The Next Wave of Open Innovation

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InnoCentive itself, meanwhile, neither generates nor vouches for solutions. The firm is paid by Seekers, who pay a posting fee of $35,000 per Challenge (though they can purchase bundles of Challenges for a lower fee). Seekers can also purchase a set of training and technology services called Open innovation Rapid Adoption Methods & Practices (ONRAMP) to help them adopt innovation more quickly within their organization. There is no cost to be a Solver.

Karim Lakhani, a professor at Harvard Business School, has documented that many of the awards went to Solvers outside the discipline of the problem. Lakhani's research report observed that, "The further the focal problem was from the solvers' field of expertise, the more likely they were to solve it."

For instance, the Ocean Spill Recovery Institute posted a problem in 2007 regarding the challenge of separating frozen oil from water on oil recovery barges. The successful Solver of this problem was a nanotechnology expert with no background in the oil industry. He used a tool from the cement industry that was originally designed to vibrate the cement to keep it in liquid form during massive cement pours.

Shared Work Spaces

InnoCentive developed another insight about problem-solving when it sought to identify key figures within its network. It discovered that its most productive Solver, a researcher based in India, had actually taken the initiative to organize a team of a dozen engineers who worked together to scan and select challenges to pursue on InnoCentive. Subsets of the broader team would then pursue a solution that would be posted on InnoCentive's platform. Upon further investigation, it turned out that about 10% of the Solvers were actually relying on academic labs or broader research teams to address the problems.

This led InnoCentive's management team to launch a major new initiative last year to develop the capability to support and encourage the formation of teams to solve problems posted on InnoCentive. By the end of April, InnoCentive will launch these new enhancements to its platform to create shared work spaces for teams and to create governance structures that can effectively manage their intellectual property issues. Later this year, InnoCentive plans to create mechanisms for individual Solvers to more effectively find each other to dynamically form teams to address specific problems. Yet later, a third phase will offer recommendations of potential team members with diverse experiences and skills.

What can executives learn from InnoCentive's efforts to harness innovation?

• Diversity enhances problem-solving
Research on problem-solving success rates clearly indicates that diversity increases the probability of coming up with a solution to challenging research problems. A surprisingly large portion of the solutions come from Solvers in very different disciplines.

• Scale matters
Serendipity is most likely to occur when a large number of diverse participants are aggregated in ways that expose them to a broad range of challenging problems.

• Governance is critical
Contrary to the popular view that open innovation is self-organizing and emergent, problem-solving platforms like InnoCentive's are carefully structured to protect intellectual property and specify decision rights and reward distribution in advance.

• Teams amplify the power of individuals
Even on a platform initially designed to support individual problem-solvers, teams began to form to increase the probability of success in challenging big problems.

• Relationships trump transactions in successfully tackling a broader range of problems
As InnoCentive has begun to specify more explicitly the four levels of problem-solving, it realized that short-term transactions are effective in addressing only a limited set of well-defined problems. The broader and more diffuse a problem becomes, the more important it is to foster longer-term relationships among aspiring problem-solvers.

• Learn from others in building open innovation platforms
Even though InnoCentive is a pioneer in deploying an open innovation platform, it is carefully studying efforts by other groups to support collaboration and learning from their efforts. Recent initiatives at InnoCentive have been inspired by social networking platforms, shared workspace providers, online discussion forum sponsors and even online gaming.

• Open innovation has value within companies
While the practices and platforms designed to support open innovation initially were focused on reaching beyond the enterprise, these same practices and platforms have application within the enterprise as well. The company has developed a specific offering known as InnoCentive@Work that allows companies to post challenging research problems solely to its own employees. Again, it is difficult to specify in advance which individuals, teams or even disciplines are likely to generate successful solutions, so executives are finding that solutions often arise from unanticipated parts of the firm.

John Hagel and John Seely Brown are co-chairman and independent co-chairman, respectively, of Deloitte LLP's Center for Edge Innovation. John Hagel writes a blog at Edge Perspectives. Their monthly column, Innovation on the Edge, explores what executives can learn from innovation emerging on various forms of edges, including the edges of institutions, markets, geographies and generations. Sign up here for an RSS feed.