Wednesday, July 09, 2008

Open innovation - building engagement between governments, companies and citizens

The McKinsley Quarterly has published a very interesting piece on the future of innovation, The next step in open innovation.

This explores the concept that companies - and government departments - have traditionally been 'closed shops' for innovation. All their innovation has occurred internally with few linkages to the work underway at other organisations.

However this is changing as organisations realise that collaborative innovation, across organisations, reduces waste and stimulates new concepts.

Anyone who has ever sat down and written a report on their own has probably experienced this at a personal level. Bouncing ideas off others triggers new directions and leads to new insights.

With the internet, a global participatory environment, we're beginning to see organisations work more co-operatively with their supply chains, with players in other markets, with the public and even with competitors.

McKinsley gives examples such as:
  • LEGO - invited customers to suggest new models interactively and then financially rewarded the people whose ideas proved marketable.
  • The shirt retailer Threadless sells merchandise online—and now in a physical store, in Chicago—that is designed interactively with the company’s customer base.
  • Open-source platforms developed through distributed cocreation, such as the “LAMP” stack (for Linux, Apache, MySQL, and PHP/Perl/Python), have become standard components of the IT infrastructure at many corporations.
  • Peugeot invited customers to submit car designs and built and exhibited the winning entry at a car show and integrated it into a PC game.
  • The Missha cosmetics brand in South Korea has reached 40% market share on the basis of cocreated cosmetics products.
  • Wikipedia has grown to over 9.25 million entries (2.44 million in english) in over 250 languages in under ten years (the English wikipedia alone has over 1 billion words - 25x the size of the next largest English encyclopedia).
Why would private organisations wish to co-operate? Because it gives them a competitive edge, as discussed by Harold Rhiengold in his fantastic TED presentation on collaboration.

This isn't purely a private sector development - it is also occurring in the public space. I can think of examples such as New Zealand's collaborative police wiki legislation, or the UK government's mashup competition.

Back to the McKinsley article, one of the points raised is that traditional media and organisational sites are growing in usage at a rate of 20-30% per year.

However sites focused on user-created content are growing at 100%.

The public has demonstrated that it is ready and able to engage organisations in productive discussions - co-developing concepts, products and policy - with suitable incentives.

The article's recommendation is that;
Even the most advanced businesses are just taking the first few steps on a long path toward distributed cocreation. Companies should experiment with this new approach to learn both how to use it successfully and more about its long-term significance. Pioneers may have ideas about opportunities to capture value from distributed cocreation, but fresh ones will appear. To benefit from them, companies should be flexible about all aspects of these experiments.

Where does your department stand?

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