Getting Unusual Suspects to Solve R&D Puzzles

by Karim R. Lakhani and Lars Bo JeppesenFor even the toughest of R&D problems, there are often people out there with innovative solutions already on their shelves or in their back pockets. The trick for corporate executives is finding and gaining access to those individuals. Our research with a company that broadcasts technological problems into the ether—and gets back solid results—has given us a profile of the kind of people most likely to solve R&D puzzles. We wonder whether firms might be able to emulate this method to draw new insights from the talents and expertise of their own employees.A little background: Open-source software communities have shown that broadcasting technical conundrums to a broad network of individuals can yield effective solutions. Open-source problem solving has now migrated beyond software to industries as diverse as custom integrated circuits, biotechnology, pharmaceuticals, content production, and music.Our profile was drawn using data from InnoCentive, the well-known Andover, Massachusetts, company that posts corporate R&D problems for outsiders to solve, offering substantial monetary prizes. In collaboration with InnoCentive, client companies have learned to break up their problems in sophisticated ways to avoid revealing strategy and other proprietary information. In a remarkable 30% of cases, problems that could not be solved by experienced corporate research staffs were cracked by nonemployees. When we analyzed all the problems broadcast from 2001 to 2004, we found that on average, each one received detailed attention from more than 200 people and received ten solution submissions. It’s similar to what the British Parliament did in 1714 when it solicited ideas for obtaining longitude at sea and got a solution from an unknown Yorkshire clock maker, John Harrison.We were curious about today’s John Harrisons. What fields are they in? What motivates them? Could a system in which companies post their R&D problems for outsiders ultimately replace an internal R&D staff? Through our studies with Jill Panetta and Peter Lohse of InnoCentive, we found these answers:Problems should be broadcast to people in varied fields.Radical innovations often happen at the intersections of disciplines. In fact, the more diverse the problem-solving population, the more likely a problem is to be solved. People tend to link problems that are distant from their fields with solutions they’ve encountered in their own work.A pharmaceutical firm’s researchers were stumped, for instance, by the unexpected results they encountered from a toxicology test in a drug study, even after consulting with toxicologists inside and outside the company. After being broadcast by InnoCentive, the puzzle was solved by a scientist with a PhD in protein crystallography who didn’t normally encounter toxicology problems but was able to apply methods common in her field. In another case, an aerospace physicist, a small-agribusiness owner, a specialist in transdermal drug delivery, and an industrial scientist came up with entirely unique solutions to a problem in polymer science.Prizes are necessary but not sufficient.Our analysis shows that prize money is important in motivating individuals to participate—people expect financial rewards for solving corporations’ problems, and, indeed, firms must pay for solutions in order to retain the IP rights to them. But the enjoyment of taking on a novel problem is a bigger draw: We found no significant correlation between the size of the prize and a problem’s likelihood of being solved.Insiders are still important.Scientists and engineers inside the company are critically important in determining which problems should be broadcast and which potential solutions are best. And they are needed to help implement the solutions in products.Reprint: F0705H 

In Innovation, Apple Leads… But the Game’s Not Over

Posted by Jim Andrew and Hal Sirkin on June 13, 2007 11:31 AMJim Andrew and Hal Sirkin are Senior Partners and Managing Directors of The Boston Consulting Group and coauthors of Payback: Reaping the Rewards of Innovation.If you read recent cover stories in BusinessWeek and the Economist, you might conclude that Apple is the ultimate innovator. And you might be right. The company has reinvented itself multiple times and in the process has already transformed at least two industries — personal computing and digital music. What will be the impact of the iPhone? While there are no certainties, “major” seems to be a safe bet.So — is Apple’s continued innovation leadership a foregone conclusion? Not necessarily. As good as its track record has been, like every great innovator, Apple has had its share of mishaps, too. More fundamentally, our experience (as reflected in our book, Payback) tells us that there are many keys to long-term innovation success for any company — and very few organizations manage to maintain success for extended periods of time. First, innovation leadership needs to come from the very top, across generations. “From the top” isn’t a problem at Apple — obviously. But Apple will have to face the generational challenge at some point. Steve Jobs has been in charge for virtually decades. Who are the other Apple innovation leaders? How will a future, Job-less Apple continue to innovate at the same high level?Long-term innovation leaders make sure that the entire organization is aligned to support innovation. Again, no problem for Apple right now — but it’s easy for organizations to get out of alignment, slowly, incrementally, as other goals and priorities creep in. As long as Jobs is firmly in the saddle and the product set stays limited there’s less cause to worry — but with other leadership, and as Apple acquires more partners with agendas of their own, and the product line continues to extend, the focus may soften.Finally, long-term innovators are humble. They’re always looking out — watching competitors, listening to customers, picking up on trends — and finding ways to turn ideas into cash payback, which is the real test of innovation success. And innovation isn’t just about ideas — it’s about using ideas to generate incremental profit. Any company that falls in love with its cover stories — and with its ideas as opposed to its execution — is in danger of becoming an innovation also-ran. So far, Apple has successfully avoided this but it’s happened before — just ask any number of formerly “great innovators” who have fallen from grace. So, best of luck, Apple — but be careful out there. 

A Buyer’s Guide to the Innovation Bazaar

Key ideas from the Harvard Business Review article by Satish Nambisan and Mohanbir Sawhney

The Idea

It’s smart to look outside your organization for sources of innovation. But the prevailing methods present unattractive trade-offs. For example, shopping for raw ideas costs less, yet it’s riskier and lengthens your time to market. Shopping for market-ready products (for example, through an acquisition) gets you to market faster, but it’s expensive.What to do? Nambisan and Sawhney recommend adding a third approach: shopping for market-ready ideas. This method falls between the two extremes of shopping for raw ideas and market-ready products. To use it, find an innovation capitalist firm to identify commercially viable ideas and to refine them so you can evaluate their manufacturing feasibility. Innovation capitalists reduce your risk by spending their money to develop a promising idea. And they help you avoid the up-front costs of acquiring fully baked products.Expand your shopping strategies, and you get first dibs on the most exciting ideas percolating outside your firm—without paying top dollar.

The Idea in Practice

Nambisan and Sawhney offer these suggestions for skillfully sourcing external innovation.Choose the Best Approaches to Outside InnovationYou don’t need to—and you shouldn’t—rely exclusively on one approach to source external innovation. Blend approaches based on your industry and company’s circumstances. To identify the right mix, locate where your company falls relative to factors like those listed in the left-hand column. Notice where your responses cluster.Use an Innovation Capitalist to Find Market-Ready IdeasHave you decided to shop for market-ready ideas? If so, build a productive relationship with an innovation capitalist firm through these means:• Understand its role. Innovation capitalists identify ideas with commercial potential through word of mouth. They chase down inventors behind the ideas, negotiate partial ownership of ideas, and fund ideas’ development. Throughout, they draw on their deep industry knowledge and maintain a sharp market focus. They then offer the fully developed product concept to interested companies. For their contributions, they share the revenues their client companies get from commercializing the new products. • Nurture a long-term, trusting relationship. Innovation capitalists contribute a unique combination of industry, market, networking, and innovation-management skills, as well as assume some development risk. To capitalize on their talents, share information about your innovation priorities, business goals, and internal processes. The more they know about you, the more they can offer value that complements your capabilities. • Educate your internal units about innovation capitalists. When internal units—particularly R&D—understand innovation capitalists’ unique role, they’re less likely to experience the “not invented here” syndrome.