among these are audio, video, and Web-based conferencing services; unified collaboration tools that bring such services together with email, instant messaging, and office automation applications; and wikis and other shared online workspaces.

The impact of wikis and other Web 2.0 technologies that facilitate collaboration has been dramatic. As Peter Gloor and Scott Cooper of MIT's Sloan School of Management have noted, they enable collaborations of a scale and pace far beyond what we have seen before.
These "unleash tremendous creativity, spurring exciting and valuable innovations" that extend "from the realm of idea generation and product development to the very essence of doing business."[24]

An example of the result is Wikipedia-the collective work of more than 100,000 volunteers. By September 2007, their efforts had resulted in some 8,700,000 articles in more than 250 languages.[25] True, the accuracy of some of its content is questionable. As a result of one mischievous posting, several British newspapers and TV channels wrongly reported the achievements of a prominent composer who died in 2007. But a study commissioned by the journal Nature in 2005 found broadly comparable numbers of errors in both Wikipedia and the online version of the world-renowned Encyclopaedia Britannica. Checking their entries on 50 different topics, it found 162 errors in Wikipedia and 123 in the Encyclopaedia Britannica.[26]

Creating marketplaces for ideas

The Web has also been used to create marketplaces for ideas.
InnoCentive, for example, is an online forum that gives the world's scientists the chance to earn big money by solving complex challenges posed by companies such as Dow AgroSciences, Eli Lilly and Company, and Procter & Gamble. Most challenges attract an award of between US$10,000 and US$100,000, but one-for a device that can measure the progress of motor neuron disease-is being advertised at US$1 million. Set up in 2001, the site now claims to allow companies to connect with "a global network of more than 125,000 of the world's brightest minds."[27] Similar marketplaces are operated by NineSigma and the InnovationXchange.

Yet2.com operates in a different arena. It was set up to help firms create new revenue streams by licensing intellectual property that is underused or no longer key to their own businesses. Licensees benefit by getting access to tried and tested ideas-many created by the world's leading corporate R&D departments-without having to develop them themselves.
In addition to these examples, numerous companies operate their own "shops" for ideas, often with the aim of involving their customers in the innovation process.

The websites used by BMW and Kraft were discussed earlier, for example. BT's website provides another example. In November 2007, it offered developers the chance to win £ 1,000 by creating an application for Wi-Fi-enabled smartphones based on the Symbian operating system. Applications were required to make use of the phone's Wi-Fi connection.[28]

Accelerating testing, production, and delivery

BT is also one of a growing number of companies to use its website to obtain early feedback from customers on the ideas it has under development. One service that has been on trial recently on the BT.com Beta site is BT BizBox. Developed in partnership with Tierlinear Web Applications, it provides a fully integrated suite of Web-based business productivity tools.The service offers customer and contact management tools, timesheets, calendaring and scheduling tools, and a document management system.[29]

Vodafone's Betavine website serves a similar purpose. Managed by the company's corporate R&D group, it allows Vodafone to assess the likely interest in its ideas and gain feedback on the usability and performance of alpha-stage and beta-stage prototypes.

Intel's CoolSW (cool software) website operates in a somewhat different way. Recognizing that professional pundits often get it wrong when it comes to identifying the software applications that will be biggest commercial successes in the future, the CoolSW encourages independent developers to post details of the new software available for trial.Visitors to the site are then asked to vote for their favorites. Developers gain from the feedback, while Intel gets the chance to learn about new independent software suppliers and identify promising entrepreneurs.[30]

In a very different area, book publisher Simon & Schuster has partnered with Media Predict, a company that operates a website that uses prediction markets to identify work worthy of investment and development. In Simon & Schuster's Project Publish literary contest, players were given fantasy money they could use to buy futures contracts in various projects. As in a real-world market, prices associated with the book proposals that were posted rose and fell depending on how well users thought the works would perform.This helped the publisher identify the proposals it should take forward.[31]

Such open feedback is becoming increasingly essential to open innovation.The process is harsh-a case of kill or cure-but it does identify winners quickly and drive rapid progress. By making software available through its beta test site, Internet giant Google was able to take its Google Maps application from trial to launch in just eight months.[32]

This highlights another of the benefits that ICT is delivering: reducing the costs and timescales associated with engineering new products and services and readying them for sale. A number of organizations are making it easy for people to use their applications and data as the basis of new developments, for example.Among these is the British Broadcasting Corporation (BBC), whose Backstage network allows developers to make use of the corporation's content in their prototypes.[33]
Mashups-Web applications that combine data from more than one source into a single integrated tool -are another example of how developers can get ideas to market quickly by piggy-backing on existing innovations. Wikipedia cites as an example the use of cartographic data from Google Maps to add location information to real-estate data from free-ads website Craigslist, thereby creating a new and distinct Web service that was not originally envisaged by either source.

Elsewhere, software companies now have the option to reduce the need for up-front investment in computing infrastructure by renting capacity in an operator's data center, while sites such as YouTube give new talent the same chance to access global audiences as established film makers and TV companies.

5. Open innovation: The cutting edge

Taken together, the current applications of ICT in open innovation are having a significant impact in broadening the world's innovation pipeline, accelerating the pace of innovation and giving many more innovators a chance of success.
But these are early days. Some of the approaches and applications of ICT discussed are still in their infancy, while others are far from reaching the end of their lifecycle. A great deal of progress is yet to come.

The dawn of the innovation prospector

Some progress will be achieved by increasing still further the numbers of people able to participate in the innovation process in one way or another.
Firms that adopt open innovation will, in effect become innovation prospectors.

To ensure that they can supply their customers in the future, prospectors working for oil companies and mining businesses are constantly searching for new deposits.Those who are first to identify, say, a new oil field stand to make the biggest gains. Similarly, firms that adopt open innovation are constantly looking for new sources of ideas and innovations they can tap. Communities with different backgrounds and cultures have different experiences to draw on and look at problems in very different ways, for example.The ideas they come up with often have the edge firms are looking for.

The younger generation is an obvious example.
"Generation Y"-people born between 1975 and 2000-grew up in the information age.Technology is an integral part of their lives, not the adjunct to it that it is for older generations.They are quick to adopt innovations, and they do so in imaginative-and sometimes unexpected-ways.Text messaging was originally promoted as a way for secretaries to keep their bosses up to date, for example. Some do that, but it was Generation Y that took to texting in a big way and has driven the development of advanced text messaging services.

Unsurprisingly, innovative firms have been quick to engage with these young adults and tap their brains for winning ideas. Microsoft is an example. Now in its sixth year, the company's Imagine Cup is the world's largest technology competition for students. Each year, students are asked to form teams to come up with novel solutions to a particular global issue-the competitions in 2006 and 2007 focused on health care and education, for instance-and thousands of entries are received.Those selected as winners go on to take part in the Innovation Accelerator-an intensive two-week program where students get help in turning their ideas into reality from some of the best minds at Microsoft and BT, co-sponsors of the program.[34]

No doubt Generation Z-those born between 2001 and 2021-will prove to be an equally productive source of new ideas. But the younger generations of developed societies are only some of the new sources of innovation that can be tapped.There are many living in the developing countries who will be able to make just as valuable a contribution to advancing the state of the art.
The Economist noted recently that many in China and India use their mobile handsets as their primary interface to the Internet.Their requirements may therefore be very different from those of Western users, most of whom use computers at home or work.[35] It also noted that villagers in Africa and Bangladesh have gone straight from having no phones to having mobile phones, making a big jump up the technology ladder. Such a "democratisation [of innovation] releases the untapped ingenuity of people everywhere and that could help solve some of the world's weightiest problems," it said.[36]

It is certainly the case that the unique challenges faced by the world's developing countries have inspired those from the developed world to come up with innovative solutions. Lifelines India, for example, supports the UN's Millennium Development Goal of helping developing countries become part of the digital society.
The Internet has yet to reach the more remote areas of India, depriving those who live there of access to agricultural and veterinary advice and other information that would enrich their lives. LifeLines enables them to get answers to their questions using the few landline phones that are available in local kiosks.[37]

Another project in India is I-Shakti. Supported by Unilever, it has helped women to set up information kiosks to give those living in their villages access to information for education and business purposes.[38]
Similar services operate in Africa. Sponsored by the International Institute for Communication and Development, the IKON Telemedicine Project allows people living in remote areas to get medical advice over their mobile phones. It also allows doctors in regional hospitals to get advice from senior colleagues working in cities.[39]

Another advance inspired by the problems of the developing countries is the XO-a laptop computer for use by students that costs around US$100. Developed by the One Laptop per Child (OLPC) initiative, the XO employs several radical innovations to keep costs down and address the realities of life in disadvantaged communities. One is a novel user interface called Sugar.
According to IEEE Spectrum, the OLPC team abandoned the desktop metaphor, reasoning that it is both outdated and irrelevant in societies where desks are scarce. Instead, Sugar displays a world of collaborators, clustered around icons representing work in progress.[40]

Once the communities the XO is designed to serve are online, open innovation will have many more minds it can tap-those of people whose imagination is "uncontaminated" by the ideas and solutions of the past, but who have a real thirst to advance in the future.

No doubt innovation prospectors will pursue these communities as sources of ideas and feedback as they emerge, but in doing so they should not overlook the potential of underdeveloped communities closer to home.YourEncore, for example, has built a network of retired scientists and engineers that can provide firms with the proven experience they need to accelerate their pace of innovation. It claims to be "uniquely positioned to help clients recover lost knowledge and to enable them to make remarkable connections to solve challenging problems using expertise from a variety of industries."[41]

Achieving innovation at the speed of life

Another area in which significant progress can be expected is in reducing the time it takes to get innovations to market-matching the "innovation at the speed of life" goal discussed earlier.
Bottlenecks and other problems have to be eliminated from every step-especially those that isolate people involved in the innovation process from the point of customer contact.Whether it is a clever innovation that is poorly productized, a clever product that is poorly delivered to market, or a well-delivered product from a company that cannot scale up in line with its success in the market, failures severely damage a firm's success and limit its chances of capitalizing on innovative thinking.

This is one reason why agile development methods are attracting so much interest from the software community. According to the Agile Alliance, a global organization with almost 4,000 members,"agile approaches to software development � deliver value to organizations and end users faster and with higher quality."[42] They do this by changing the entire product development process, from the identification and evaluation of new opportunities to the development and delivery of those with the best chance of success. Software developers, business specialists, marketers, and others work together throughout, focusing the full breadth of their expertise on the project such that a better result is achieved and it's achieved much more quickly.

The need for greater agility also explains the growing enthusiasm among larger firms for making resources they would once have guarded jealously available to small businesses and other innovative third parties.
Amazon and BT are among the firms that have followed the trend set by Microsoft and others to offer access to the capabilities that underpin their businesses online through software development kits (SDKs).

Amazon's e-commerce service allows developers to build novel applications that they can use to make money selling Amazon products,[43] while BT's SDK allows developers to incorporate the company's phone and messaging services in their applications.[44] BT's SDK also provides functions that developers can call on to authenticate the identities of users and manage their access rights.

Building leadership skills

Of course, open innovation demands more than new technology alone. As essential to its success will be the development of a range of new management and leadership skills.

Many of today's executives began their careers working in firms where departmental boundaries were set in stone and collaboration-even among colleagues working in different parts of a business-was difficult, if not actively discouraged. Competition was encouraged at all levels. Many companies operated internal marketplaces, for example, and the door was firmly closed between "us"-the company-and anybody outside, be they customers, suppliers, or competitors.
This couldn't be further removed from the world we live in today. Managers often have to lead teams where they are not the "boss" in the traditional sense, and they may not "own" the budget or the other resources they need to get the job done. Leaders have to be effective at harnessing the rich diversity that people from different cultures and backgrounds bring to a business, especially when it comes to understanding and responding to the needs of customers in different parts of the world.

Open innovation pushes these skills to the limit.
Those who manage the process will have to be good at marshalling the efforts of vast numbers of innovators, with many of whom they won't communicate directly or ever meet.They will need to know how to sort through many thousands of ideas and responses.And excellent negotiation skills will be essential-for example, to agree on the financial and commercial basis on which ideas can be used. Human challenges such as these are likely to be among the most difficult to solve.

6. Conclusion

There is no doubt that open innovation is the way of the future.
Looking back, it's clear how easy it is for firms to lose the initiative and sink without trace. Of the companies included in the Fortune 100 when it was first published in 1917, 61 no longer exist. Of those that remain, only 18 make the list today-and only 2 of those have performed better than the average over the past 90 years.

And it is a similar story on the other side of the Atlantic. Only 24 of the companies listed when the FTSE 100 Index was established in 1984 remain in the list today.

The Innovation Big Bang increases the stakes.To ensure that their competitiveness is sustainable and differentiable in the long term, firms must now look well beyond the limits of their own R&D departments and indeed their own payrolls.The world is full of people who are keen to offer their ideas, and firms will need to become exceptional exploiters of this immense pool of talent if they are to survive.

For those used to relying on their own resources, it is a tremendous change-both in approach and in outlook. But it is a change that offers big benefits, and not just to firms themselves. By creating opportunities for many more people to participate in the innovation process and share the wealth that is created, open innovation will help overcome the digital divide.

Notes


  1. The first electricity networks in the United Kingdom date from around 1880 (see http://en.wikipedia.org/wiki/Electrical_power_ industry). Thirty-three percent of homes had electricity in 1931 and 67 percent in 1939 (see http://homepage.ntlworld.com/ paul.linnell/sso/ssointroduction.html).Top
  2. UK Office of National Statistics, 2007, quoted in http://www.tech.co.uk/computing/Internet-and-broadband/news/ 51-per-cent-of-uk-homes-have-broadband?articleid=717937052; "Broadband Markets: Europe, Asia and North America," IDATE, December 2003, http://www.idate.fr/fic/news_telech/117/ IDATE_News_291VA.pdf.Top
  3. Cameron 2005.Top
  4. IEC 2007.Top
  5. Arthur D. Little 2005.Top
  6. Chesbrough 2005.Top
  7. West 2007.Top
  8. Australian Government 2001; Tischler 2002.Top
  9. See Shell Chemicals 2003.Top
  10. Business Innovation Insider 2006a.Top
  11. Philips Research 2004.Top
  12. BT 2006.Top
  13. Gloor and Cooper 2007.Top
  14. Business Innovation Insider 2006b.Top
  15. BT, "Web21C SDK," http://web21c.bt.com/.Top
  16. Radjou 2006.Top
  17. Research & Technology Executive Council survey, "A Crowding Market for Externally-Sourced Technology," January 2007.Top
  18. Dodgson et al. 2005. Top
  19. PKasperson 1978.Top
  20. UN 2005.Top
  21. See Sun Microsystems, "Sun Utility Computing," http://www.sun.com/service/sungrid/index.jsp. Data accurate as of November 1, 2007. Top
  22. See Sun Microsystems, "Sun Helps Genomics R & D Group in Leading Life Sciences Company Get Critical Research Tools to Market in Record Time," http://www.sun.com/customers/ service/applied_biosystems.xml.Top
  23. See IBM 2006.Top
  24. Gloor and Cooper 2007.Top
  25. See http://en.wikipedia.org/wiki/Wikipedia:About.Top
  26. Giles 2005.Top
  27. See the InnoCentive website, http://www.innocentive.com.Top
  28. See BT, "Wi-Fi Developer Challenge," http://www.groupbt.com/Innovation.Top
  29. BT BizBox, http://www.btbizbox.com/about/.Top
  30. Intel Corporation, CoolSW website, http://coolsw.intel.com.Top
  31. See Simon & Schuster 2007Top
  32. Musser et al. 2006.Top
  33. See BBC Backstage website, http://backstage.bbc.co.ukTop
  34. See Microsoft, "The Imagine Cup," http://www.microsoft.com/ about/inventors.mspx.Top
  35. The Economist 2007a.Top
  36. The Economist 2007b.Top
  37. See BT, "Lifelines India," available at http://www.btplc.com/ Societyandenvironment/Videoandaudioclips/LifelinesIndia.htm.Top
  38. I-Shakti website, http://www.hllshakti.com/sbcms/ temp1.asp?pid=46802251Top
  39. Wray and Mayet 2007.Top
  40. See Perry 2007.Top
  41. YourEncore website, http://www.yourencore.com.Top
  42. The Agile Alliance website, http://www.agilealliance.org.Top
  43. Amazon Web Services website, http://aws.amazon.com.Top
  44. BT, "Web21C SDK," available at http://web21c.bt.com/.Top

References

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---. 2006b. "Open Innovation at Kraft." June. Available at
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Wray, R. and F. Mayet. 2007. "Upwardly Mobile Africa: Key to
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