Consumers today are more informed, globally connected and more active than ever before. This has provided motivation for companies to seek new ways to create value, by providing consumers with an active and indispensable role in their innovation processes.
The new consumer values personalized experiences of consumption and therefore companies must find ways to generate business within the paradigm of this relationship. Consumers seek and can access information without geographic boundaries. Today, everything is connected. Companies cannot afford to ignore this trend, so must adapt and leverage this limitless connection before their competitors.
Shared innovation has much to do with Henry Chesbrough’s “open innovation” theory, in which he proposes that companies go beyond their confines – by combining internal and external knowledge – for its R&D. This is contrary to classic processes of innovation adopted by companies, which have traditionally closed themselves off to the outside, exercising the highest levels of secrecy, from the product’s outset to its final creation.
In this context, Chesbrough argues that projects initiated and executed from within the company, reach the company’s existing market. In the open innovation model where projects are initiated and executed from both within and outside the company, they can reach broader markets, via the same company, or others through patents.
Procter & Gamble had issues of scaling until its new CEO altered its innovation and knowledge management systems to absorb more ideas from outside the company. Until that time, P&G had more than 7500 employees in its R&D department, which hardly generated innovation. Post strategy change, the same team launched more than fifty new products every year for the company. The difference being, the company has more than 7000 external collaborators, with whom it is digitally connected.
The case of InnoCentive is interesting as it serves to assess supply and demand in terms of innovation. Their approach is very simple: companies can express their need (I have a problem…), and researchers can provide solutions (I have a solution…).
The project has enlisted more than 80,000 scientists from 170 countries. Incentives for the problem solver constitutes one of the secrets of success, with remuneration ranging from 10,000 ten thousand to 100,000 dollars. El Pais newspaper effectively summarized the initiative’s success with the following question:
Why settle for a single investigator if you can have 80,000 working for the same cost?
And still co-creation is not a new strategy. In 1990, C. K. Prahalad and Gary Hamel published an article entitled “Co-Opting Customer Competence” highlighting this theory.
Perhaps one of the most paradigmatic and known cases of shared innovation is Lego. By the late nineties, Lego initiated Lugnet – Lego Users Group Network – which established a direct relationship between the company’s employees and customers. The company maintains several projects along these lines; the company encourages its customers to propose new products, one such product Lego Mindstorms stands out here.
But how do we approach a project of this nature without revolutionizing the entire company? Some of the following basic principles can help us. The first is communication; it seems obvious that if we want to engage our clients’ ideas, we have to communicate with them, but communication in this context means being able to listen in a massive way, and this requires a structured listening system.
Another basic principle for effective co-creation projects is to provide users access to the information base and ideas, currently being utilized by the company. Here, an understanding exists regarding the “public” level of knowledge the company feels comfortable sharing, with no risk vis-a-vis information reaching the hands of its competitors.
Information can refer to the product’s history, its main advantages, milestones, and results achieved, etc.. There’s no risk involved, instead, it serves to engage the project’s users and a deeper way. The ideal support here would be creating a specific Wiki, in which the information has been previously entered. It is difficult to write about an empty vessel, but extremely easy to comment and contribute to existing information.
In this sense, and perhaps most importantly, the company must be highly transparent.
If we create a project to encourage user participation, we must be committed to it and make sure that the end game reflects its intentions, otherwise, it can turn against us.
Question to ponder: Can co-creation and shared innovation help my organization? How? What’s preventing us moving forward?