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Hybrid Model for Open Innovation

At present I am involved with an academic project regarding open innovation and new product development process. Those who follow me by twitter or read some of my post on “my other blog” knows I promote an hybrid approach I call “clospen”: “The open nature of the process, integrating a big number of actors like, potential customers, suppliers, designers, manufacturers, etcetera, some competitors among them on other projects, some of them with different interest on the project, place the open platform in a sensitive situation. Is everybody able to contribute in the same way? Will be everybody granted with access to all the information? Is the platform or the management team able to handle a big number of people and enterprises? There is several questions like this that induces to consider pertinent an hybrid approach, open and close at a time, clospen”.
I was not the only one to realize of the convenience of this hybrid model addressing some type of project, professors N.Venkatraman, D.J.McGrath and Jeffrey Word at “Business Network Transformation” book , chapter 5, page 106, invokes the approach. But the best reference I found explaining why and how about the convenience of the hybrid model is due to Mr. Francesco D’Oracio. I specially like slides #20, #21 and #25 explaining the model and slide #30 about the underlying reason to openly contribute, the WIITF (What Is In It For Me) reason.
Please, enjoy his presentation:

InOutTV: “Close-Open” Innovation Example

Today we are going to receive some feedback about the open contributions from the readers of Eudald Domènech blog regarding the development of the new InOutTV media-center as an evolution of their present PVR device. For those not familiar with this Spanish company I like to say that the product and service they offer is like, but not the same, the one TiVo is offering in the USA market, a dual tuner TV recording system with an enhanced Electronic Programming Guide (EPG) service that enables you to see on TV what you like when you want.

This exercise is other example of how the user contribution is appreciated by manufacturers pursuing to bring a better product. Some particularities of these initiative are that the comments (more that 500 up today according Eudald) are hidden to avoid over-inform competition. This is a version of what I call “clospen innovation”, an hybrid approach to open innovation: “The open nature of the process, integrating a big number of actors like, potential customers, suppliers, designers, manufacturers, etc. some of them competitors among them on other projects, some of them with different interest on the project, place the platform in a sensitive situation. Is everybody able to contribute in the same way? Will be everybody granted with access to all the information? Is the platform or the management team able to handle a big number of people and enterprises? There is several questions like this that induces to consider an hybrid approach, open and close at a time, clospen”.

I is not only Eudald at InOutTV supporting this initiative, I think −this is a pure personal opinion− also their partners promote it, for instance David del Val, who recently spoke us about innovation and new innovative practices into the “Debate and Knowledge event” organized by “Fundación Telefónica” few weeks ago, furthermore I am sure he is strongly contributing into the strategic plan of the company regarding new products and services development.

InOutTV is into the radar of key player not only because of his product, his business model but his innovative approach to improve products and services. Congrats!

Forecasting

Forecast use to be a key activity on traditional supply chain activities. Besides the deep knowledge available about forecasting and the broad range of forecast techniques, I like to comment some remarks we use to hear about forecast.

Forecasts are usually wrong

I understand this is to emphasize we have to be careful on how to interpret predictions. If we take the exact forecasted figure it use to be wrong, most of the time they are not exact. Furthermore, sometimes even a forecasted trend fails. But to be wrong it doesn’t mean to be useless. For instance, the Newton theory of gravity is wrong compared with the relativistic one, but for some purposes Newton theory is useful, is “true enough”. Even relativistic is not “fully true”. In the same way we have to know how to use data forecast, the domain of validity, the assumptions made, the uncertainty consider … forecast is not a crystal ball but is a powerful tool. This is the sense we have to understand the said “forecasts are usually wrong”.

A good forecast is more than a single number

When we speak about the status of a project or we ask about a technology with some top manager, most of them self manmade owners of a fair big company, they use to ask me for a single word, god or bad, yes or no, sold or not, etc. Their mind in that case is dichotomic because the underlay question is to go ahead or not with a given action (adopt that technology or not, send the invoice or not, fire an executive or not). Human mind like a single element, a single word, a single concept, a single figure to define a situation, and prediction process is immerse on the same phenomena, we like to define future status with a single word or a single figure. But in the same way real life is not a single number, the forecast of a real live fact will not be a single number. Life is also dynamic.

A good forecast has to integrate the assumptions made to perform the forecast and has to integrate the evolution along the time of the forecasted factor.

Aggregate forecasts are more accurate

Usually a fact use to be a summation of facts. Each one with a different contribution grade to the final fact. This is a fact use to be a weighted summation of factors. When we made a forecast, we are, directly  or indirectly, forecasting individually those factors, and to do this we are assuming certain conditions for each factor. If a given assumption fail in a given degree, the forecasted factor will fail accordingly. All the assumptions are not going to be wrong at the same time and the higher the number of factors we can integrate to forecast a fact, the lower the likelihood all of them fails simultaneously and therefore the forecast will be more robust.

The former paragraph has been a verbal explanation of the well known at statistics theory of the “central limit theorem” that states the conditions under which the mean of a sufficiently large number of independent random variables, each with finite mean and variance, will be approximately normally distributed.

The longer the horizon, the less accurate the forecast

Forecast is at the end an extrapolation mathematical computation, this means the far from the known data the worst prediction. Also, if we forecast with a single number, because of the dynamic nature of life, most probably will fail because the assumptions will change. The nature of the forecasted phenomena has strong influence, for instance, we can forecast the average distance between the earth and the sun for the next one thousand years accurately even with a single number. But the weather forecast for next month is really difficult if not impossible.

We can make the same remark when forecasted estimation is based on linear regression, but when higher order functions like quadratic or exponential functions comes into play, time influence increase dramatically and a fail on the selection of the coefficients could produce very big mistakes at the longer time period.

Past + key information = better forecast

What is a forecast? A description of a future situation. If the situation is static, it will be determined by the knowledge of relevant to the case (key) factors and their influence and if the future situation is dynamic, the change will be a composition of a trend, a seasonality (or periodicity) and novelties. Trend and seasonality could be observed in the past so weighted “in the right way” could contribute to improve forecast. But sometimes …

Eco-Innovation

Last week I was attending the presentation of the book Eco-Innovation written by Javier Carrillo, Pablo del Río and Totti Könnölä. I have not read them yet but the presentation includes an overview of the main contents and topics covered by the book, a sounds to cover most of the related with point subjects. I would like also to emphasize the speech of Mrs. Beatriz Yordi , head of Eco-Innovation unit of the European Commission, explaining the activities and initiatives the EC is addressing regarding this “hot” topic.

The event was also a nice opportunity to meet with professor Jesús Guerro, the IE expert on Reverse Logistic and the man who open my mind to the broad ranges of business opportunities behind that concept and their practice. As usual on the events organized by IE the cocktail and networking time after the presentation was really enjoyable.

Madrid Olympic City

Is the smartphone going to become a commodity?

On the last conference I attend, SIMO Network in Madrid, I could enjoy Howard Rheingold presentation about “mobility as a key technology” with a lot of examples about the relevance of mobile devices and applications on our present and future lives. I obviously realized a gadget it seems is going to be everywhere, everytime attached to almost everybody is the smartphone. The omnipresence of the smartphone drives the device to become a commodity which implies the hardware evolution will follow the same path of other technological devices like the PC or the notebook, after a pre-paradigmatic stage an standard in the market set of features are established, followed by a price reduction race among hardware manufacturers complemented with performance enhancements.

Other devices like notebooks and netbooks are also present on this battleground with a lot of innovation like the internet tablet by Archos. But besides the “gadgetry” view, today there are new factors to consider at present competition, I am speaking about how this devices are conceived, designed and manufactured. The relevance of the “wisdom of crowd“, the “open innovation platforms“, the “voice of customers” and openness in general are unquestionable new factors to consider.

The quick overview attached below and compiled by AnaBorg of today’s state of the art smartphones built in open platforms like Android shows the growing activity around that devices and openness:

• OpenMoko Neo FreeRunner
• Samsumg Galaxy
• Acer A1
• Motorola DEXT
• Nokia N97

The abundance of smartphone hardware platforms contributes to the widespread and improvement of open mobile platforms like Android or where under my point of view the future of movile devices and communications are. But this topic is out of the scope of this post …

Design Methods

I liked the post by the “Design council” regarding “Design methods“, but I think it is more a collection of  “New Ideas Generation” proceses that designs, nevertheless a nice package of tools to consider when addressing a new design project.

New Products Development: Implementation

This post outline several issues that are required to be analyzed with deeper detail and suggest some guidelines to implement an open platform for the development of new products under a collaborative environment. A review to the existing literature about theoretical knowledge and empirical experiences regarding virtual organizations, mention there is two principal roles, the business orchestrator and the team members. If you consider the project under an entrepreneurial approach, the participant seems to be the more feasible role, this allows to integrate our project into an existing networks building on our own  strengths and expertise, but if we have in mind a more academic perspective or we have in mind access to a big budget for implementation, the role of orchestrator is the one to consider. Along the post the orchestrator role is going to drive our thoughts.

“Clospen” approach

The open nature of the process, integrating a big number of actors like, potential customers, suppliers, designers, manufacturers, etc. some of them competitors among them on other projects, some of them with different interest on the project, place the platform in a sensitive situation. Is everybody able to contribute in the same way? Will be everybody granted with access to all the information? Is the platform or the management team able to handle a big number of people and enterprises? There is several questions like this that induces to consider an hybrid approach, open and close at a time, “closepen”. It will be one of the project goals to find out a balance between openness and control and this is a key value of the project hen defining the architecture of the business network, the participants and their reward mechanism.

Information Technologies Platform

There is no doubt IT is the tool that makes possible integrate at the lower transaction cost the people, companies and resources required to make possible this concurrent a collaborative way of develop new products, but IT is a broad territory to explore. Within this project we have to evaluate the existing collaborative software platforms and their suitabliness to the project, furthermore, to analyze the philosophy of the platform, issues like:

• Build a complete new platform from scratch?
• Integrate existing tools better suited to our product types?
• Use open software or proprietary solutions?

Some existing tools we have to consider, evaluate pros and cons are:

• Proprietary ERPs like SAP NetWeaver :

• Open code ERPs like Openbravo:

• Collaborative tools like Webex from Cisco, Basecamps or Groove from Microsoft:

The right way to evaluate the tools is verify if they can perform the business process the open platform we are developing requires.

Business Network Members

In fact we are defining what is called also a “virtual corporation” where some activities are considered “core”, usually they are the marketing or brand management, the R&D and the global management, in this case the orchestrator. Other activities are “critical” but not core, like sales, manufacturing and logistics, and other are only required like administrative, general facilities, etc. Along the project we have to review what activities and members fit into each category.

Regarding the nature of the products to develop we can define at a first glance the following core activities which could be addressed by a corporate team or core network member:

• Marketing Team
• Medical Team
• Electronics Team
• Materials Team

Along the project we have to detail the capabilities and expertise of the referred teams or network members.

Business Network Processes

Inspired by the Lean Design For Six Sigma techniques we have to define the relations among expert team members and network enterprises.

The project goal would be to define the activities flows among different teams or functional network members and how they are related with the collaborative tools we decide to use.

Innovative Reward Mechanism

There is a lot of contributors, and we have to evaluate non standard reward mechanism like dynamic allocation of shares ,  reputation, shared interest, etc.

I think a key success factor of the loose coupled network we are defining is the way the contribution of each member is going to be performed. All participants need to be committed with the project accordingly the relevance of their task and rewarded in the same degree. Some also innovative formulas could be considered, like:

“Liquid property”, this is to find a mechanism to distribute shares dynamically according the contribution of each participant. Something between the capitalist and cooperativist models.

“Sponsor an artist”, is a new way to finance new artist by joining through a website the required number of people to pay the disc edition. The rights of the song will be shared proportionally. Examples: “El cosmonauta” film and the saga “The lord of the rings”.

Open Platform for New Products Development

Current Situation

Major Complications

Proposed Solution

Succeed Metrics

New Products Development: Proposed solution

The difficulties outlined before could be diminish with the help of new technologies and enterprise practices that are gaining momentum today. The widespread of telecommunications and broadband, the virtualization of services, the acceptable level of performance of the knowledge management tools, the growing of enterprise networks, etc. are becoming tools the trigger the acceptance of a “collaborative” way to address problems and work in a “concurrent” way rather than linear.

Lets describe a little bit some of the key features the “new Supply Chain” we are proposing has to integrate.

Concurrent: The previously mentioned “linear approach” fits with the most usual up to day department structure of the companies, the fully independent units one, were inputs and outputs from a given department were clearly defined and planned in advance, “slowering” and “bureaucracing” the whole creation and development process because the mismatch of the input/output needs among different departments and the suboptimum solutions reached. The rational behind this is that the optimum of the whole chain is not the optimum of each stage. The concurrent approach is a more “collaborative” development process, were all the implied agents work together pursuing a global optimum. We have a practical example in the way the European Space Agency is facing the development of new satellites by the use of the Concurrent Design Facility.

The concurrent development practices will solve the lack of relevant information at different stages of the project and of different actors.

Open: Traditionally research and development activities were conducted inside the company, this is what is described by H.W. Chesbrough like the “close innovation paradigm”. The advent of several factors like the increasing availability and mobility of skilled scientist, the mature and widespread of venture capital markets and the increasing capabilities of external suppliers, leads to a new status where the silos approach was not the best fitted to address new innovation challenges and as Chesbrough highlighted the “open innovation paradigm” appears. We are in an abundant knowledge landscape where we can do a great work by searching and integrating external knowledge in new and different ways to create new products and services that fits our own particular goal.

The openness will contribute to integrate real customer needs from the early beginning, target niche markets and be open to existing solutions from all over the world and integrate the latest and more appropriate technologies.

Interactive and iterative: The development of a new product is a inherent trial and error process, and in the same way in the software development industry there has been a widespread transition from the “Waterfall model” (linear or sequential process) described before to the “Spiral model” (iterative process) we can translate this experience to other industries. The trick is to systematize in an agile way the traditional “trial an error” process, and their inherent learning nature.

Lean: We are designing innovative products that has to be  manufactured in a reliable, fast and cost effective way. This principles has to be accounted from the early beginning, this mean the pertinent Lean Design For Six Sigma tools has to be considered and integrated in the framework we are defining.

LDFS practices will be the way to an acceptable level of market performance at first attempt, which by the interactive and iterative nature of the process will led to an continuous improvement.

Virtual: The open nature of this new approach implies to join the effort of a big amount of people spread all over the world. Some like “WEB based” platform has to be used to integrate interaction and information flow. The approach of “virtual corporation” or “knowledge broker” relying on the intensive use of information technologies and knowledge management tools is a key enabler to implement the previously mentioned open and concurrent features.

Virtually is the key to minimize transaction cost, be agile and flexible to build custom supply chains to address a particular project.

Reward: The open nature of the approach means some clear and reward mechanism has to be conceived. There are several agent involved with different commitment. Reward has to be accordingly.

I think this new way to develop new product is going to be the main trend in the industry in the coming years, the earlier we start to apply this design practices into existing organizations or the new ones, the higher chance to be on a privileged position to address the market. The aim of this project proposal is to integrate all this factors in a unique model and give the design guidelines to build a software platform or configure an existing one to support this open design activities into a virtual framework.

Open Platform for New Products Development

Current Situation

Major Complications

Proposed Solution

Implementation

Succeed Metrics