IS3321 Information Systems Solutions for the Digital EnterpriseLecture 9: Open Innovation, Lead Users and ContestsRob Gleasure

R.Gleasure@ucc.ierobgleasure.com

Open Innovation, Lead Users and Contests Last session

Social Media The Crowd and Social Media for Content Distillation The Crowd and Social Media for Content Distribution

Today’s session Open Innovation, Lead Users and Contests

Generating creativity from individuals Incentivising creativity from individuals

Consider the Following Problem We produce protective cases for smart phones. Customers have

complained that the transparent part of the cases are difficult to clean without making them cloudy - we want to outsource/crowdsource a new solution for these cases that won’t have this problem

We could go to a specialist but there’s no guarantee they’ll figure it out

We could go to the crowd but what does the average person know about production materials?

Jumping Off Point Up to now, we have leveraged the power of consensus and

coordination offered by the crowd as a collective. But some problems are so specialised that the average crowd-member has little to add to the creative process

For this problem we don’t want consensus, we want access to outliers of brilliance!

Put differently, we aren’t looking at the wisdom of crowds, we’re looking for wisdom in crowds

Open Innovation “Open innovation is the use of purposive inflows and outflows of

knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively”

(Chesbrough 2003)

Comes from organisation’s realisation that not all of the smart people work for them, many clever ideas are floating around outside of the organisation’s boundaries

This typically takes two forms Lead-user innovation Innovation contests

Lead-User Innovation Lead-user innovation is based on the idea that some users will be

more advanced or intensive than others, hence ahead of the needs curve (Von Hippel 1986)

Because they are more invested in the area, these needs also tend to be a high priority, meaning they tend to find creative workarounds, adaptations, and solutions

Organisations may thus try to leverage the power of the web to find, communicate with, and collaborate with these individuals to integrate and improve upon their solutions

Lead-User Innovation

Image from https://hbr.org/1999/09/creating-breakthroughs-at-3m

Example: Manufacturing and 3M 3M is a large materials company in the US producing products such

as adhesives, abrasives, laminates, passive fire protection, dental and orthodontic products, electronic materials, medical products, and car-care products

The 3M’s Medical-Surgical Markets Division was making $100 million/year in surgical drapes but there had been no breakthroughs in almost 10 years – doctors loved their drapes but insurers found them too expensive

To combat the price issue, they looked at Doctors in developing countries Vets operating on pets Makeup artists

Example: Social Work in Developing Countries Jerry and Monique Sternin were working in Vietnam in 1990 on a

project to decrease malnutrition in 10,000 villages 65% of Vietnamese children under age 5 were malnourished Government projects were failing

The Sternins decided to find 6 families you were unusually well nourished despite being “very, very poor” and noted they Ate several small meals, rather than a few large ones Added small shrimps, snails, crabs, and greens to their rice that

others felt were dangerous

Within a year, only 20% of their 1,000 children enrolled in their project were malnourished

Example: Web-Based Enterprises and HashTags The idea of hashtags (e.g. #rivetinginformationsystemslecture)

wasn’t introduced by Twitter, in fact Twitter founder Evan Williams thought they wouldn’t catch on as they were ‘too nerdy’ and they would group content themselves using more sophisticated data analysis behind the scenes

A couple of innovative users began using them and it started to take off

Twitter saw how they worked and changed their UI to encourage their adoption among all users

Advantages of Lead User Methods Reduced cost of R&D Potential for improved productivity – you know the solution works Gather feedback early Identifying lead users alone is useful for marketing and planning Potential for future collaborations with external innovators Potential for viral marketing

Disadvantages to Organisations Potential reveal of sensitive information Potential loss of competitive advantage as innovations are typically

hard to protect Lead users may have agendas Multiple lead user groups may exist with different trajectories Possibility that inviting others into the design process means

innovations are travelling both directions

Innovation Contests Sometimes completely new innovations are needed and our lead

users haven’t solved them or aren’t willing to share them

For these reasons Innovation Contests have become increasingly popular A challenge is set, along with a reward for the best solver Solvers submit solutions The challenge-setter selects the best solution for the reward

Example: Innocentive InnoCentive is probably the most established contest platform at

present

InnoCentive was set up in 2001 within the Eli Lily umbrella, it later spun off in 2005 to form its own company proper

The Solver community includes 355,000 people from nearly 200 countries

Nearly 2,000 challenges have been posted

Cash prizes are generally $10,000 to $100,000

Example: Innocentive The idea is that challenges are posted across areas as vast as

Business and Entrepreneurship Chemistry Information Technology Engineering Food and Agriculture Life Sciences Math and Statistics Physical Sciences

In 2005 InnoCentive also added a non-profit area designed to generate science and technology solutions to pressing problems in the developing world

Advantages to Companies Gain access to a large database of innovative thinkers who enjoy

difficult problems

No staff outlay (pay on demand)

Opportunity to compare contrasting options

High chance of finding solution, compared to getting in a consultancy

Advantages to Solvers Work from home

Reputation

Gets to see cutting-edge problems in different fields

Opportunity to apply specific techniques repeatedly

Interesting work

Disadvantages Have to post problems in a very public forum

Tends to require/attract one-shot solutions, e.g. hard to come back for ongoing development

What if the requirements had a loop-hole?

Solvers are pragmatic and tend to avoid problems where competition is high – may not be much of a ‘contest’

Readings Chesbrough, H. W. (2003). Open innovation: The new imperative for creating

and profiting from technology. Harvard Business Press. Moore, G. A. 1991. Crossing the Chasm: Marketing and Selling High Tech

Products to Mainstream Customers. Harper-Collins, New York. Von Hippel, E. (1986). Lead users: a source of novel product concepts.

Management science, 32(7), 791-805. Von Hippel, E., Thomke, S., & Sonnack, M. (1999). Creating breakthroughs

at 3M. Harvard business review, 77, 47-57. Brief history of hashtags on Twitter

http://readwrite.com/2011/02/04/the_first_hashtag_ever_tweeted_on_twitter_-_they_s#awesm=~ojXlyc6l507vMl

Description of Vietnamese nutrition project in Brown, T., & Wyatt, J. (2010). Design thinking for social

innovation.Development Outreach, 12(1), 29-43.