Michael Dolan Dot Com

Tuesday, June 24th, 2008

McKinsey: “The next step in open innovation”

There’s a great article over at McKinsey Quarterly’s website on the next step in innovation. It offers a peak into where companies are headed now that they’ve (well some at least) established basic means for tapping into open innovation through communities. To access the full article you need a login.

Here’s a teaser:

For most companies, innovation is a proprietary activity conducted largely inside the organization in a series of closely managed steps. Over the last decade, however, a few consumer product, fashion, and technology businesses have been opening up the product-development process to new ideas hatched outside their walls—from suppliers, independent inventors, and university labs.

Executives in a number of companies are now considering the next step in this trend toward more open innovation.¹ For one thing, they are looking at ways to delegate more of the management of innovation to networks of suppliers and independent specialists that interact with each other to cocreate products and services. They also hope to get their customers into the act.

I was particularly interested in the hurdles to evolving towards a more participative value chain model. These are the four hurdles McKinsey identified:

• Attracting and motivating cocreators
• Structuring problems for participation
• Governance mechanisms to facilitate cocreation
• Maintaining quality

I would add a fifth challenge which is maintaining visionary leadership. The challenge is that when a company open up to such participation, it’s too easy to justify investment in innovation to solve what customers, suppliers, etc are asking for today. What’s difficult in an environment with tons of user input is to also step back and recognize where you *should be* beyond what’s being asked for today. Think of Apple. If Apple had asked and listened to its customers about what to do next with the iPod next, customers would have posted a million points about X, Y, … N feature enhancements they’d like to see. What Apple did instead is look beyond what was right in front of everyone and set a strategy to take over the mobile device people carry with them. Apple looked further ahead and built an SDK platform for enterprise applications. They set a brilliant strategy that has now resulted in the iPhone becoming the next generation of what was just a music playing device. How many people will carry and iPhone and an iPod? Now look at the boost to Mac sales and you can see Apple has executed this strategy very well.

This challenge is also present in open source communities. Often the community will set many resources to what gap is in front of someone willing to speak up and complain or advise. The challenge is for that community to look a step ahead and identify what are the needs your users will want 3 years from now, not today.

I’ve diverted from my starting post, but while I thought the article was great, I felt compelled to add my personal addendum. The bottom line is that I think companies need to build into their open innovation model a means to capture this longer term vision either from the community if possible (without community NDAs) or through internal means.