When InnoCentive launched in 2001, it was in a context very different from today.
Around 7% of the globe was on the internet, productivity in the US was growing at a rate of around 2.5% a year and total factor productivity in the US – a measure of innovation – was growing at about 1.8% annually.
Fast forward 16 years and over 50% of the globe is now on the internet and all sorts of technology has dropped significantly in cost. But at the same time, US productivity growth has slowed to 1% a year and total factor productivity growth has halved.
How does this connected world that is full of cheap tech but with stagnating productivity affect open innovation? What are the key trends and emerging technologies that will inform its future? As we look to 2018 and beyond, these are the types of questions we are asking ourselves at InnoCentive. In this article, I’ll be exploring four changes I expect to see in the form and usage of open innovation.
More organizations will have figured out how best to fully embrace Open Innovation (OI). This is still an obstacle today. Most organizations understand the need and value of tapping external technologies and talent but they are not always sure how to establish OI as a defined innovation channel, which requires the right working processes and practices. At InnoCentive, we work hard to support our clients in creating an environment where OI can flourish. And we are seeing a change – in 2016, the average number of Challenges run by each of our clients was 30% higher than in 2012.
But this deeper integration will also come from the creation of new mechanisms for organizations to connect with the outside. Flash organizations, a concept being pioneered by Stanford University, represent one such mechanism. These are set up to pursue specific goals and combine elements of crowdsourcing and offline organizations – they are “completely virtual and assembled on-demand from massive online labor markets…[but] assembled in an organizational hierarchy”. In some ways, they can be seen an extension of the Team Project Rooms we have at InnoCentive, augmented to facilitate longer-term, collaborative projects where team-based work is mandatory rather than optional.
All sectors and company sizes can benefit from increased user input into product development and on-demand access to external talent and technologies. However in general it has been the larger, high-tech or R&D-heavy organizations that have been the early pioneers. In the future I expect OI to be increasingly embraced by organizations that are smaller, low tech or service based. There are a number of driving forces behind this, including:
- Further development of OI’s key enablers - accessible technology and greater connectivity – and the associated network effects.
- Exponential growth from more organizations embracing OI, which increases the imperative for others to embrace it in order to remain competitive.
- OI and crowdsourcing providers further refining and developing their offerings.
Through developments in Artificial Intelligence (AI), machines will get better at identifying connections, finding the needle in the haystack, interpreting ambiguous inputs and building complex models. There are two significant ways I can see this impacting on OI:
Identifying external technologies and talent
People and technologies have an extensive digital footprint, which will only increase in the future. AI will be used increasingly to scan through the wealth of available data sources – such as news articles, patent databases, scientific journals, and national registries – to identify the people and technologies that may be able to solve a specific problem or need. It will also be able to identify trends, thereby helping organizations establish the need or problem in the first place.
Evaluating proposed ideas and solutions
Rather than having humans go through the ideas and solutions that are proposed to address a particular problem or need, this will be done by machines. They’ll be able to evaluate the ideas and solutions against a set of requirements and compare their relative merits, despite varying forms and content. This evaluation will be done in real time, allowing innovators to receive instantaneous feedback so that they can refine their submissions accordingly and be incentivised by the increased gamification. At InnoCentive, we already use a similar functionality for our data Challenges, whereby Solvers can see how the predictive accuracy of their algorithms ranks against others in real time. I expect this functionality to be further developed and available for all types of Challenges in the future.
The increasing ability of machines to build complex models will also allow for the evaluation of the ideas and solutions not only as they are but how they could be. Even written theoretical proposals will be quickly and easily built as virtual 3D models and simulated in a replica of the actual environment that they would need to operate in.
Blockchain - which in simple terms is a digital, decentralized and public ledger of transactions - has a promising application as an IP registry. This would transform how IP is registered, licensed and transferred. I see this impacting on OI in three main ways:
By removing financial intermediaries, along with the associated transaction costs, micropayments become feasible. This makes it easier to ensure individuals are recognized and compensated for the value they create. Furthermore, by breaking innovators’ contributions into blocks, this recognition and compensation can be accurately distributed according to the scale of their contribution.
Building trust through smart contracts
Blockchain allows for the creation of smart contracts, with terms and conditions that all parties can specify. Under a smart contract, funds would not be released until a computer program determines certain conditions, such as product specifications, have been met.
Due the public and immutable nature of the ledger, all transactions are traceable, making it much easier to establish and verify ownership.
I think the future of open innovation will be one where all sorts of organizations systematically use a multitude of mechanisms to connect with those outside their walls, combining the best elements of different approaches to construct an optimum model. AI will be used to deliver better solutions, allow for more informed decision making and expedite the innovation process, while blockchain will help build trusted relationships, reduce risk and simplify negotiations.
How do you see the world of open innovation changing? What will be the transformative imperatives and technologies?