Accurately Reading Open Innovation Tea Leaves

Monday, 24 September 2012 06:30
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I have studied the common interactions between participants in open innovation very carefully, from the technology provider's perspective as well as from the technology seeker's standpoint. While there may be some exceptions to the rule that I postulate this week regarding success determinants, I believe that they are just that...exceptions. Curious to learn more? Read on, dear friends.

Accurately Reading Open Innovation Tea Leaves

In my experience, I have found that there are two basic types of open innovation missions sponsored by technology seekers: Nice to Find Soon (NFS) and Must Find Now (MFN). Given the vast difference in success probabilities between them, how can a would-be technology provider distinguish between them? After all, the technology seeker isn't going to label them as such.

A technology provider aiming to address a corporate technology need that has been posted on the company's website should realize that the particular Need is almost certainly a NFS, and not a MFN. After all, would you advertise your company's most pressing strategic technical needs so that your competition can spot them?

With an NFS, one should expect a slow and not especially urgent review process. Also expect a very high rejection rate as the sponsor can afford to highly selective. Further, unless the company very precisely and objectively describes their success criteria and is very specific about the actions they'll take if they are met, you can safely assume that it is a NFS.

I don't mean to suggest that would-be technology providers shouldn't invest time in programs that they decide are NSFs. I merely advise providers who elect to pursue NSFs to consider lowering their expectations and to saddle up for a long and leisurely ride.

MFN programs on the other hand, are high priority projects where the customer is usually highly motivated to find and adopt a qualified solution on rapid timing. Unlike the NFS, a seeker will proactively act to find his solution versus passively waiting for it to arrive. The odds of a submission being an MFN (or at minimum, a higher prioritiy NFS) increase with the number of the following determinants that apply to the solution provider: (1) they were approached by the technology seeking company to discuss their solution (not the other way around), (2) rapid pace and progression for communications between parties and (3) money is explicitly part of the discussion and may be exchanged.

As you might imagine, MFNs tend to be far more interesting than NFSs. What makes MFNs so great? With them, the client is fully engaged and motivated, and decision makers are directly involved. There are also typically close-in program and decision deadlines. Dedicated funds and resources are employed to rapidly move the successful candidate's technology forward. When a company commits money to external development (versus asking the outside party to assume the cost burden themselves), that is the clearest and most direct signal of the customer's interest and importance. This leads us to Fruhling's Rule: When the customer opens up his wallet, you can safely conclude that they're serious.

However, seeing an open wallet and seeing the money that is in it may be two very different things. Savvy technology providers should recognize this distinction and show proper self-discipline to maximize their success probabilities. We will discuss this topic next week.

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