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Great business ideas

Dec 18 2011 11:58 *Ian Mann

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The Open Innovation Marketplace, Alpheus Bingham & Dwayne Spradlin

Imagine the difference it would make to your business if you could pay only for the results of great ideas and projects that worked rather than for the many that didn't work.

Sustaining a business is principally the act of continual value creation, and this occurs through the process of innovation. Innovation is what enables companies to maintain their competitive edge. The alternative is to be driven to compete on price, convenience, added services, or some other aspect of business.

Bingham and Spradlin’s book describes a cutting edge approach that is growing into the standard way that great organizations innovate.  The value of this book lies in the authors’ articulation and compelling promotion of a process that can be adopted by any business or organisation, of any size.

Present-day commercial innovation is carried out with an estimated 80% internal resources and 20% external ones. The costs are borne entirely by the organisation. With the advances in communication the adage that 'none of us is a smart as all of us' can been scaled up and globalised. Most of the smartest people are not in your organisation, nor can they be, nor need they be, provided you could access their input. This is where the open innovation marketplace plays its role.

At the turn-of-the-century there were only a few organisations that provided a platform for ‘crowd sourcing’ innovations. Amongst these were Hello Brain, InnoCentive, TopCoder, BountyQuest, and the not-for-profit foundation X-Prize.

What these crowd sourcing platforms are able to achieve is best illustrated by the example of the Canadian mine, Goldcorp. It had mining rights on about 55,000 acres near Red Lake in Northern Ontario, but little idea of where exactly to engage in the costly activity of sinking a mineshaft.

Founder and chair at the time, Rob McEwen, listened to the many perspectives offered by his staff on how and where the gold might be found in greater quantities, yielding a higher overall mine productivity. These conclusions were based on assumptions and models that McEwen wanted to challenge.

He had the geological survey data given freely to anyone seeking it in exchange for the hypothesis on where gold might be more prevalent. The answer that best suited Goldcorp's efforts, would receive $575,000 in prize money. The survey data was shared with over a thousand groups and individuals.

Proposals came in from all around the world. The winning entry was a collaborative effort by two groups from Australia. Their graphic method provided an entirely new perspective of the data and led the mine to become the most productive gold mine in history.

NASA's Space Life Sciences Directorate issued a public challenge to solve the problem of forecasting solar events. A semi-retired, radio-frequency engineer from rural New Hampshire contributed the best solution to this challenge. His idea on how to address this problem was so unusual and clever that NASA described it as exceeded their requirements. Just a smart person, who was paid a modest $30,000 for his insight.

A university researcher involved in a line of work similar to the open challenge may easily and out of interest add the issue to what he is doing anyway with no thought of monetary reward.

Rare diseases receive less attention from large commercial organisations than the more common types and are therefore best addressed through open innovation. A foundation known as Nathan's Battle was established by the parents and friends of a young boy, Nathan, suffering from a rare and fatal neurodegenerative disorder known as Batten’s Disease.

Their website lists scientific and clinical efforts, and solicits specific needs that would enable the foundation to continue with the studies. Not only do they use the crowd, but they are using the crowd to search the crowd for those who know of “...a Good Manufacturing Practices facility to produce clinical grade virus vector for us to be used in the toxicity testing and in the clinical trials.”

Essential to open innovation is the formulation of the challenge with precision. Einstein famously said, “If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute solving it.” 

What can a business expect from the full adoption of challenge driven innovation as a strategic practice? For starters it is a more cost effective problem-solving methodology because you pay for results and not for trying.

However, sourcing innovation from outside the organisation is not just a numbers game. There are three characteristics of the crowd’s problem-solving capability that ensures greater value. One is “diversity” - having a large number of people tackling the problem using widely different approaches.

Another is the “marginality” of the respondents who are, most often, not from the discipline that posed the problem.  The radio-frequency engineer mentioned above was not an astrophysicist. Thirdly, there is the uncontrollable, unpredictable “serendipity,” one of those factors completely outside the control of either the organization or the individual attempting to invent or innovate.

Archimedes’ discovery of a body’s displacement of water was a function of serendipity. Why was it that this maths and science oriented, intelligent person had failed to discover how his body displaced water on any of his many prior baths?  It was serendipity that he had the insight just when he needed it for determining the quantity of gold in Herio’s crown.

Challenge driven, open innovation represents a dramatic revolution in enabling more effective, efficient, and predictive innovation. Even if you only try this approach internally (at first, of course,) a well-constructed challenge is an astonishingly powerful and uniquely effective tool for focusing staff energies on the most important problems facing your organisation.

The Open Innovation Marketplace is a superb read for your year-end vacation when you will have the time to ponder its implications and possibilities.

Readability            Light ----+ Serious

Insights                   High +---- Low

Practical                 High --+-- Low

*Ian Mann of Gateways consults internationally on leadership and strategy.

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ian mann  |  book review
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