open innovation

Dr Henry Chesbrough had a good idea about innovation and wrote a book about it. In fact, the idea was so good that he wrote three books, several articles and launched a website about it. Along the way he interviewed hundreds of people who confirmed his hypothesis that there are two sorts of innovation: open innovation and closed innovation. These can be given capital letters thus: Open Innovation and Closed Innovation. Both can also be followed with the word paradigm, for good measure.

To save time, I'll use his own summary of the Open Innovation paradigm:

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. [This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology.
Dr Chesbrough's idea is described as 'pathbreaking' on the jacket of his book, where several wise people are quoted fulsomely endorsing his idea. Scott Cook, Chairman of the Intuit Executive Committee, goes so far as to say that the book is both seminal and practical and 'provides the how-to for revving up your innovation engine for leaps of profitable growth'. I'm hopeful, confident even, that no-one will describe the present book/blog/Brain in that way.

On the strength of all this, I bought the book and read it on the train back from a birthday party in Oxford. At the party, important people like Metropolitan Police Commissioner Sir Ian Blair, Professor Robin Grove-White (former head of Greenpeace UK and Director of the CPRE) and Professor Richard Macrory, who was appointed by the UK Cabinet Office to lead a review on regulatory sanctions, talked about important things. I thought 'this is the sort of place where change begins really'. Surely it has to be as much about people as paradigms?

Anyway, in the Closed Innovation paradigm, a company uses insiders to have ideas, some of which it develops and commercialises in-house, using the profits partly to fund further research and idea-generation in-house. In the Open Innovation paradigm, in case your attention drifted during the bit about purposive inflows, the same company gets ideas from wherever it can and takes them to market through a combination of internal and external channels.

Red Stripe used a combination of both paradigms: insiders drew ideas in from outside, but then had their own idea, which they discussed widely with outsiders, before setting about commercialising it internally. It could, of course, have done any of those things differently. I don't have a view on whether it should have (though Dr Chesbrough does). I just think that innovation teams may find it useful to think carefully about this question at the outset.

Mike Seery's own conclusion was similar:

Some people had thought that our public call for ideas would yield the
killer idea. Others thought that they had it already. And the rest thought that
a decent dose of inspirational brainstorming would be needed.

Learning by doing ~ learning while waiting

But another thought in Dr Chesbrough's book caught my attention. In the foreword, John Seely Brown talks about two sources of learning: learning by doing and learning while waiting. John Seely Brown clearly likes this idea too, because he's put the whole of his foreword on his website, which is indicative of the closed loops in which this kind of discussion takes place. But it's another revealing thought for an innovation team. Certainly the Red Stripe team found and had ideas while they were waiting to decide which idea to take to market and while they were soliciting ideas from outside. But their Bavaria/Lughenjo idea evolved considerably in the course of 'doing' the business plan, talking to partners and getting ready to make their formal presentation to the GMC. It's from this 'doing' process that the final HiSpace idea emerged.

I think it's fair to say that some of the ideas that emerged from doing were more practical and practicable than many of those that emerged from the earlier waiting process. So, there's perhaps a case to be made for 'doing something', even at the outset, because it may reveal ideas of a different order.

Once again we can view the Red Stripe approach as a combination of the two. But the outcry (scroll down when you get there) that greeted their decision not to publish the ideas that were submitted by outsiders (and which was generally speaking based on an objection to a private company soliciting money-making ideas and then keeping them to itself) may have concealed a more important issue - namely that if they had allowed the 'world' to kick around and discuss the ideas that were submitted, they might have found that much of the process of evaluation, sifting, analysis and development of those ideas could have been done for them by people who, collectively, knew more about their viability than the Red Stripe team ever could.

But then, of course, the problem remains that Red Stripe would never have actually owned any of the ideas.

The Delphi Technique

While we're on the subject of learning while doing and the team's conversations with NGOs and other experts who were likely to be involved in the Lughenjo idea, I should mention the Delphi technique. I was alerted to it by a Harvard Business Review article called The Wisdom of (Expert) Crowds by Robert Duboff. The technique, which is not unrelated to scenario planning, is rather like an amplified focus group. You recruit two dozen or so experts on a particular topic and ask them to evaluate possible developments/trends/outcomes in a chosen business or technology area. (There's a lot more to it than that - an independent facilitator then summarises their thoughts and they have another round. And so on. There are lots of rules, which necessitate the hiring of expensive consultants to oversee the process.) I suppose it's also related to the Prediction Markets idea, which the Red Stripe team had discussed at the outset and were encouraged to pursue during their idea harvesting process.

As I've said elsewhere, involving the experts eventually led Red Stripe to reject Lughenjo and it's possible that the earlier, formal involvement of such a group might have helped them home in on a workable idea. But, of course, that would require that they had first decided which mountain they were going to climb. For sure, Red Stripe were in the lucky position, as an Economist team, of being able to get the attention of experts whom others might have found it more difficult to talk to.

Cathedral and bazaar

Before we leave the Open Innovation paradigm, I'd like to mention another way of thinking about all this that's been around a lot longer. In 1997, Eric Raymond, talking about the open source software movement, came up with the term 'the cathedral and the bazaar', which is constantly evolving into a book. The former represented the conventional method of using a group of experts to design and develop a piece of software (though it could apply to almost any large-scale creative or innovative work). The bazaar represented the open source approach. This idea has been amplified by a lot of people, notably Don Tapscott and Anthony Williams in their book Wikinomics and on their website and blog of the same name. Wikinomics, being the commercialised arm of The Wisdom of Crowds, of course has its opponents and detractors. It's not a panacea and plenty has been written about the foolishness of crowds. Bruce Schneier's essay on the psychology of security is one elegant example of this. But Eric Raymond himself is also quoted in a compelling article by Nicholas Carr as saying that 'one cannot code from the ground up in bazaar style. One can test, debug, and improve in bazaar style, but it would be very hard to originate a project in bazaar mode.' In the same vein, Raymond is also quoted as saying, 'The individual wizard is where successful bazaar projects generally start'.

Project Red Stripe had six fine individual wizards, unsure of how far to trust their own wizardry and how far to turn to the wisdom of the crowd.


Open vs. Closed. You can use insiders or outsiders; your own ideas or other people's; your own money or other people's. With the latter, there's always going to be less ownership and less control. But more room.

Thinking vs. Doing. Trying to implement one idea may inspire other ideas, but settling on an idea too soon may close down other options. Time-tabling is important.



Paradigm bottle: Michael Calore
Innovation Camp: Theis Kofoed Hjorth
Innovation mosaic: Roland Tanglao
Delphi: Jay Galvin


Larry MacDonald said...

Well put. My conclusion is that "ideas" are the wrong way to get started. Better to study the pains the market is experiencing rather than select one rather random idea someone had that may not be related to any high demand market need.

Braden Kelley said...

If you're curious to learn all about Project Red Stripe at The Economist - check out my review of the book "Inside Project Red Stripe"

Braden (@innovate on Twitter)