innovation

Google Announces Several Open Initiatives

Google plans on creating and giving away software tools for free.

Indeed, that strategy would fit into a model that Google has begun talking about recently. Vic Gundotra, who heads Google’s developer programs, said last week that Google would soon begin an aggressive project to create software tools and give them away free in an open-source format.

The goal, he said, is to improve not just Google’s applications, but any software that runs on the Web. That, in turn, would drive more Internet use, and Google would benefit indirectly by selling advertising, he said. More >

In my earlier post, I stated some of the generic advantages of open innovation.  I also listed a few notable organizations who are adopting the open innovation framework as part of their strategy.  One of the advantages I listed was using shared IP to reduce the barrier to entry.   Here are some specific announcements by Google and Apple that underscore the advantages of open innovation through open source:

1. Google launches open source cellphone operating system (Google Phone Plan Draws Interest.  The Wall Street Journal, Oct. 31, 2007)
2. Google announces OpenSocial for social networks (ZDNet Oct. 30, 2007)
3. More on Google OpenSocial
4. Meebo reinvents its business model by going open (Meebo Opens Site To Developers.  The Wall Street Journal, Oct. 30, 2007)
5. Apple working on SDK for iPhone (Apple To Open iPhone)
6. Shared IP in health IT (ZDNet Oct. 30, 200)
7. Open Source To Hit $22 billion by 2010 (C|Net)
8. NetworkWorld open source 2007 list of companies to watch

Kameran Ahari

Advantages of Open Innovation

Spend more time thinking about different ways to reinvent your business model.  Your business model is more important than your technology alone or source of innovation.  If you have ever been involved with technology, life sciences, pharma, or the semiconductor fables industry, you are probably familiar with the role of intellectual property (IP) and patents.  Chances are your IP management strategy was governed by a protectionist not invented here (NIH) and not sold here (NSH) policy.  Despite the status quo, an increasing number of innovative companies have managed to abstract the process and source of innovation from their value chain.  Meebo is the latest company to join the list of open innovators.

Earlier this year, I looked at technology start-ups who were implementing open business models as part of their core strategy.  A number of these initiatives involved the Internet, open source software, and open business models.  Zimbra and Meboo are just two recent examples.  You might be saying to yourself - so what's new?  What is new is the commercial intent of these initiatives with investor backing.  Cleary some of these new initiatives reflect the commercial viability of open innovation and business models.  In the early days, most open source projects had no commercial intent. Interestingly enough, a handful of companies like Google, Amazon, and Salesforce.com found it strategically advantageous to use free open source software (FOSS) for their own infrastructure.

Some of the companies who are embracing the open innovation framework:

• Apple
• Google
• Amazon
• Zimbra
• Meebo
• Skype
• Salesforce.com
• Eli Lilly
• P&G (Procter & Gamble)
• BASF
• DuPont
• Dow Chemical
• General Mills
• Kimberly-Clark
• GSK (Glaxo Smith Kline)

Don't fall into the NIH trap.  Creating your own IP is not a prerequisite or determinant for success.  75% to 95% of patented technologies stay on the shelf and go to waste.  Not to mention the fact that 90% of all products fail.  Moreover, if your IP management policy prohibits reassignment, then your patents are not assets.  With rising technology development costs and increasingly shorter product life cycles, the risk of innovation is almost certain.  Technology life cycle has gone from 4-5 years, from a decade ago, to 6-9 months.  In other words, your window of opportunity to recoup your investment got even shorter.  Having your innovation, business model, and community aligned is more important. 

So why are you waiting to explore the strategic advantages of what Henry Chesbrough calls - open business models.  Companies big and small are learning that many of their best ideas, approaches, and solutions come from the outside.  Moreover, by adopting the open innovation model, companies can dramatically reduce the pitfalls, costs, and risks associated with closed innovation. 

These are some of the generic advantages of open innovation:

• Speedup time to market
• Reduce the risk of innovation
• Less risk guessing what the market wants
• Let the market / community tell you what they want
• Integrated community innovation
• Innovation can come from anywhere and anyone
• Some of the best ideas are outside of your organization
• Some of the best solutions reside outside of your organization
• Lower your R&D and operating costs
• Supplement your R&D
• Tap into the virtual R&D community
• Create brand evangelists out of your community
• Shared IP can create a formidable barrier to entry

What does it mean to have an open business model?  Think of all the things you do in your value chain and how it fits into the entire supply chain.  What is a value chain?  Everything you currently do or that contributes to your value creation (product / service) is your value chain.  You can think of the supply chain as all other participants, suppliers, partners, and channels between your value chain and ultimate customer.

What is an open business model and how do you open your business model?  As you share technologies, seek IP, outsource functions within your value chain, and rearrange your supply chain, you begin to lay the foundation for a more open business model.  Remember, open business models are not the exclusive domain of open source software initiatives.  Community collaboration and innovation are simply some of the attributes. For simplicity, think of open and new business models somewhat interchangeably.  Some of the most innovative businesses are no more than a brand.  P&G is certainly adopting this trend.

Some of the marketplaces for trading, sharing, swapping, buying, or selling IP:

• InnoCentive
• NineSigma
• Big Idea Group
• InnovationXchange
• Shanghai Silicon IP Exchange
• Ocean Tomo
• SparkIP
• Techex
• Patentcafe
• Eureka-club

If your organization has successfully embraced the concept of open innovation and open business models, congratulations!  You just joined the ranks of some the hottest start-ups and handful of innovative Fortune 500 companies who understand that some of the best ideas come from the outside. There is a good chance your organization is creating and capturing value ahead of the competition.  Moreover, your business model more than likely reflects the state of your industry, technology or company life cycle, and R&D development cycle relative to the target market window of opportunity.   

If your organization has embraced the open innovation framework, please tell me more about your open business model.

Kameran Ahari

The Next Wave In Innovation

Learn How To Reinvent Your Business Model

There are an endless number of business books, articles, and opinions on why great technology and tech-based companies go from being market leaders to laggards. I agree emphatically with Mr. Chesbrough of U.C. Berkley that companies should establish a process and framework for innovating their business model and stop relying solely on the technical side of the organization for their next breakthrough innovation.

In some of my earlier weblogs, I stated how technology has lost its competitive edge and strategic component. More importantly, innovators need to move beyond technology as a basis of innovation or source of sustainable competitive advantage. In a number of my subsequent postings, I underscored the importance of business process and business model innovation. Technology is so pervasive, accessible, and widely deployed within organizations, it is no longer viewed as strategic. Nor does it provide sufficient differentiation for a sustained business model. Furthermore, most technological innovations are increasingly susceptible to Moore's Law. By nature, technology has a tendency to be short lived. One of the technology axioms is - anytime you introduce a good technology someone else is looking to introduce a newer, faster, smaller, and cheaper version. Technology is simply an enabler. The days when technology provided the primary source of competitive advantage are long over. This is a view shared by notable management gurus, business leaders, and some of the elite business schools thought leaders.

Henry Chesbrough, executive director of the Center for Open Innovation at the Haas School of Business at University of California, Berkley, recently published an article in the Wall Street Journal titled "Why Bad Things Happen To Good Technology: New Ideas Take You Only So Far. Firms Also Need To Innovate Their Business Models" (April 28, 2007. WSJ. p. R11). In his article, Mr. Chesbrough argues this is the next wave in innovation. You can read the complete article online.

In summary:

The next wave in innovation is the ability to innovate new business models.

1. Most business leaders, investors, and academicians consider technology as merely an enabler.

2. Changing a business process or business model can provide a significant source of sustainable competitive advantage.

3. You can enter a market for a well-established product or service by leveraging an entirely new business model. A good example is Netflix.

4. You should have a dedicated person, team, or consultant who is constantly looking for new business models for current / future products.

5. You should explore if your current business model can be undermined because someone out there will do it for you.

6. Develop a framework and forum for exploring new and competing business models.

7. Embrace change.  Remove barriers to the status quo and your own success. Don't get trapped in your own success and business model (H. Chesbrough, WSJ). http://online.wsj.com/article/SB117735510033679362.html

As always, I welcome your comments and any other great links to other resources consistent with this topic.

Kameran Ahari

U.S. Loses Technology Innovation Leadership: Ranking Drops in Networked Readiness Index

According to BBC News, U.S. loses long held top position as world's primary engine for technology innovation (BBC News http://news.bbc.co.uk/2/6502725.stm).

NETWORKED READINESS INDEX RANKINGS 2006 (2005)

1: Denmark (3)

2: Sweden (8)

3: Singapore (2)

4: Finland (5)

5: Switzerland (9)

6: Netherlands (12)

7: US (1)

8: Iceland (4)

9: UK (10)

10: Norway (13)

Source: WEF

The Networked Readiness Index published by the World Economic Forum (WEF) and Insead. You can read the entire article at BBC News.  The article explains what types of paramerters the WEF uses to judge countries.

This is the headline form BBC News:

US 'no longer technology king'

Singapore was among the nations ranked higher than the US The US has lost its position as the world's primary engine of technology innovation, according to a report by the World Economic Forum. The US is now ranked seventh in the body's league table measuring the impact of technology on the development of nations. You can read the entire article on BBC News website http://news.bbc.co.uk/2/6502725.stm

Why Do So Many Products & Companies Fail?

Do companies in the innovation business fail at a higher rate because of their inability to create good ideas?  Or does it have to do with poor management, process, and execution?

By some estimates, 90% to 97% of all new products fail.  Since, there is a direct connection between innovation and execution, I thought I would list some of my own observations.  You can download and read the complete description for each one from my website (innovator's dilemma).   

1.         Ad hoc new product development.

2.         Open loop syndrome.

3.         Wrong strategy.

4.         No strategic planning or mapping process.

5.         Not linking strategy.

6.         Lack of performance tools.

7.         Ineffective communication.

8.         Execution.

9.         Ineffective or absent lead user methodology.

10.       Shadowed products.

11.       Faulty positioning.

12.       Creating more marketplace gaps.

13.       Poor intelligence.

14.       Not invented here syndrome.

15.       Genetic makeup and culture.

16.       Late to market.

17.       Poor marketing planning.

18.       No or deficient business model.

To Innovate, First You Must Learn How to Fail

The pressure to innovate has less to do with the dot.com bubble or internet and more to do with new sources of competitive advantage.  As Thomas L. Friedman would say, it has more to do with the other 4 billion people on the planet who are quickly coming online in the new global economy. 

The incumbent manufacturing hemispheres no longer have the least cost producer advantage.  As these western countries and regions abandon manufacturing for more scientific and services sector, strategic innovation becomes the new source of competitive advantage. However, this new strategy does not change the fact that we are a risk averse society by nature.  Trying to change an inherently risk averse business culture and managing innovation dates back at least a century.  Thomas J. Watson, Thomas Edison, and Albert Einstein all understood that to find the next breakthrough idea one had to be willing to fail serially towards the optimum solution or discovery.

 

To understand the underlying challenge companies face innovating, one only needs to read some of these famous quotes:

Anyone who has never made a mistake has never tried anything new. – Albert Einstein

The way to succeed is to double your error rate. -- Thomas J. Watson

Recently, I was asked if I was going to fire an employee who made a mistake that cost the company $600,000. No, I replied, I just spent $600,000 training him. Why would I want somebody to hire his experience? -- Thomas J. Watson

Every time we've moved ahead in IBM, it was because someone was willing to take a chance, put his head on the block, and try something new. -- Thomas J. Watson

Follow the path of the unsafe, independent thinker. Expose your ideas to the dangers of controversy. Speak your mind and fear less the label of 'crackpot' than the stigma of conformity. And on issues that seem important to you, stand up and be counted at any cost. -- Thomas J. Watson

All the problems of the world could be settled easily if men were only willing to think. The trouble is that men very often resort to all sorts of devices in order not to think, because thinking is such hard work. -- Thomas J. Watson

Many of life's failures are experienced by people who did not realize how close they were to success when they gave up. -- Thomas Edison

Results? Why, man, I have gotten lots of results! If I find 10,000 ways something won't work, I haven't failed. I am not discouraged, because every wrong attempt discarded is often a step forward.... -- Thomas Edison

There is no failure except in no longer trying. – Elbert Hubbard

One fails forward toward success. – Charles F. Kattering

Failure is success if we learn from it. – Malcolm Forbes

Capital isn't scarce; vision is. -- Sam Walton

We have plenty of bright individuals, ideas, and capital.  We need to create a work environment that stimulates creativity and experimentation without negative consequences. Moreover, we need to teach our kids and workforce to understand the truly positive dimensions of thinking, tinkering, experimenting, and removing any societal stigmas on failing.

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