Which software is right for Open Innovation?


This article discusses which software might be best suited to different Open Innovation (OI) approaches. The subject is of particular interest since, on the one hand there are more and more companies that are embracing OI, and on the other, there are multiple software solutions available in the market that have proven productive.

The article first looks at the different OI approaches companies are using and the types of internal software support processes and interaction between the Open Innovators and the co-innovation community. It then takes a closer look at why a large German company has selected a not-so-obvious software solution for R&D-driven Outside-in OI.

Any company serious about implementing OI eventually must address the question of which software to choose to support its corresponding processes, and the interaction between internal and external innovators. Current OI comes in many shades and, depending on the OI approach being pursued, there are various types of software that could be appropriate.

Inside-out OI: Minimal software support

In OI Inside-out, companies try to exploit the value of Intellectual Property (IP) not being actively used or not playing an obvious role in deterring competitors. Statistics show that this applies to some 40-90% of a company’s IP. Within the OI paradigm, exploiting the value in this kind of IP involves external market paths such as licensing, joint ventures and spin-offs.

Internal processes are supported by the databases that store and manage the firm’s IP. However, I cannot identify a widely used software solution for managing the interaction between open innovators and the external community. Interaction is mostly person-to-person with little software support.

Consider IBM, seen by many as a global benchmark for this type of OI. IBM spends more than USD 5 billion on R&D annually, holds more than 60,000 patents, and generates some USD 2 billion per year in licensing revenue. How does it do this? IBM’s R&D labs include what they call Industry Solutions Labs. These labs are the drivers of Inside-out OI. Their mission is to ensure early involvement of customers and business partners in order to identify and exploit emerging business opportunities. Around 25% of IBM’s Zurich lab staff work with customers and business partners; they run more than 400 workshops per year, which generate around 100 innovation projects a year.

One notable exception regarding software for this OI approach is www.yet2.com, which is operated by a Web company originally funded by the chemical giant DuPont and others.

Outside-in OI: Focus of OI software solutions

In Outside-in OI the situation is different. In this approach, companies take external ideas and then treat them as if they were internal ones. In practice, companies pursue this type of OI in two ways: customer-driven ‘crowdsourcing’ (i.e. ideas from customers, co-creation with customers); and R&D-driven.

Interestingly, all of the software used in this context by leading companies is Web-based. This supports the argument recently put forward by Ehsan Ehsani.

Customer-driven Outside-in OI: Numerous crowdsourcing software providers

A quick search on Google using the terms ‘crowdsourcing’ and ‘software’ yields some 4 million results. The software vendors in this type of OI are of six types:

  • Software companies that originally developed software for idea management;
  • Web 2.0 social software companies that migrated to crowdsourcing;
  • Online communities that leveraged their proprietary technology outside the original community;
  • Software companies that started out by what today is called crowdsourcing;
  • Applications within existing social networks (e.g. Facebook);
  • Intermediaries that focus their business models on crowdsourcing.

Selection of the most appropriate software platform depends firstly on the focus of your search for external ideas and the associated level of confidentiality. Is your company looking to optimize the potential in existing products, line extensions or radical innovations? Secondly, it depends on the type of crowd you want to attract (although this should be seen, at least partially, in conjunction with the first aspect). Is your company looking for open/semi-open ideation communities, a broad public community, or a carefully selected closed community?

R&D-driven Outside-in OI: eSourcing software might be the right choice

In R&D-driven OI, researchers and developers look for scientific or technical solutions to issues on the current R&D agenda. Looking at global benchmarks, we find that the practice of this type of OI has two variants., In a rather open approach where potential co-innovators have low barriers to membership of the community (e.g. Procter&Gamble’s connect+develop), and as a closed community in which confidential, not-for-public-dissemination information on innovation challenges, is shared.

Reasons for choosing a closed community in R&D driven Outside-in OI

I recently concluded a project with one of Germany’s largest companies, focusing on the second variant. This project required the building of a closed and global co-innovation community with a three-digit number of members. The rationale for this approach was that one-step seeker/solver-processes in a confidential environment would provide greater potential effectiveness and efficiency than an approach where individual OI challenges were open to a global audience and, where in a second step, the best out of a huge number of proposals had to be chosen. This approach required that the individual OI challenges contained extensive background information. In order to protect this confidential information, a closed community had to be set up.

Selecting the best software platform

In selecting the software platform we first established the high level requirements. These were:

  • Security: proven security and robustness;
  • Communication: easy communication with participants for a specific OI challenge; easy submission of proposals; legally accepted storage of all communication (due to IP considerations);
  • Workflows: support for processes via workflows, e-mail reminders, etc.;
  • Areas if competence: classification of community members by areas of competence (to facilitate the search for suitable participants);
  • Proposal management: easy capturing of structured and unstructured information; formalized evaluation of proposals; repository for submitted proposals (for later use);
  • Performance Management: statistics and reports, automatically generated dashboards;
  • Integration into existing stage gate process, supplier database, ERP system and corporate Web site;
  • Usability: easy handling for internal and external innovators.

On analyzing these requirements we made the interesting finding that, with some level of abstraction, all of them were provided by solutions for strategic, Internet-based procurement (eSourcing).

So, in this case, the client decided to take an existing in-house eSourcing software platform and customize it to the requirements of this particular OI approach. Measured in terms of Total Cost of Ownership (TCO) and deployment time, this was a clever decision.

Points to be remembered

Looking back at the implementation of the software I think two points are important to keep in mind:

  • Plan for learning cycles

No standard software –software for use in dynamic scenarios, such as OI, will certainly not fit perfectly with business requirements at the first shot. Moreover, companies that have implemented OI have found that the underlying processes change as the breadth and depth of implementation increases. Based on experience, it is wise to plan for several versions that ultimately may yield the best-suited software solution.

  • Be prepared for communication challenges

In defining the details of the software solution, there will be involvement of at least three different parties, each with a different view and a different language: R&D experts, deeply involved in the technical/scientific challenges they want to be resolved; other stakeholders focused on early results in a new terrain; Management with an interest in clearly defined roles and processes; and the software provider, who is strongly tied to the standards set by its software. Based on experience some ‘translation efforts’ will be required in order to achieve an alignment of these parties.

By Frank Mattes, contributing editor, Germany

  1. I have a deck that you find helpful on this subject! I’ll send you the link on the share drive.

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