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I wanted to finish up blogging about the Open Innovation Strategy paper I published on SCN last month by drawing attention to the value serived from getting a firm’s OI strategy to include how to ensure OI initiatives bring value the firm’s field selling teams. There are some good questions for the OI strategist to ask:

– Can such a strategy introduce more opportunity for its field to drive revenue and growth?

– Is it enough for open innovation efforts to enable innovators to work with external collaborators where there is no certainty that the results will reach the field?

Can the success of an open innovation program be measured as valuable and relevant without knowing if the program’s results directly contribute to reducing costs for a customer or contributing to revenue for the firm attempting open innovation?

To measure open innovation success in this way differs from simply knowing if sharing and advancing knowledge is occurring or how much time is required to transform an idea into a useful innovation.  Outcomes from open innovation activities that are not measured for their impact to direct revenue generation still secure value for the firm, but such measures should complement those that demonstrate the output from open innovation extends value outside the firm.

The SAP Co-Innovation Lab has culled some of its own insights into how open innovation can be applied to the benefit of those who sell innovation. This lab provides an innovation platform comprised of a robust IT infrastructure comprised of technology partner sponsored complementary assets, an IP framework crafted to meet the needs of co-innovation, subject matter expertise driven through rich knowledge brokering, project and operations management all delivered as services.

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These services are then consumed by project requestors from both inside and outside of SAP in pursuit of project work meant to render commercially successful co-innovation results.

This project work has driven the lab’s steady, global growth over the past 3 years so our perspective is that this opportunity to support exploration is of value to all project participants. Through observation, we can see that the interest and arguments for wanting to pursue a given open innovation project are many. Despite this genuine interest and need, some project proposals can oftentimes become derailed if delivery of the expected results do not line up with the business stakeholder requirements to take advantage of the project’s outcome within a given window of selling opportunity. Timing that is often quarterly since this is the clock sellers must work to.

Account managers and partner managers alike, especially for large initiatives or big deals, will expect to invest in activities over one or two quarters if there is some level of assurance that the investment will bear fruit in the form of a closed deal in the second half of the year but for perhaps every instance that this occurs, there are three other deals that will only consider open innovation project work supporting a 90 day window of opportunity.

Scholars who study strategic management and innovation often talk about the dynamic capabilities of the firm as described in the published works of David Teece.  One such dynamic capability pertains to how well a firm can balance exploitation and exploration. One example of exploitation is where a firm can take immediate and exhaustive advantage of existing sustaining innovation, selling it directly or through a myriad of channels. This would also include cross licensing and OEM agreements bundling technologies and services into solution portfolios. This generally meets real demand and drives growth for all participants. Partners work together to take full advantage of this exploitation and it’s a strategy proven to work. The question becomes how much growth can be fueled this way if the ecosystem of participating partners does not grow as fast or faster?

This is where the notion of exploration may be able to fill in the potential gap. Exploration would be what the firm does with its ecosystem partners to discover new innovations; both sustaining and disruptive with the effort focused upon pre-release technology as well as to discover novel ways in which to re-use or repurpose existing technologies either through new integrations or net new innovation built upon previous work through collaboration or co-development. The successful orchestration of exploitation and exploration is viewed as a dynamic capability and one that an open innovation strategy can serve to optimize being able to get more innovation to the field more often and at a faster pace than what is traditional.

For a field organization to begin seeing open innovation as something of value, its benefits must be easily discovered, one approach is to look for the edge opportunities that represent where innovation is pursued through projects that can yield a useful result in 90 days. This may take 2 forms:

1.) Formulate a solution with a partner from existing products/technologies against an environment in the COIL lab which can replicate the target environment where the solution is to be deployed. The innovation emphasis is to identify improvements in performance, to lower cost, or reduce complexity through optimizing interoperability. The resulting proof points from such an exercise then contribute directly to closing deals

2.) The second is to pursue larger or more complex projects with partners of taking 3 to 6 months where the field invests in the effort over one to two quarters with the understanding that it will increase selling opportunity in the following quarters. This could take the form of new process innovations, or exploring interoperability and integration between different components and/or other elements in the stack.

With successful project execution, this second form contributes to forming a trust relationship with the field strong enough that it encourages field teams to discover how an open innovation approach can work to their benefit (and their customers). This newly forged trust then contributes to the firm being able to refine its dynamic capability of balancing exploitation and exploration made possible through open innovation. With support from the field it becomes possible to develop a new metric for measuring success of an open innovation strategy from its ability to directly contribute to revenue growth.

For someone that carries a bag they know more deals are won when a vendor can align what it does to a customer’s long term goals. Open Innovation projects represent an extraordinary opportunity for a vendor and its partners to collaborate on innovation projects that demonstrate a drive to delivery of solutions aligned with long term customer goals.

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