McKinsey's new article on open innovation

Posted by: Reena Jana on June 23, 2008

I just read the McKinsey Quarterly’s just-published article, “What’s New in Open Innovation?” — it’s available online. Most of the article features an overview of what’s been going on in terms of businesses co-creating with customers and consumers. You know, “user-generated content” or “crowd-sourcing.” Sure, it includes some stale news, such as what’s been going on in Second Life. That this example seems so out-of-date a year after the media (BW included, of course) heralded it shows you how quickly what’s hot online, in terms of communities, can fade.

A rarely discussed area mentioned in the article, though, is worth some investigating: how B-to-B businesses are using co-creation. The example McKinsey gives is a brief nod to SugarCRM’s customer-relationship-management software, which the company’s clients customize.

Worth reading: the authors’ list of how-tos has some sage advice. Nuggets include the suggestion for establishing clear rules, such as making sure it’s evident who owns what in terms of a co-creation’s IP, and clear roles, in terms of asking certain groups to co-create a specific aspect of a product or service, rather than encouraging a chaotic free-for-all. These bits of advice could be some of the, well, clearest and most valuable guidelines for businesses looking to experiment more with the concept of “co-creation.”

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Reader Comments

Pete Mortensen

June 23, 2008 01:48 PM

Interesting piece, to be sure. In true McKinsey fashion, they do a great job of surveying the existing literature. But, also in true McKinsey fashion, it's hard to discern an actual point of view within this survey. Anyone who has ever used Linux knows, for example, that crowds to not an approachable or usable operating system make.

Open-Source coding has been brilliant for low-level functionality and almost a universal failure in interface design, which further highlights concerns about co-creating products, particularly in look and feel.

As the article notes, B2B is, perhaps, the most reliable and safe area for co-creation. Customers tend to be as expert as the producers in such eco-systems, and they're closer to end users and therefore have a clearer idea of what people need. Collaborating with the value chain is a critical area for growth for B2B organizations. I would love to hear, however, if McKinsey has any experience conducting co-design or co-creation sessions with clients. Our experience doing them has been a bit different from what we expected -- or the theory predicted.

Micheal F. Martin

June 23, 2008 01:49 PM

People talk about patent thickets, but the thickest thickets aren't the ones created by the claims of patents -- they're the ones created by the multiple overlapping rules of ownership that apply to joint development efforts in the United States.

And it only gets more complex when you start considering how the ownership rules in the United States are different from most of the rest of the world.

To my knowledge, no IP treaty negotiation thus far has been able to address this important, but oft hidden aspect of our system of IP.

Chris McKinzie

June 24, 2008 02:37 PM

Nice article from McKinsey. Although co-creation as defined as "jointly developed innovation" is a nice concept, I think it has many hurdles to overcome, including incentives, conceptualization of the problem among the group and IP rights issues (there is even a project at Penn. State looking at this) just to name a few.

What may be more interesting and viable is the concept of co-creation from a more compartmentalized perspective since most inventions come from individuals or small groups and then evolve over time. It is the evolution process that can be "handed off" to others that are more skilled at a particular step in the idea to innovation process. The "Open Innovation" part of this comes in when you breakdown the traditional, linear product/service development process and consider that maybe it is best to give this "idea" to someone else (even another company) that is better positioned to evolve the concept.

There are a growing number of firms that help facilitate this type of open innovation exchange and Navi Radjou at Forrester has done some nice research on the subject and has labeled the model Innovation Networks. Also, Tapscott explains it as an Ideagora in his book Wikinomics.

It will be interesting to see how the end to end co-creation is adopted but there was also the recent failure of Cambrian House a couple months ago that certainly suggests that the model is not ready for prime time. In the end I think the evolutionary models are easier to manage, easier to define ownership and create clear incentives that make them much more viable.

Martin Ashcroft

June 25, 2008 01:58 PM

It's the "how-to" that's most often the tough part. While much has been written on the virtues of open innovation, I recently stumbled across a true guidebook that proffers sound "methods and techniques" especially vital to B-to-B initiatives.You may want to check out Ken Thompson's "The Networked Enterprise: Competing for the Future through Virtual Enterprise Networks," to go beyond the concepts and on to the "doing."

Liz Moise

June 25, 2008 04:15 PM

Reena,
I enjoyed your recap of this piece, as you know our B-to-B Seekers are big fans of open innovation. IP protection has always been a big priority for us, and we find that our clients and our Solver network have grown to expect it, as they co-create using our services.

I thought you might enjoy reading a recent post to our blog by one of our Solvers, James Mitchell.
http://blog.innocentive.com/2008/06/18/james-mitchell/
He talks about how he loves the practical application of his ideas thru InnoCentive.

Regards
Liz Moise
Marketing Manager
InnoCentive

Dr. V P Kochikar

July 2, 2008 07:36 AM

One not-so-obvious advantage of Co-creation is that it reduces the risk that a newly developed product will fail in the market. For an elaboration, see http://www.infosysblogs.com/thinkflat/2008/03/born_in_the_flat_world_bringin_1.html.
So, if you want to boost the chances that a new product will succeed in the market (and who doesn't?!), Co-creation with customers is a highly recommended way to go.

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What comes next? The BusinessWeek Innovation and Design team of Michael Arndt and Helen Walters chronicle new tools for creativity and collaboration, innovation case studies in both the corporate and social sectors, and the new ideas that have the power to change the way things have always been done.

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