How to Innovate
in the Open
Any organization can reveal its inner
workings, but it’s not as simple as
opening the door and letting everyone in.
“To move from closed to open
requires a mind-set change, and that
can be very challenging,” says Brad
Barbera, executive director of the
Product Development and Management Association. To start running
a more open operation, try these
PDMA-approved best practices.
STAGE 1: Discover
Start by developing an understanding of what consumers need, but
beware: The solution to their problems may reach beyond their wildest
imaginations.
“Ten years ago, no one could’ve
articulated an iPhone to you,” says
Barbera. “It takes a special insight on
combining what is technologically feasible with what a consumer wants—
and what they might not even know
they want yet.”
STAGE 2: Develop
Solve the problems necessary to
execute your insight. These days,
product development teams must
pay particular attention to technology and design.
“We’re seeing the e;ect and
impact that design has on the success of products,” says Barbera.
STAGE 3: Deliver
Set up the proper distribution channels, find the right suppliers, and get
the goods in the hands of consumers.
Then, return to step one by studying
how your product can be improved.
“We think about it as a circle,” says
Barbera, “because if you’re looking at
a stage, you’re already learning what
the next stage ought to be.”
Brunner is a partner at Ammunition
Group, a San Francisco–based design
firm that has helped launch such products as the Beats by Dr. Dre headphone
line and the Barnes & Noble Nook
e-reader. He also worked with Apple
from 1985 to 1997.
“Most companies choose to learn
in the marketplace—they get out there
and sell it,” Brunner says. “That is sort
of an open model; you’re just spending a
lot of money to get it out there.”
Firms that close o; development
can maintain an edge over competition
by keeping their building methods and
product road maps secret. Simply put,
says Brunner, “you’re not giving away
information that you gleaned in your
development to other people.”
In addition, closed operations usu-
ally wait until inventory is available to
make new product announcements,
so as not to cannibalize existing sales.
If a customer knows a new product is
coming, he or she may wait instead of
making an impulse purchase of the cur-
rent model today. In the case of Apple’s
iPhone 4, it’s unclear how much money
was lost after the prototype leak, but it
was probably in the millions of dollars.
On the other hand, it can be much
more lucrative for businesses to throw
open their doors and develop products
in the public eye. According to Barbera,
PDMA has been examining open innovation for the past 10 years, and numerous studies have shown that the method
helps get products to market faster and
generates higher-quality innovation.
The key to maximizing external
input is capturing it early, says Brun-
ner, because that’s when it can have an
impact without being disruptive. But
the problem with being open so far in
advance is that your competition may
scoop you. “That’s kind of the rub,” he
says. “A year before you launch some-
thing would be the time when it would
be of benefit to be open.”
Home theater PC maker Boxee had
a hand-in-hand relationship with its
users for years prior to launching. The
company refined its software as a beta
release before packaging and selling it
in a hardware device, all the while gath-
ering feedback from users on how they
used the media-playing interface.
So, when Boxee was ready to
manufacture and sell its hardware, an
eye-catching sunken cube, customers
weighed in on the design of the product.
Specifically, users influenced the elimination of a USB port from the front of
the device and a change to the text color
on the remote control. “On the other
hand, some people really didn’t like that
the Boxee Box doesn’t fit in their current
media arrangements,” says Idan Cohen,
Boxee’s head of product development.
“We decided that the first product we
were going to put out was going to be a
looker, and this is what we were going
to come out with. … It was definitely the
right decision.”
Who Should Open Up?
Boxee is young, small and tech savvy, so
it makes sense that it has adopted open
innovation, but companies of all stripes
have embraced the standard.
“It isn’t necessarily old versus new
that defines whether you’re open or
closed,” Brunner says. Certainly, new
companies have an easier time being
open because they can build their foundation that way. But pharmaceutical
companies Eli Lilly and Procter & Gamble are both over 100 years old and have
embraced collaborative practices with
great results. Eli Lilly developed insulin
in collaboration with the University of
Toronto back in 1923. But, more recently,
it built and spun o; an online network
called InnoCentive, which enables scientists to post problems on the Web
and reward the experts who help solve
them. Procter & Gamble, meanwhile, has
increased its product success rate by 50
percent since switching to open development methods and has made its research
and development department 60 percent more e;cient in the process.
The decision to be open or closed
is based on several factors, including
research and development needs, manufacturing investment and the value of a
company’s intellectual property. In the
computer hardware industry, says Brunner, the machinery required to build
products is expensive, and the longer
a product is in development, the more
di;cult it is to change the designs. “It
takes tens of millions of dollars to build
up a product, and most people are very
