We recently announced the publication of The Open Innovation Marketplace, written by InnoCentive Founder Alph Bingham and CEO Dwayne Spradlin. In the post below, Alph Bingham shares his thoughts on Challenge Driven Innovation.
Business processes make companies smart. They are one of the primary means for archiving and retrieving institutional knowledge. They are what allows Boeing to build a plane or Pfizer to launch a drug -- when in all likelihood NO one employee of any company knows what it takes to accomplish those tasks. But in spite of enabling this almost magical quality of collective knowledge, business processes also make companies dumb. They can archive and institutionalize modes of behavior no longer relevant. They all have a "discard by" date, but too few get discarded on time.
Many of the current business processes related to innovation were forged before the world became "connected." They assumed a reality that ceased to exist as we rolled into a new century. New innovation processes need to be hung on an innovation architecture that reflects a world where knowledge is fluid, where connections are fast and where outcome transcends geography. Corporate innovation practices assume a closed system -- or at least one that is predominately so. Leaders have read much and talked much about the new era of open innovation but how many have rewritten their business innovation processes, how many have changed their metrics for innovation success and how many have gone back and redefined the gate criteria separating the stages of their innovation cycle?
Innovation is risky business. And to manage those risks, project gating criteria are selected that prevent an overabundance of false positives. That is to say that projects likely to fail are periodically reviewed and terminated before they burn too many resources and too much cash. But if those expenses were shared by a partner or better by a network, such terminations would in most instances be premature.
Although one would never argue for throwing out some of the distinctive benefits of the historic stage-gate paradigm, we might argue for its cohabitation alongside other project paradigms to organize the open innovation process. The alternative framework put forward in "The Open Innovation Marketplace" is Challenge Driven Innovation, or CDI. In CDI, a portion of the larger project is formulated as a Challenge, in which a “Challenge” essentially represents the problem statement for a block of work that can be modularized and in most cases rendered “portable.” That is, such a block of work can be outsourced or insourced as an integral unit. The central processes to the CDI framework are those of dissection, channel distribution, and integration. But in the exploding choices of innovation channels, how does one decide? No one channel is always preferable. Even the most closed channels have their proper time and place. Innovation leaders today are faced with a marketplace of opportunities and channels and there are circumstances in which each may be the "best route." Successful leaders will integrate all the approaches in a cohesive innovation strategy; they will use the marketplace.
In the CDI framework, we imagine as much as 80 percent of the innovation effort will be carried out externally. However, a key point to note, is that internal innovators won't just be doing 20% of what they used to do, but rather a change in skills will be required for the internal effort in a more open innovation model. Internally, much of the work under CDI consists of monitoring and evaluating those activities placed externally into appropriate innovation channels. It also requires skills in project dissection, channel orchestration, and reassembly—skills generally not demanded within a closed innovation world and for which training is lagging.
Elsewhere and elsewhen on this website we will be posting a few slides illustrating these principles. And of course, details can be found in the book. But CDI is not the endgame. Once one moves beyond the concept that innovation is the ultimate "home grown" turf, one realizes that the whole corporation is subject to a "marketplace mentality." Based on principles you'll find in chapter 2, the second half of the book introduces you to both the concepts and the practices to evolve into a 21st century Challenge Driven Enterprise, CDE. Stay tuned.