NESTA Connect

Counter-Intuitive Innovation

  “The only thing harder than starting something new, is stopping something old.” Dr. Russell Ackoff

There is a small but persistent minority of people I talk to about open innovation that quickly dismisses it as obvious, usually very politely, and claim it's just what organisations have been doing for years. However the more I think about it the more I firmly believe that open innovation is highly counter-intuitive which is why it remains somewhat marginal.  To illustrate the point here are  some traits of open innovation  which often pass people by so I feel compelled to capture them in this post.

1.  Start At The End.  

Without a clear vision for the sort of relationships you're aiming for, you can forget about asking potential collaborators for their skills, ideas or resources.  You need to show that you are serious about collaboration and that means being clear about the time, money and appetite you have to see a potential partnership though to the end. We would always recommend starting at the end, with a win-win business model.

2.  Buy From Your Customers

How many of your customers are inventors too?  Organisations tend to think of customers as primarily recipients of products and services however they are often amazingly knowledgeable about your brand and sometimes it makes clear business sense to buy from them as well as sell to them. This two-way flow of value is too often overlooked.

3.  Show Not Tell

Many large organisations are trying to become open innovators by first trying to change their culture. Whilst this is rational, it rarely seems to work.  Companies will often change their ways of doing things more happily and spontaneously if they see first-hand evidence of colleagues adopting a new approach and it working.  Success sells. 

4.  You Will Never Spot a Winner.

Ok you might sometimes, but lateral leaps only become obvious with the benefit of hindsight. Some of the best collaborations we've been involved with now seem perfectly natural but I cannot stress enough the challenge it was in getting there.  Great new ideas don't actually have to make complete sense at the start.  If there's something there that's conceptually exciting there are plenty of rational process you can apply later.  Killing a good idea and new relationship off too early is a dangerously easy trap to fall into - who will ever know it would have made millions?

5.  It’s Not Who You Know, It’s Who Knows You

There is a lot of discussion about networked effects and  it's valuable to have a large, diverse and engaged network. However the real key is for people to approach you first with an opportunity before they go to your competitor. Their incentive will be financial but much more important that that is the ease with which they can find you, understand what it is you want and understand that you really would value doing business with them.   

The future of innovation is ... together

Excellent new collaborative book about the Future of Innovation where hundred of authors give their views.   Here's the link.  The plan is for this to grow into a kind of innowikki so why not submit your own thoughts?  To save you hunting high and low, here are mine!  

The future of innovation is ... together

Let’s ignore the difficulties and problems of collaboration for now. There are many factors driving businesses large and small towards corporate open innovation (COI) at the dawn of the 21st century: Innovation is expensive and outsourcing promises lower overheads; Innovation is now global and even the largest multinational corporations (MNCs) realise that their knowledge has limits; Innovation is slow and often incremental and MNCs are attracted by the possibilities of quickly side-stepping disruptive competition or colonising new markets in a kind of corporate lateral thinking; Innovation is a group endeavour and some businesses have been quick to recognise the potential of the new web based networks as humanity wires itself together.

It is fair to say that most writing on COI is from the MNC standpoint. Most small companies are not familiar with COI as a concept and don’t know where to start or how to engage with MNC’s even if they do. From the perspective of SMEs or start ups the motivations are quite different. NESTA’s P&G Open Innovation Challenge has shown us that what many small businesses need above all is a customer. And if that customer is also a business or development partner rather than a pushy venture capitalist who insists on owning a large chunk of the business, so much the better.

Trust in the future

So what about those difficulties and problems? The solutions to the problems of intellectual property are almost as numerous as the business partnerships themselves. One solution NESTA noted in its Corporate Connections programme was to ‘keep the lawyers out of the room’ for as long as possible. This approach resulted in a profitable and unlikely partnership between McLaren and NATS and contrasts with the ‘sign first, ask questions later’ approach of most MNCs. For more unequal ‘David and Goliath’ partnerships, more creative approaches to intermediation can be beneficial as can the plethora of web based idea matching services that is now emerging. The one common element here is that establishing trust among actors in the innovation process will become a much more deliberate part of innovation strategy. A side-effect of this will be the necessity for more empathy between very disparate organisations. Partnerships will only succeed if everybody can answer the question ‘why bother innovating?’ on behalf of their external partners.

Extreme collaboration

Just as the extreme sports such as wingsuit flying or BMX racing are more exciting and rewarding than their more conventional counterparts, extreme collaboration can get you further, faster. NESTA and Virgin Atlantic’s current experiment in user-led innovation in which we are encouraging users to take a stake in the outcome is in stark contrast to the usual situation in which companies get away with paying nothing for ideas. Initial indications are that this approach is paying off and that treating customers as potential business partners can work. Of course with conventional companies this sort of innovation is tough. A recent paper from Cambridge’s Institute for Manufacturing notes that implementing an open innovation strategy presents many challenges for management. Many MNC’s have a decent strategy but are struggling with attaining the more operation capabilities to match. Some large companies will also have to be culturally reprogrammed in order to enable openness and cooperation rather than encourage secretiveness and competition. They will have to look hard at how they achieve the high levels of personal commitment to a project that open innovation requires.

Innovation is the new marcomms

To conclude, I feel excited about this new phase in innovation. As open innovation moves from the margins to the mainstream it has the potential to reinvigorate all R&D and NPD activity in companies. If you’re old enough to remember how marketing became essential in the boardroom in the 1980s then perhaps like me you’ll predict a similar resurgence as innovation gets a pace a top table.

Embracing Chaos & Connectivity

I recently watched an excellent documentary on BBC4 called 'high anxieties: the mathematics of chaos' (still available on iplayer) which essentially tells 3 interwoven histories over the last 100 years or so, namely:

1. Chaos theories in mathematics
2. Economic theories and models
3. Climate change theories and models

To cut a long story short, the main message is that  we have repeatedly make the mistake of believing that the world behaves like a big pinball machine with predictable causes and effects. However in reality, mathematics and science include inbuilt chaotic behaviour which we generally choose to ignore as it's too unsettling.

More specifically, what the 3 histories show us is the following:

• The is potential for chaotic behaviour almost everywhere
• the more connected a system is, The more likely that chaotic behaviour occurs that system (be it mathematical, economic, climate etc)
• The more you drive/push/grow a system, the more likely chaotic behaviour will occur.

Now I can't see our global connectivity decreasing any time soon; in fact I think it can only increase. Therefore assuming chaos is generally something we strive to avoid/manage in economics or our climate, this suggests to me that we need to rethink our attitude to relentless growth.

Ever the optimist I believe we need to embrace this ambiguity and chaos, not ignore it, and be more wary of certainty. Perhaps we should learn to live with ambiguity from unexpected sources such as artists, the slow movement and mathmeticians. But then again i'm not certain.

What is the right size to thrive in a recession?

One of my favourite observations of the last couple of days comes from James Cherkoff who runs his own small business who asks:

"What do I say the next time my commercial bank asks for a solid business plan?"

Pot calling kettle, and all that. Anyway, the current crisis really demonstrates how everything and everybody is linked to everything else. And in particular that trust (between large financial institutions) is the bedrock upon which the 21st century networked economy is all about.

So our economic fate is increasingly intertwined with others and we are experiencing our first real networked global recession as Charlie Leadbeater says. This obviously means we have to find £400bn pounds when our banks get too creative, but it also creates plentiful opportunities if we know how to embrace them. So, ever the optimist, I am wondering whether, can we turn this to our advantage given the diversity and connectedness of the UK.

Desperation is the father of necessity (with necessity being the mother of invention) and it may well be the smaller agile businesses who can find the bigger opportunities in the next 12 months, though obviously the corporates ought to find it easier to whether the storm i.e. Small is Beautiful but Big is Powerful.

The crisis is a fascinating reminder for large swathes of the population (and estate agents) in how markets can go down as well as up, but more importantly is possibly a once in a generation opportunity to really radically redesign and rethink our politics, economics, and society for the better.

The talkoot of the town (& bothy)

I’ve recently learned of the Finnish word ‘talkoot’ (from these guys) which is described as follows:

Talkoot is the cultural equivalent of common work in a village community, although adopted to the conditions of Finland, where traditionally many families lived in isolated farms, often miles away from the nearest village.

A talkoot is per definition voluntary, and the work is unpaid. The voluntary nature might be imaginary, due to social pressure, especially in small communities; and one's honor and reputation may be severely damaged if one doesn't show up — or proves to be a poor worker.

Learning this new word immediately reminded me of when I used to live in Edinburgh, and when we had many a great trip to bothies (such as the one in the above below). Bothies are described as simple shelters in remote country (usually means at least 2 hours walk from the nearest road and certainly no electricity or plumbing) for the use and benefit of all who love wild and lonely places.

Bothies appear to me to have a lot in common with the isolated Finnish farms where the idea of Talkoot arose. There is an implicit understanding in bothies that you temporarily share the space with anybody else who may be there, and collectively work together to gather firewood, make food, clean up etc. (As an interesting aside, Euan McIntosh also used bothies as a powerful analogy of social networks back in May at Nesta’s innovation edge conference, but I won’t go into that again here.)

But why, you might well ask, am I talking about talkoot and bothies on a blog about collaborative innovation? Well as Peter Drucker says (via Euan Semple):

In a knowledge economy there are no such things as conscripts - there are only volunteers. The trouble is we have trained our managers to manage conscripts.

Organisations based on hierarchical command and control structures have proven to be very efficient for mechanistic or specific tasks but generally terrible at stimulating innovation and creativity. So in seeking to create these new organisations in a world increasingly based on ideas and relationships, which required an environment that encourages voluntary and spontaneous contributions, perhaps we have something to learn from the spontaneous and voluntary nature of both bothies and talkoot.

Video and final stab at social networks and cities

Readers of this blog or attendees at Nesta's recent events will have heard me, or others talk about the theme of 'social networks as the new cities'.

I don't intend restart this discussion again in detail but for anybody who is interested, find here a video of a talk I gave earlier in the summer at the NLab conference in Leicester, on this topic.

It's something of a stream of consciousness exploration of the subject but hopefully gives a flavour of my point of view. Namely that cities arn't just simply analogous to social networks, but rather some of the functions that cities provide (proximity, economies of scale, random interaction etc) are now increasingly being provided by social networks.

And most importantly, we are only just beginning to see the impact on our cities and places which will be profoundly impacted by the web, just as they have been historically by other disruptive technologies.

Anyway, enough on that, but as always I'd be interested in any thoughts and feedback as ever.

PS. Thanks again to Sue Thomas for curating the event and inviting me to attend.

Convergence of Media Production

Broadcasters have for years now been talking about developing content across different platforms.

When it works well - BBC's coverage of the Olympics, Channel 4's Big Art Project - it is wonderful.

But TV producers and digital production companies have traditionally faced a key barrier to innovation. Their differing business models, ways or working and the issue of intellectual property ownership have meant that collaboration to produce convergent content is more difficult than it ought to be.

NESTA teamed up with PACT to sort it out, and they have produced some useful legal templates and a guide to allow firms to contract more easily to work together.

What we'd like to know is whether they can be used outside of these media sectors. If relevant to your business, please feel free to try them and let us know?

Guide to collobaorating

Jon

The Comedy Bow-Tie of Innovation

Traditional innovation theory is full of funnels such as these. The thinking is that lots of ideas miraculously appear and then are filtered down and developed until they are successfully launched into a predetermined gap in the market.

However it is widely acknowledged that this 'linear model' of innovation is a long way from reality. See here for lots more on that. Andrew Gaule has suggested here that the model is more like a bow-tie and building on that I'd like to suggest it is more like a comedy bow tie. Confused? Let me explain.

A comedy bow tie spins around in the middle for hilarious (!) comic effect.

The Comedy Bow-Tie of innovation on the other hand is a little something like this (excuse the hand drawing but I couldn't figure out an easy way of doing spirals)

• Phase A - Lots of potential inputs. New ideas are simply recombinations of old ideas
• Phase B - Iterate furiously
• Phase C - Breadth of market applications

All a bit like a comedy bow-tie don't you think?

So to stimulate innovation one must:

1. Legitimise scanning for new ideas from unlikely places e.g. Googletime (assuming you are already scanning in the usual places)
2. Create the space to iterate - innovations never come fully formed and need to be developed and redeveloped many times. This requires time and small amounts of money e.g. Skunkworks
3. Set up a mechanism to target multiple markets, this is seldom clear early on

What do you think? Does this make sense? And can you help us find a better name?

Users, Abusers, and Cross-Cutting Networks

I attended the launch of our latest report on User-Led Innovation yesterday. The event included contributions from a number of really interesting organisations/communities such as Sibelius, Swapits, and GBADev where it's the customers/consumers/users that do much of the innovation around their respective product ranges. What is interesting about all of these examples is how people are increasingly giving away their ideas for free, either to a) address a specific need, or b) for fun, or c) for kudos; or for some complex combination of all three.

The traditional approach to innovation is to protect your ideas and create economic value from them. And yet, as access to ideas or information becomes much easier, open and free, it is the networks or communities that will become the bedrock of innovative people and organisations, not the ideas themselves. And it will be our ability, as individuals or organisations, to innovate and create value through our networks and relationships, not so much our ideas.

However the great thing about networks is also their achilles heel. Namely that their value is widely distributed. This means that it is hardly ever in one person or organisation's interest to organise them. Also, organisations are often wary of facilitating communities as it can be easy to perceive them as abusing the brand or remit of the sponsoring organisation.

Therefore, if you accept some of the above, there is possibly a role for public sector support around more cross-cutting networks, or even a network of existing networks, as others typically don't have the time, money or incentive to set them up and run them. I think Nesta already does this to a small degree but how could and should we scale this up?

Why are some companies better at open innovation?

One of the nice things about this job is discovering intermediary organisations that are working to the same ends - to understand and promote open innovation.   I was at a Global Business Partnership Alliance (GBPA) workshop  recently where we explored the statement 'Innovation in the future will demand that historically adversarial relationships be replaced by co-operative relationships based on trust and openness.' I couldn't agree more and what was interesting is that GBPA go on to define the 'vital signs' of those companies well equipped to change their behaviour.  I sum these up as a kind of 'corporate empathy' which embraces good communications skills, habitual transparency and a commitment to partners' interests that is rare in today's dog-eat-dog world.  We looked at a case study - Chrysler's well-known supplier cost reduction exercise (SCORE).  The trouble is, I'm not convinced this is truly co-operative innovation.  Chrysler gives the competing suppliers a 'choice' of passing on all savings generated or keeping half of them, with a 'bearing' on the future relationship.  Sounds like Hobson's choice to me and if you're a hard-pressed small firm the odd $5m today can go a long way.  NESTA's Open Alchemy programme is, I like to think, a bit more forward-looking as it's about future profits not past costs and it's a bit more open-minded in that suppliers such as Oracle are on a level playing field with their clients such as BT or Pfizer.