How to reduce cost of Open Innovation

One of the assumptions when firms start open innovation is that it will cost less compare to innovating in-house, and this assumption is mostly true.  The subsequent question however is can Open Innovation itself be cheaper than what it costs today?

The primary cost of Open innovation can be divided into two main buckets.

Cost bucket One – In-house team which takes care of coordination with intermediaries and internal technology team.

Cost bucket Two – Intermediary costs.

For the cost bucket One, 3 key pointers to reduce cost

1) Avoid too many dedicated persons handling Open Innovation, instead time share, say 10% of the time of highly motivated people, who love innovation and would happily give that extra time and energy.

2) Have central budget for Open Innovation; this will offer prioritization decision in the hands of Open innovation team who will take decisions after hearing the ROI pitch from the technology requester team. This is a big cost saver.

3) Define Goals, it is tough to define Goals in innovation, so define goals for processes, for number of interactions, even number of failures. (Must fail 2 more time, nice!)

For the cost bucket Two, 3 key pointers to reduce cost

1) Avoid consulting cost, trust me consulting is overrated and overpriced. You might need consulting in some cases but when you need and how much you need must be scrutinized.

2) Shop around, you might be comfortable with the vendor you are used to work with, but don’t forget open innovation is all about trying out new avenues, apply this logic to vendor selection also. You might be able to see cost reduced to half, while outcome remain comparable. Try ideaken !

3) Make some of your fees to Intermediary linked to shortlisting of the solutions.
Where there any other points which worked for you in reducing the cost of Open Innovation. Do share.

FRUGAL Open Innovation

Frugal Innovation is the art and science of taking out non-essentials from a product manufacturing process, from product feature list and from product maintenance lifecycle, in turn drastically reducing cost to the extent which didn’t hold much importance in pre globalised world.

Frugal Innovation for Product Innovation is what “Lean” is for production practice – which considers dedicating resources for a goal other than the one which creates value to the end customer as waste and a target for elimination.

Why is Asia at the forefront of it? The primary reason is scarcity of resources, (which has nothing to do with anything else but the fact that this part of the world was inhabited first!), and the necessity to get around the problem of scarcity.  For example the inexpensive ECG machine developed by GE, which addresses the key scarcity of continuous electricity and can even runs on a car battery. 

Case for FRUGAL Open Innovation

I am using this term ‘FRUGAL Open Innovation’ while I think aloud and eventually made this a title of this blog!

1) The thought I am working backwards from is ‘Open innovation’ and ‘Frugal Innovation’ both have shown its merits and their share of challenges in the recent past. What happens when you combine these? Does it make sense? And if it does make sense then what are we talking about?

We are talking about a conscious effort and hence adding ‘must meet’ or ‘good to have’ FRUGAL EXPECTATION in open innovation challenge definition.

2) Though frugal innovation is happening and will keep on happening, with an assumption that you would like to derive some benefits and check out the frugal possibilities for your products and services, let us continue working backwards from the thoughts we discussed so far.

Arbitrarily putting stretch goals won’t make something Frugal. The expectations and hence the objectives of frugal innovation need to come from a root of it – ‘The Need’. So the open innovation aspect of it starts even before we talk about the solution. Unless you already have a hang of what is the need, your first step should be to reach out to diverse audience of that geography and solidify the need.

It is very important to note that even if you are trying to create a product for developed world eventually, it cannot skip the step at a geography where application of that frugal product makes more sense. In fact, most probably the frugal idea won’t take birth if this step is omitted. And if it is born anyways then it still might leave some unanswered questions about its real frugalness!

For innovators from developed world, one of the challenges would be to embrace frugal thinking, but it’s just a matter of time.  

3) Note that we are still talking “The need” and haven’t moved towards the invention part of it. One last reason I feel like mentioning here is, origin of most of the successful frugal innovations were the need (or pain) felt by an individual. So as an organization you should not skip this step and there is no better way to simulate it than co-creation.

4) From here on you have two enablers to take you forward.

a) One, you can tap into the inventions which match your need. The small issue with this (and even the previous step of formulating the challenge with the help of need owners) is many of the frugal innovation authors won’t be reachable on internet. But many might. One of the good things in Asia is when you omit many, many still might remain! Nevertheless partnering with the local partners like ideaken will help.

b) Once you have got the need formulated and the frugal aspect incorporated. (Which you will need to be really sure about), you can ignore from where the solution come from. In other worlds you are back to pure open innovation and still have a frugal strain incorporated as one of the expectations.

So here is the definition of Frugal open innovation

Frugal Open Innovation

Frugal Open Innovation is a conscious effort to incorporate the expectation of taking out non-essentials in a perceived localized need, followed by an innovative solution with the help of external know how, to delight the customers with perceived but mostly with non perceived need of same or different geography.

From where the ideas might come from AND from where it may NOT.

Ever wondered where you should put in your effort to increase the chances of getting positive innovation outcome, or where you should not? We attempt to answer this question below, where we prioritize many positive and negative origins of innovations. If you find something missing or have a different opinion then we surely would like to hear from you.

Situation 1:
You are looking at sustaining innovation, you know the problem which is not easy to solve, and you need an innovative solution. 

- ideas most probably come from … someone who has already partially or fully, in same or different domain - solved it.
- ideas most probably come from … from a analysing a conflict between two or more expectations of your overall objective.
- ideas most probably come from … how emerging countries getting around it or from a person from different industry all together.

- may NOT come … From someone you were expecting it to come from.
- may NOT come … from your city of operations.
- may NOT come … from a problem statement which has not evolved from its original state during last few months.

Situation 2:
You are looking at creating a disruption in how user consumes the product or a service, even changing the mindset and create completely new need. 

- ideas most probably come from … a serious trouble, and not routine goals and objectives.
- ideas most probably come from … Confidence from your previous success.
- ideas most probably come from … Individual Genius, followed up with knowledge based collaboration.

- ideas may NOT come … from meeting rooms and conferences.
- ideas may NOT come … From a situation where top management is waiting for the team to deliver.
- ideas may NOT come … when you are in a hurry to counter the competitor’s recent launch.

Situation 3:
You are convinced that little drops can add up, and you are keen to innovate at a lowest denominator on a continuous basis.

- ideas most probably come from … Diversity of idea providers, Diversity in opportunities you make avilable.
- ideas most probably come from … Genuine ego to be better than the rest in the market.
- ideas most probably come from … an irrelevant inspiration or derivation of bad or not so good ideas.

- ideas may NOT come … When you are trying to think of an idea!
- ideas may NOT come … From the provider of previous great idea.
- ideas may NOT come … When you receive many ideas and goal is reduced to selecting one great sounding idea.

Diversity - hard to define, but has pretty good impact on business & innovation.

When you come across someone very innovative or creative, most probably you would be looking at an intersection of abilities and the breadth of knowledge. If you zoom out a bit, the communities which are rich in diversity are also fun to be in. Take it to another level and you will find companies which are most innovative are also the ones who support diversity – not by chance but pretty much by design.

However diversity is not an overnight change which you can bring into your community or a company.

Let’s examine ‘Why’ diversity has such positive impact and ‘How’ you can make sure you are not leaving this important aspect unaddressed and how you can benefit from it in your quest for the business growth and innovation.

WHY (diversity has positive impact)

a) It all starts from a very unique environment and culture we as individuals are brought up in . The world is so big that no single community can survive with the same outlook, practices and tools. This  localized and trapped knowledge is pretty much accessible via the people who move around the world.

b) Heard of bio-mimicry, the science of looking at nature and solving problems not related to nature or taking an inspiration and innovate. Diversity is a tool using which one can think from different perspectives, which as we all know can result in inventions.

c) Most probably your company strategy is somewhere trying to capture the long tail of a market, you probably need a similar strategy for your research and development activities, where you can reach out to the long tail of talent, the just in time, and the right match and just for the period you really need it.

HOW (you can promote diversity)

a) Companies do not have a bias in their hiring policies, but the person in control could pretty much influence the not so diverse hiring, best place to retrospect. Though one way to bring in diversity is to bring in people from diverse background, another important way is to reach out to them and engage with them in a mutually beneficial way for a short duration of time.

b) Apply tools which bring in diversity, talk to the wrong people (assuming you have already spoken to the right people!), pick the odd country and imagine your product and services there, may not be for your expansion but just to get away from stereotype market you see around you. You may not be able to build a machine which flies like a bee, but you will surely find an idea for improvement, get inspired, and possibly get close to where you want to be.

c) Long tail of a talent match is all about spreading it wide and letting the receiver decide if he or she would like to engage.  Diversify from your conventional methods of engagements; the good news is it does not cost the earth in this connected world.

ideaken enables your engagement with individuals from diverse geographies, connect to the perceived wrong set of people and engage with someone who could be at the long tail you are after!