Open Innovation Idea-Generation-Collaboration PDF

Open Innovation: Enhancing Idea Generation
Through Collaboration

2013 APQC. ALL RIGHTS RESERVED.
page 1
Table of Contents

Project Personnel and Copyright 2
Research Champion 3
Sponsor and Best-Practice Organizations 3
Introduction 4
Research Champion Perspectives 5
Subject Matter Expert Insights 7
Study Findings 10
Open Innovation Strategy 12
Open Innovation Roles 29
Open Innovation Processes 38
Open Innovation Measurement and Improvement 61
Open Innovation Enablers 73
Research Champion: Project Management Institute 89
About This Research 89
Case Study: Amway 92
Case Study: British Telecommunications plc (BT) 113
Case Study: Cisco Systems Inc. 128
Case Study: Corning Inc. 152
Case Study: General Mills Inc. 162



page 2
Project Personnel
PROJ ECT TEAM
Marisa Brown, director, research services, APQC
Becky Partida, research specialist, APQC
Andrea Stroud, research program manager, APQC
RESEARCH CHAMPI ON
Chris Landes, manager, market research, Project Management Institute
Stephen Townsend, director for global alliances and networks, Project Management
Institute
SUBJ ECT MATTER EXPERTI SE
Matthew Heim, executive vice president, inno360
Christopher W. Miller, CEO and founder, Innovation Focus
CONTRI BUTI NG WRI TER
Lauren Trees
EDI TORS
Paige Leavitt Mowbray
Becky Partida
MEMBERSHI P I NFORMATI ON
For information about how to become a member of APQC and to receive
publications and other benefits, call 800-776-9676 or +1-713-681-4020 or visit our
website at www.apqc.org.
COPYRI GHT
2013 APQC, 123 North Post Oak Lane, Third Floor, Houston, Texas 77024-7797
USA. This report cannot be reproduced or transmitted in any form or by any means
electronic or mechanical, including photocopying, faxing, recording, or information
storage and retrieval.
Additional copies of the report may be purchased from APQC by calling 800-776-
9676 (U.S.) or +1-713-681-4020 or online at www.apqc.org. Quantity discounts are
available.
ISBN-13: 978-1-60197-186-9
STATEMENT OF PURPOSE
The purpose of publishing this report is to provide a reference point for an insight
into the processes and practices associated with certain issues. It should be used as
an educational learning tool and is not a recipe or step-by-step procedure to be
copied or duplicated in any way. This report may not represent current
organizational processes, policies, or practices because changes may have occurred
since the completion of this study.

page 3
Research Champion
Project Management Institute
Sponsor Organizations
Aramco Services Co.
Cenovus Energy Inc.
ExxonMobil Corp.
The Houstonian Hotel, Club and Spa
Nestl Purina Pet Care
Newmont Mining Corp.
Trimble Navigation Ltd.
United Technologies Corp.
U.S. Army ARDEC
Best-Practice Organizations
Amway
British Telecommunications plc (BT)
Cisco Systems Inc.
Corning Inc.
General Mills Inc.


page 4
Introduction
Bolstered by the increasing rate of change in many markets, organizations are
seeking ways to get to market faster, deliver greater value to customers, and better
manage costs. Open innovation, with an emphasis on collaborating externally and
internally, has helped many organizations achieve those goals. APQC undertook this
study, Open Innovation: Enhancing Idea Generation Through Collaboration, to
examine the practices of successful organizations. By studying Amway, BT, Cisco,
Corning, and General Mills, in partnership with PMI, Matthew Heim, and
Christopher Miller, we found organizations getting desired results. Access to the
right network, the right mechanisms to integrate and expedite vetting new ideas, and
a fully integrated process helps level the playing field with larger competitors and
enables the shift from small innovations to more large, breakthrough ones.
Expanding the organizations sources of new ideas powers the shift from quantity to
quality of innovations.
In this research, we saw that open innovation yields access to connections and
partners with differential technology that was not previously considered. But its not
just technology. Open innovation also helps organizations take advantage of
processes and cost structures that they may not have known before reaching out to
the partner. This collaboration also gives organizations the ability to leverage
different business modelssuch as different go-to-market or manufacturing
opportunitiesfrom partners.
Two particularly interesting findings that emerged in this research are: 1) the
integration of open innovation and knowledge management (KM) and 2) the
treatment of intellectual property by the best-practice organizations. APQC has
studied KM as a discipline since 1995. We now see how some core KM approaches
like expertise location, the facilitated transfer of best practices, the transfer of
lessons learned, and the use of social media for collaboration are all relevant and
helpful to open innovation. APQCs prediction is that the intersection of these two
disciplines is going to yield many exciting changes in the years to come. When it
comes to intellectual property, in this study APQC saw organizations shifting away
from long-held beliefs that they must own all intellectual property related to their
products and services. As comfort with open innovation has grown in the
organizations studied, so has their willingness to try other models and be more open
regarding ownership of intellectual capital. As the world becomes more open, so do
many corporate approaches and policies.
Marisa Brown
Director, Research Services, APQC


page 5
Research Champion Perspectives
PROJ ECT MANAGEMENT I NSTI TUTE
The innovations coming over the next 10 years have the potential to completely
transform the world in which we live. From enabling entrepreneurs in developing
countries to mobile medicine to alternative energy sources, the potential
opportunities and their impacts are astounding. The companies effectively leading
and sustaining that innovation curve will experience strong financial performance
and have a significant competitive advantage.
From a shorter-term business vantage point, a recent report from Wipro and Forbes
Insights titled Growth Strategies for 2012 and Beyond found that strategic innovation is
more important than ever for driving growth at the worlds largest companies.
Under pressure to differentiate their businesses after the 2008-2009 recession, and
with emerging markets playing a more critical role in future growth plans, business
leaders believe their ability to innovate is what will set them apart. The global study
found that 68 percent of surveyed executives agreed that innovation is now more
important than it was prior to the recession.
All aspects of the innovation processideation, evaluation, validation, and
executionare important. Still, research organizations such as Booz & Co., the
Boston Consulting Group, and PricewaterhouseCoopers continue to produce
studies showing that execution performance is the most critical component of
innovation. For example, the Booz & Co. 2012 Global Innovation 1000 study found
that those companies that described themselves as highly effective in the early stages
of innovation reported that being highly effective at idea conversion is more
important to financial success than being highly skilled at generating ideas. This
finding demonstrates that innovative ideas must be transformed into some end that
drives business strategy to be of value to organizations. Organizational project
managementwhich includes project, program, and portfolio managementis the
system through which innovations are transformed from ideas into actions.
The Project Management Institutes 2012 Pulse of the Profession In-Depth Report:
Organizational Agility identified that more compact and agile innovation is critical.
Three-quarters of respondents identified faster response to strategic opportunities as
a required characteristic for an agile organization, and almost two-thirds mentioned
the need for shorter decision/production review cycles. The Economist Intelligence
Units 2009 study Organizational Agility: How Business Can Survive and Thrive in Turbulent
Times further proved that finding by uncovering that half of CEOs and chief
information officers surveyed said that rapid decision making and execution were
essential for a companys competitive standing. When asked in the Pulse study how
successful they were with implementing new initiatives over the past two to three
years, most organizations responded that their performance was unchanged or less
successful (55 percent).

page 6
A PMI-funded study, Best Industry Outcomes by Lynn Crawford and Terry Cooke-
Davies, examined how business strategy drives organizational project management
in nine industries. The study found that the key strategic drivers, success criteria,
and factors across all industries in order of precedence are:
1. execution performance,
2. financial performance,
3. customer focus and satisfaction, and
4. innovation.
The Project Management Institute is dedicated to helping organizations improve
their execution performance so they are better able to leverage their innovation
activities to drive business performance and success. As a partner with APQC on
this important study, PMI hopes that its contributions provide useful insights,
approaches, and knowledge for practitioners seeking to change the world through
innovation.


page 7
Subject Matter Expert Insights
Open innovation is a term that has existed for merely a decade, yet it has rapidly
advanced from being viewed as a fleeting trend to becoming a globally recognized
management discipline. This rapid development can only be attributed to one factor:
it has proven to generate demonstrable value. Recent advances in technology,
competitive landscapes, and social media have presented both drivers and
opportunities for external collaboration. It is crucial at this time of rapidly increasing
competition that companies begin to understand the new tools, structures, and best
practices that are available today and how to create value from their open
innovation investments.
The concept of contemporary open innovation derived from the need of companies
to sustain the rapid pace of technological advancement in their product
development lifecycles. As the idea of going to the outside showed promise, other
departments across the value chains of organizations explored new ways to leverage
external knowledge. Hence we see the emergence of crowdsourcing and other
externally facing, campaign-based activities designed to augment ideation and
knowledge generation, from the demand chain through the supply chain of many
organizations. Furthermore, we now see the practice of open innovation migrating
from manufacturing into other service-based industries such as insurance, banking,
and professional services.
Open innovation used to be a discipline practiced only by larger corporations that
could afford to build an infrastructure of people, process, and technology to support
external collaboration. More recently, smaller regional governments, science parks,
and other local and federated networks have been forming to provide smaller and
mid-sized enterprises better access to the open marketplace. With their limited
budgets and resources, it is even more crucial for these smaller organizations to have
the means to continue innovating with access to external knowledge. We will
continue to see open innovation expand into the small and mid-sized market
segments as these new networks and programs continue to emerge.
In this study, APQC has assembled the collective knowledge of various experts in
the field of open innovation, as well as companies that have evolved into a mature
state of open innovation strategy, process, and overall effectiveness. Although there
is still no single best way of implementing and managing open innovation, the
companies highlighted in this study share the diverse practices they have developed
that have proven to be effective in generating value for their organizations. With
this knowledge, todays new open innovation practitioners can quickly discern which
practices would best fit their organizations unique needs and perhaps inspire new
ideas that will contribute to the ongoing growth and evolution of this exciting new
frontier.
Matthew Heim
Executive Vice President, inno360

page 8
As open innovation has matured, it has moved from an interest in simple idea
screening from external/non-company sources to experimenting with a large variety
of tools and techniques that target and extract ideas from:
within the value chain (partnering with consumers and vendors),
within the community of interest/the value network (parallel groups that must
work together, such as software and hardware), and
the rest of the world.

Few would disagree that companies serious about market leadership must consider
open innovation. Yet many organizations have faced the challenges of discovery
with little concrete evidence of what works. What metrics are appropriate? Are we
comparing open innovation with internal innovation techniques? Can you even run
different innovation projects against a common set of metrics?
The first step in having meaningful metrics is to have a solid set of hypotheses.
APQCs Open Innovation: Enhancing Idea Generation Through Collaboration
research is important work not only for what organizations can learn and
immediately apply, but also because it suggests a set of significant hypotheses. These
hypotheses can be tested and potentially yield the metrics fact-based organizations
yearn for.
My nominations for hypotheses about all forms of discovery, open and internal,
follow.
The ideation process, like all processes, is a servant body of knowledge. It
supports the content and does not lead it. It is not about the tool; it is about
what you want to do with the tool.
Those with an agreed-to process succeed more often than those that work to
constantly reinvent it. A process helps an organization or project team go from
an agreed-to starting point through a discovery activity and ultimately to an
agreed-to conclusion.
Those that have facilities with different types of ideation tools and more
flexibility to exercise them tend to be more satisfied with the outcome. A tool
can be anything from co-location to a short creativity exercise.
Finally, and most controversially, ideas are the smallest outcome unit of ideation
activities, relationships, and understanding. Empathy, shared commitment, and
agreed-to direction can all emerge from ideation and are the essence of the
value.


page 9
Potential open innovation ideation differentiators follow.
Projects that use open innovation are more likely to have clear strategic
direction than those that do not. This implies a charter with a discovery process
connected to the strategy and agreed to by the team and its high cover.
Those that aggressively support open innovation use a greater variety of tools
than those that do not. They do not limit themselves to the process knowledge
within their corporate walls.
Those that are aggressive about the use of open innovation strengthen the
capability of their internal team by exposing it to diverse knowledge sets. This,
in turn, can strengthen internal innovation efforts.
Those that use open innovation are more successful at breaking through
artificial organizational definitions and barriers. The innovation teams take a
broader world view that allows more honest introspection of what an
organization does that is helpful and what it does that might inhibit its goals.
Finally, ideation within open innovation is not restricted to the discovery stage.
All stagesdiscovery, development, commercialization, and life-cycle
managementrepresent opportunities for open innovation ideation. After all,
building something new may require new operating processes, new business
models, and new organizational structures.

This APQC research is an important effort to add understanding by observing best
practices in a few best-in-class companies. It will not give you a definitive answer to
what will work for you. But it will give you an important understanding and a
unique perspective on ideation within open innovation at this time. If you can
convert the ideas and questions created here into an honest dialogue for the
continuous improvement of your companys process, then we contributors will be
deeply grateful.
It has been a pleasure to join you in a small part of the journey.
Christopher W. Miller, Ph.D., NPDP
CEO and Founder, Innovation Focus


page 10
Study Findings
BEST PRACTI CES
The APQC project team, in conjunction with the Project Management Institute and
the study subject matter experts, identified 11 best practices in this research
regarding open innovation strategies, roles, processes, and measurement and
improvement.
Open Innovation Strategy
1. Focus on targeted, needs-based open innovation.
2. Partner broadly across a variety of external and internal organizations.
3. Position your organization to build and manage key relationships.
4. Allow open innovation maturity to drive the approach to intellectual
property ownership.
Open Innovation Roles
5. Establish a central, dedicated group to drive open innovation.
6. Seek open innovation team members with specialized skills and
backgrounds.
Open Innovation Processes
7. Integrate and align the open innovation process with other relevant
processes to ensure key entities are involved at critical points.
8. Embrace broad and specific scouting for new ideas.
9. Invite participation in open innovation via experiences.
Open Innovation Measurement and Improvement
10. Seek compelling measures for open innovation.
11. Use change management to drive commitment to open innovation.


page 11
KEY ENABLERS
In addition to best practices, the project team recognized five practices that are
common enablers of successful open innovation. Their presence is not necessarily a
best practice, but their absence would affect the organizations odds of achieving
success.

1. Seek hands-on support from and exposure to senior leadership.
2. Recognize internal and external contributors for their ideas.
3. Match portfolio management to the innovation and organizational
strategies.
4. Focus on the open innovation process and players first, and then find the
tools to help.
5. Capture lessons learned, and continuously improve the open innovation
process.


page 12
Open Innovation Strategy

Findings in This Section
1. Focus on targeted, needs-based open innovation.
2. Partner broadly across a variety of external and internal
organizations.
3. Position your organization to build and manage key relationships.
4. Allow open innovation maturity to drive the approach to intellectual
property ownership.

FOCUS ON TARGETED, NEEDS-BASED OPEN I NNOVATI ON.

To thrive, an organizations open innovation initiative should be needs-based and
closely tied to the organizations strategy. APQCs research has previously found
that successful organizations develop strategies for their product development and
innovation programs. APQCs 2007 report Successfully Embedding Innovation: Strategies
and Tactics found that leading organizations use business strategy to create guidelines
for innovation.
1

The results of this study extend this concept into the open innovation space. Rather
than throwing open the doors and accepting all unsolicited ideas, the best-practice
organizations in this study focus their open innovation initiatives on areas of the
business that have specific needs. This ensures that new innovations acquired by
these organizations remain relevant to the business.
HOW BEST-PRACTI CE ORGANI ZATI ONS DO I T
Amway has a focused open innovation effort in that 80 percent to 90 percent of the
innovations it sources from external groups are based on specific needs identified by
the organization. This provides some freedom for the organization to pursue
additional innovations while keeping a primary focus on the strategic needs of the
business. When searching for new innovations, Amway creates a technology profile,

1
APQC. Successfully Embedding Innovation: Strategies and Tactics. APQCs Collaborative
Benchmarking, 2007.

page 13
which is a detailed description of a technology or solution that Amway is seeking.
These profiles include:
the characteristics of the desired technology,
its intended purpose or use,
any existing technologies in the same category, and
any deal breakers, or items that should be taken off the table in sourcing
potential innovations.

Amway shares these profiles both within the organization and with potential
partners to accurately communicate what the organization is looking for and to
quickly filter through potential innovations.
BTs open innovation initiative focuses primarily on addressing needs within the
organization for new service offerings to repackage and distribute to its customers.
Its centralized innovation group communicates with senior managers to identify
needs from the organizations business units. The centralized innovation group can
then research external organizations that BT may partner with to address the
organizations need.
In a different way to address organizational needs, General Mills has established the
General Mills Worldwide Innovation Network (G-WIN) to find relevant
technologies. Through its G-WIN innovation portal on the organizations website,
General Mills accepts submissions from outside organizations. The organization
posts briefs that describe needs that it wants to address. These briefs are abstract
enough to generate a variety of potential solutions from both within and outside of
the food industry.
Align open innovation initiatives with organizational strategy.
In addition to maintaining a focus on addressing the needs of the business, the best-
practice organizations in this study ensure that open innovation efforts align with
organizational strategy. This means that organizations look for innovation
opportunities in adjacent markets that expand the business without moving in a
radically different direction. The best-practice organizations also set clear
expectations on the value that must come from new innovations.
Many organizations that have advanced open innovation practices provide a process
to review and integrate unanticipated, adjacent technologies found through open
innovation that could add value.
Cisco Systems emerging technologies group seeks new innovations in markets
adjacent to Cisco and in areas in which other parts of the organization are not
investing. It focuses on the value that these new innovations can generate for the

page 14
organization overall. However, the organizations revenue goal in expanding is an
ambitious one: its emerging technologies group has a mission to cultivate new
businesses with billion-dollar revenue potential. It set this goal because of the
amount of revenue needed to make an impact on overall revenue for an
organization the size of Cisco. The organization also seeks to generate value for the
enterprise by seeking innovations that provide growth opportunities for Ciscos
foundation and other businesses.
Amway also uses innovation as a means of staying competitive. The organization
views innovation as a combination of creativity, potential value, and strategic fit. It
uses innovation strategically in that it only pursues an idea that has a clear market
and aligns with the long-term goals of the organization. Its innovation process
focuses on bringing together a consumer need, a technology (including design,
materials, process, or information), and an opportunity to create value for the
business. Amway recognizes that it needs innovation because it does not have the
resources that its competitors have to devote to internal product development. Thus
it determined that open innovation could potentially facilitate $48 million in new
business every month and lead to 5 percent organic growth. Having an ambitious
goal for the organizations open innovation initiative ensures that Amway remains
focused on using innovation to remain competitive.
At BT, its technology scouting initiative aims to find organizations with innovative
technologies that BT can then package and offer to its customers. This goal is in line
with BTs focus on providing new service offerings to customers at the lowest cost
and with the best customer service. An example of how the technology scouting
group provided value to the organization is BTs service offering Dolby Voice. BTs
scouting group learned that Dolby Laboratories Inc. was developing surround
sound technology that could be applied to phone calls. BT licensed this technology
as a way of differentiating its audio conferencing services from that of its
competitors.

PARTNER BROADLY ACROSS A VARI ETY OF EXTERNAL AND
I NTERNAL ORGANI ZATI ONS.

The best-practice organizations in this study collaborate with a wide variety of
external and internal groups for innovation. The backbone of such collaboration is
the openness to suggestions from external sources. As part of this study, APQC
collected data from both the studys best-practice organizations and from the studys
sponsoring organizations. All of the participants were asked to rate whether their
organizations were receptive to projects suggested by strategic partners and other
external sources. The best-practice organizations indicated that being receptive to
projects suggested by these external sources applied to some degree to their
organizations. For the sponsoring organizations, this is true to a lesser extent. Sixty

page 15
percent indicated that it was true to some extent, and the remaining 40 percent
indicated that they were not sure or that it was not true to some extent.
The willingness of the best-practice organizations to look outside of the enterprise
for new ideas signals a shift from recent ways of doing business. During the late
1800s and early 1900s relationships were often built in designated clubs, where
representatives from organizations would meet to strike deals. Then around World
War II companies grew more protective and became internally focused, which led
them to develop complex R&D organizations and rarely look externally for
innovations. However, to remain sustainable, best-practice organizations are again
looking beyond their walls to source innovations from external groups. Although
relationship development remains important, it has shifted from the insulated
environment of clubs to one in which organizations establish nontraditional
relationships with groups they may not have considered before.
Figure 1.1 presents the types of groups that both the best-practice organizations and
the sponsoring organizations for this study work with on innovation efforts.
Partners for Idea Generation and Innovation

Figure 1.1

0%
0%
75%
25%
25%
50%
75%
75%
100%
100%
100%
25%
75%
75%
100%
100%
100%
100%
100%
100%
100%
100%
0% 20% 40% 60% 80% 100%
Other (Affiliate organization)
Competitors
Open innovation service providers
Government agencies
Entrepreneurs
Employees within the group responsible for open
innovation
Universities
Customers
Consultants
Suppliers
Employees and business units outside of the group
responsible for open innovation
Best-Practice Organizations (N=4) Sponsoring Organizations (N=4)

page 16
The best-practice organizations in this study collaborate with employees, as well as
more traditional partners such as customers, suppliers, and universities. However,
these organizations also collaborate with government agencies and entrepreneurs.
These organizations have embraced business, government, and university
collaboration to facilitate innovation and creativity. Nearly all of the best-practice
organizations also collaborate to some degree with their competitors.
By contrast, the sponsoring organizations for this study collaborate primarily with
traditional partners such as suppliers and consultants. Only one-quarter of these
organizations collaborate with government agencies and entrepreneurs for idea
generation, and none of these organizations collaborate with their competitors.
It is important to note that the best-practice organizations vary the outside groups
with which they collaborate based on the innovation need. Thus they may not have
projects in progress with all of the different types of partners at the same time.
Amway leverages networks for potential sources of innovation (Figure 1.2). For
example, Amway uses scientific advisory boards to identify and locate bleeding-edge
technologies that are of interest to the organization. Many of the board members
from academia have brought promising startups to the attention of Amways open
innovation team.
Amways Networks for Open Innovation

Note: SAB denotes Amways scientific advisory board.
Figure 1.2

page 17
Amway also taps its customers and internal business units as sources of innovation.
Some of these internal units conduct local product development that can be used in
other areas of the organization. Amways open innovation team also maintains close
relationships with other business units to gain valuable perspective on the feasibility
of projects. Figure 1.3 presents the partnerships the open innovation team has
established with other units within Amway.
Partnerships Between Amways Open Innovation Team and Other
Functions

Figure 1.3

For example, Amway's open innovation team has a close relationship with the
procurement function, which provides valuable insight into negotiations. The open
innovation group tapped the procurement function to create its own strategic
sourcing position.
Amway also looks to foreign governments for introductions to innovative
organizations. Because venture capital is not readily available in some countries, the
national governments for these countries sometimes provide seed money to
innovative companies. These governments are eager to connect organizations such
as Amway with these smaller companies so that home-grown innovations can be
brought to market.

page 18
Similarly, BT works with a variety of internal and external groups to source
innovations. Figure 1.4 outlines the organizations sources for innovation. BT
focuses on licensing and adapting existing technologies rather than investing in
technology development. The creation of BTs Dolby Voice audio conferencing
service is an example of this. Rather than develop the technology within BT, the
organization invested in an adaptation of an existing BT service.
Innovation Sources and Initiatives at BT

Figure 1.4

General Mills seeks innovation partnerships with suppliers, universities, and
organizations outside of the food industry. The organization has also adopted
software to map talent and expertise across the globe. Through its G-WIN portal,
General Mills seeks novel technologies to address the needs of the organization.
Corning uses external collaboration as a way of distinguishing itself from
competitors. It collaborates with universities both within and outside of the United
States to gain access to expertise, equipment, and facilities that the organization does
not have. It has established long-term agreements with key universities to enable
more rapid interaction, which can lower barriers to initiating projects. Collaboration
with universities has had the added benefit of helping Corning to identify
prospective employees.

page 19
One of Ciscos key strategic methods for innovation is acquisition. The organization
has grown largely through the acquisition of other organizations, which it purchased
in part to access new technologies. Cisco also looks to retain the leadership from its
startup acquisitions in order to develop new technologies that can help the
organization maintain a competitive advantage.

POSI TI ON YOUR ORGANI ZATI ON TO BUI LD AND MANAGE
KEY RELATI ONSHI PS.

The best-practice organizations in this study have positioned themselves to have
access to and manage collaborative relationships. This involves encouraging
personal interaction rather than depending solely on electronic communication with
open innovation partners. The high-touch aspect of relationship development is just
as important to these organizations as the high-tech developments obtained through
open innovation. This can be especially important for organizations with partners in
countries with cultures that value personal interaction in business, such as Brazil and
China.
Several of the best-practice organizations in this study are interested in areas around
the world in which innovation tends to be clustered, such as in Silicon Valley or
Research Triangle Park. These organizations have staff located in these regions so
that they can better access the innovators who are there. Best-practice organizations
in this study also have development facilities co-located with other organizations.
These facilities encourage close relationships with the other organizations and
enable collaboration for potential innovations.
BTs scouting group primarily acts in Silicon Valley because of the concentration of
innovative companies in this area. However, the scouting group also maintains a
focus on London, Israel, the Boston area, and Asia in its search for potential
innovation partners. This group maintains contact with other areas of the business
to both learn more about business unit innovation needs and to present potential
innovation partners to BT staff. BT has located its engineering headquarters at
Adastral Park in the United Kingdom. BT shares this facility with 44 other
organizations.
BTs Applied Technology Centre interacts with internal customers by providing
rapid prototyping services. The staff of the Applied Technology Centre translates an
idea into early-stage visualizations or working prototypes so that BT business unit
staff can quickly understand potential customer experience and benefit. These also
provide a better idea of the technical feasibility of a concept and build confidence
within the business units for a particular offering.

page 20
Corning has a central R&D facility designed to combine the technical capabilities of
its staff and create keystone components. Having a central location facilitates
creative interactions among researchers, developers, and engineers, which can lead
to innovation. However, the organization also has a network of research and
technology centers across the globe, which provides Corning with a better
understanding of local markets. It has also established the West Technology Center
in Silicon Valley to work with universities, customers, and technology companies on
the West coast of the United States. The relationships developed through this center
have led to idea generation, as well as the identification of other opportunities for
collaboration.
Cisco also looks to Silicon Valley for potential sources of innovation. Cisco
originated in Silicon Valley and has grown through the acquisition of startup
companies in the area. Staff from these companies are retained after the acquisition
and often become involved in incubation teams that develop new ideas for
expanding the business. These teams are small and have limited resources in order
to mimic the startup environment, but they also have the safety and security of a
large organization.
The Cisco culture encourages collaboration among employees. The most effective
Cisco employees have a wide network of contacts within the organization. This
enables them to learn from each other, draw on the best ideas, and quickly
overcome obstacles in idea development.

ALLOW OPEN I NNOVATI ON MATURI TY TO DRI VE THE
APPROACH TO I NTELLECTUAL PROPERTY OWNERSHI P.

An important consideration for organizations engaging in open innovation is how to
address intellectual property that is brought to or results from an innovation
initiative. The data collected by APQC from both the best-practice organizations
and sponsoring organizations for this study indicate that an organizations approach
to intellectual property ownership tends to reflect its level of experience with open
innovation. When asked how they addressed intellectual property concerns raised in
the open innovation effort, all of the sponsoring organizations indicated that they
seek ownership of all intellectual property. Only half of the best-practice
organizations for the study seek intellectual property ownership in their open
innovation efforts. However, the methods an organization employs to address
intellectual property in open innovation may change depending on individual
circumstances.
When asked to rate the extent to which intellectual property issues are an obstacle to
their open innovation efforts, half of the responding best-practice organizations
indicated that such issues were only a slight obstacle. The highest rating any of the
best-practice organizations gave intellectual property concerns was that they were

page 21
only somewhat of an obstacle. In comparison, the sponsoring organizations in the
study rated intellectual property concerns as somewhat to definitely an obstacle to
their open innovation efforts.
For the best-practice organizations in this study, intellectual property considerations
do not inhibit the consideration of an innovation. The open innovation groups in
these organizations seek to move forward with collaborations that provide value for
both parties and let other, specialized areas of the organization handle the
intellectual property negotiations. For organizations in an industry with technology
that frequently changes, intellectual property is even less critical because of the rate
of technological change. In these industries the need to quickly move on
innovations is the driving force behind open innovation efforts.
The role of intellectual property ownership in open innovation partnerships with
universities is also changing. Historically, universities in the western hemisphere did
not want to part with their intellectual property. However, with the rising popularity
of open innovation, they have become much more flexible in creating licensing
agreements that allow different arrangements such as providing corporate partners
with exclusivity rights within a certain industry or for a given period of time.
Organizations with more mature open innovation efforts are taking advantage of
this shift and recognizing that there are alternatives to ownership of the intellectual
property.
Ciscos approach to intellectual property originating through its open innovation
efforts varies depending on the source. Cisco will often acquire other companies as
a means of accessing a new technology. For intellectual property submitted for I-
Prize (the organizations external innovation challenge), Cisco has evolved its
approach to intellectual property in partnership with its lawyers. Initially the
organization sought to own all intellectual property submitted, but now it looks at
submitted ideas with the possibility of licensing selected ideas in the future. This
balances the needs of the business with the need for the organization to protect
itself. When it does license technology from I-Prize, Cisco does not always seek
exclusivity. It has adopted this strategy to ensure that it can execute new ideas as
quickly as possible and so that external groups will feel comfortable contributing
ideas. The organization also recognizes that many entrepreneurs seek out Cisco for
development of an idea because they do not have the funding necessary to bring the
idea to market. Refraining from exclusivity can encourage these individuals to
partner with Cisco, leading to benefit for both parties.
BT holds patents that it primarily uses to protect itself against infringement from
other organizations. When the organization works with existing or potential partners
in its hothouse events (three-day, competitive innovation events), BT executes
agreements with these parties that specify the intellectual property that existed prior
to the hothouse. These agreements indicate that new intellectual property developed


page 22
during the hothouse belongs to BT, but this can vary if a partner is being paid to
participate in the event or if the resulting idea is an improvement on existing
technology owned by the partner.
General Mills builds relationships with innovation partners that provide value to
both parties. Its external partner development group works with organizations
wanting to provide an early-stage technology. The group builds relationships with
these organizations before discussing precommercial rights and development. Some
of the lines of business have regular discussions with key suppliers about new
product opportunities, and other key suppliers now have research staff co-located at
General Mills facilities to enable collaboration between the organizations.


page 23
Research Champion Insights:
PMI
Focus on targeted, needs-based open innovation.
Varying economic growth rates worldwide and shifting global market priorities have
created a complex, risk-laden business environment. There is little question that
global volatility will continue into the foreseeable future. So organizations face a
future that rewards innovation on one hand while threatening innovation projects
due to the rapid pace of change on the other.
Depending on the industry, innovation can be absolutely critical to an organizations
success, as the PMI-funded Best Industry Outcomes study found.
2
Explore the following
industries, for example:
Aerospace and defenseThis sector is highly capital-intensive and
characterized by large, lengthy programs and projects carried out under contract
for government and large private sector companies. Programs and projects in
this sector usually involve multiple suppliers and partners to deliver the end
product to the customer. Technological innovation is required for such programs
and projects, and from the customers perspective the quality and reliability of
the technology is paramount. Current drivers of innovation in this sector include
reductions in research and development investment, shrinking public sector
funding, and competition from emerging markets, according to the 2012 report
Realising the Value of Open Innovation by Big Innovation Centre.
3

AutomotiveThis industry, also highly capital-intensive, requires a significant
infusion of capital upfront. Thus, profitability fueled by customer features and
vehicle performance are critical factors in benefits realization for both vehicle
manufacturers and component manufacturers. Todays vehicles have extensive
technology-enabled systems that support vehicle performance and help to
facilitate maintenance. At the same time, vehicles use both on-board and off-
board technologies to provide customer features such as satellite radio and
mapping support, Bluetooth-capable system operability, and video streaming.
Those features add complexity to the design and product life cycle process.

2
Lynn Crawford and Terry Cooke-Davies. Best Industry Outcomes. Project Management
Institute, 2012.
3
John Golightly. Realising the Value of Open Innovation. Big Innovation Centre, 2012.

page 24
Many customers now evaluate vehicles based on fuel performance and use of
biofuels. All of these forces combine to continuously push the need for
innovation within the industry.
Engineering and constructionOne respondent from the Best Industry
Outcomes study perfectly stated the range of innovation associated with
engineering and construction projects: Deliver products faster, better, cheaper
than the competition, and delight our customers through the delivery of those
projects so that we gain repeat business from those customers. Part of delivering
more for less for our customers is providing innovation solutions, so taking the
ultimate benefits they want from the projects and looking at the delivery solution
for them, and trying to value engineer that and innovate it so that it delivers back
benefits for less costs.
4

IT and telecommunicationsThe rapidly changing technological landscape
means that companies in this sector must get to market quickly with products
and services that deliver value to their customers. And those products and
services must have reliable performance and quality, or else risk negatively
impacting customers. So this sector faces two innovation challenges: how to
deliver products and services that customers need and how to develop new
offerings that customers do not yet know that they need. For example, the
mobile phone has evolved into a multifunctional mobile device. It incorporates
talking, texting, video, live television feeds, GPS, financial services, calendars,
and tools to collaborate, innovate, and capture new ideas in real time, anywhere
in the world.
PharmaceuticalsAccording to Big Innovation Centres 2012 report Realising
the Value of Open Innovation, this industry is moving from a chemical paradigm
to innovative therapies requiring mixed disciplines and integration of
technologies.
5
Perhaps that explains why in the Best Industry Outcomes study this
industry was the only one for which respondents identified innovation as its
strongest strategic driver. One respondent characterized innovation in this sector
as building the blueprint as you go, rather than starting with one.
6
Innovation
projects in this sector have high degrees of complexity and uncertainty that are

4
Institute, 2012.
5
John Golightly. Realising the Value of Open Innovation. Big Innovation Centre, 2012.
6
Institute, 2012.

page 25
managed throughout the project. Thus, the projects tend to be large, of long
duration, and subject to regulatory compliance issues. Over the course of a
project, organizations in this sector often create new knowledge that may be
different from what they originally expected to create. Thus, strong change
management and portfolio management are required to quickly translate that
new knowledge into innovative products.
UtilitiesThis industry was perceived as slow moving when government or
state-controlled enterprises represented the primary generation and distribution
providers. However, as privatization and deregulation continue to take hold, the
industry has become volatile, highly regulated, competitive, and cost sensitive.
Companies in this sector reported in the Best Industry Outcomes study that
innovation supports growth strategies and use of new technologies.
7

Successful organizations embrace continuous innovation by adopting Lean methods,
integrating the voice of the customer, and adjusting their projects to take advantage
of market conditions. However, the number of organizations that feel they do this
well is limited. PMIs 2012 Pulse of the Profession In-Depth Report: Organizational Agility
uncovered that todays turbulent environment demands organizational agility to
support the need for innovation and to adapt to change. However, only 12 percent
of organizations surveyed in 2012 felt they were highly agile, and that rate had
declined from 23 percent in 2008 (before the global economic recessions impacts
were fully felt).
8

Building the capacity for organizational agility provides many rewards, such as:
faster response to changing market conditions,
overall improved organizational efficiency,
improved customer satisfaction, and
more profitable business results.

Changes in the external environment can sabotage projects and programs unless
organizations are prepared to mitigate the impacts. Thus, effective risk management
practices are essential for organizational agility. Risk management requires effective
planning and identification of known risks that can impact a projects or programs

7
Ibid.
8
Project Management Institute. Pulse of the Profession In-Depth Report: Organizational Agility.
Project Management Institute, 2012.

page 26
success. Known risks may include supply chain issues, the need for regulatory
approvals, the availability of financing, and similar project needs that are subject to
forces outside of the project or program. There are also risks that cannot be foreseen
but may have negative implications for projects. For example, natural disasters may
deplete specific resources that the supply chain needs to deliver on its commitments
or new regulations may inhibit an organizations ability to move into a new market.
Although not foreseen, these risks still need to be mitigated, or the entire project or
program could fail.
PMIs 2012 Pulse of the Profession In-Depth Report: Organizational Agility found that 90
percent of organizations that are effective at risk management report high or
moderate levels of agility. Those organizations were effective at detecting and
evaluating risks in the external environment (72 percent) and at identifying and
leveraging significant risks (39 percent). Those organizations standardized their
practices to mitigate risks on several levels by:
integrating the voice of the customer into the project/program,
establishing formal risk management processes inside and outside of projects,
conducting project risk simplification, and
conducting contingency planning.
9

Partner broadly across a variety of external and internal organizations.
Like project management, innovation processes may sometimes benefit from
external inputs and supports. Critical external support can come through
partnershipsthat is, structured relationships in which two or more parties exchange
services, products, technologies, knowledge, or other capabilities in exchange for
something of mutual benefit. There are two key partnership types that relate to
innovation and project management.
1. SupplierOne or more organizations have a contract to provide something
to the contracting party in exchange for remuneration. The contract governs
the relationship between the parties. The contract attempts to maximize
performance or financial benefit while reducing or deflecting risk.
2. CollaboratorOne or more organizations enter into a relationship to share
something that enables all parties to accomplish mutually beneficial objectives
that they would not be able to accomplish effectively individually. With
collaborations, the relationship governs performance and drives strategic
alignment, information exchange, capability sharing, and process integration.

9
Ibid.

page 27
Both supplier and collaborator structures add elements of risk to innovation projects.
Both introduce multiple stakeholders, each of which may expect a different outcome
from the project. Key risks in this area include goals that are not shared among
stakeholders, hidden agendas, and imprecise terminology that affects communication
and understanding. Partners involved in groundbreaking projects that neither party
has attempted before may face ambiguous project elements, unpredictable risks, and
nonlinear processes. Partnerships can generate structural stresses as the partners
attempt to integrate their staff, processes, and technologies. All of these uncertain
elements create new risks for the innovation project.
The tidal wave of corporate mergers, acquisitions, and expanded use of strategic
alliances that has enveloped the business landscape over the last 20 years has brought
significant change within organizations in strategic, operational, and human terms.
Many high-profile mergers and acquisitions have failed because the companies could
not effectively integrate their distinct cultures, processes, and strategies. Perhaps the
key factor in defining the failure of mergers, acquisitions, and alliances is value
realization. In most cases, failure is defined as not realizing the promised value for
shareholders and/or customers of the acquisition or alliance.
A good example of the need for partnership alignment comes from the automotive
and IT sectors. Automotive companies are now embedding third-party software into
the technology systems of their products to provide greater value to customers. With
the rapid pace of technological change, software providers that want long-term
relationships with automotive companies must ensure that their software remains
aligned with the technologies their clients embed in their vehicles. So the
relationships between software and automotive companies require long-term
management and strategic alignment in order for both to achieve the full benefits of
the collaboration.
Among the best-practice companies in this study, BT often leverages services
developed by third-party companies as part of its innovation practices. Both parties
are at risk in that relationship if either partner changes its technology platform,
software, or infrastructure in such a way that it is no longer compatible with that of
the other. And Ciscos approach of acquiring organizations with innovative
technologies mitigates such risk but then requires Cisco to effectively integrate those
technologies. Both approaches work effectively for those companies, but each
company must decide how best to integrate with its partners.
The external partner development group within General Mills plays an important
role in establishing connected innovation partnerships. New partnership
opportunities are first identified by its strategy and innovation group, which
cultivates the relationship. The mission of the external partner development group is
to enable growth through strategic partnerships, so the group is organized into teams
with diverse sets of skills. Each team is essentially a community of practice and could
include individuals with backgrounds in procurement, finance, licensing, business

page 28
development, law, or other relevant areas. The external partner development group
works to establish win-win relationships with external groups and feels responsible
for ensuring that partners find value in every interaction with the organization. These
activities support General Mills goal of becoming the partner of choice for
innovators. Even if a particular project does not move forward, the external partner
development group wants to ensure that the partner will return to General Mills in
the future with additional innovations.


page 29
Open Innovation Roles

1. Establish a central, dedicated group to drive open innovation.
2. Seek open innovation team members with specialized skills and
backgrounds.

ESTABLI SH A CENTRAL, DEDI CATED GROUP TO DRI VE OPEN
I NNOVATI ON.

The best-practice organizations in this study show that successful open innovation
efforts are often driven by a dedicated group of staff members. Seventy-five percent
of responding best-practice organizations from this study have a group of staff
members specifically dedicated to open innovation, whereas only 40 percent of the
sponsoring organizations have such a group. Despite the size of the best-practice
organizations in this study (having a median annual revenue of $17 billion), they
keep their open innovation groups relatively small. Two-thirds of these responding
organizations have 25 or fewer employees in their open innovation groups, and one-
third have 26 to 50 employees in their open innovation groups.
One benefit of having a dedicated group for open innovation is that it enables an
organization to execute an agile open innovation strategy. Without such a group an
organization would struggle to maintain direction and achieve continuity. Another
benefit is that this group is the clear owner of the open innovation process.
Although this group may work closely with others in an organization, it maintains
accountability for open innovation initiatives.
It is worth noting that despite their ownership of open innovation, the dedicated
groups for the best-practice organizations in this study do not own product or
service development. Instead, they act as facilitators that connect business units with
potential sources of innovation. As in the case of BTs development of a self-run
hothouse kit, these groups may also develop tools and resources that other business
units can use to develop their own innovation approaches.
Located within Ciscos development organization, the emerging technologies group
has a business incubation program for new technologies that could allow the

page 30
organization to enter into new markets. The group also partners with the
organizations corporate development group to scout for technologies and startups
in new areas. The business incubation program also serves in an advisory,
consulting, and support capacity to Ciscos internal startups.
Amways open innovation team is located within the organizations broader R&D
function. It was designed to be a place for ideas to incubate and grow, with less
emphasis on aggressive timelines and more on flexibility. This team focuses on
longer-term projects that may provide Amway with more value than the incremental
innovation on which the organization had previously focused.
Cornings emerging market and technology group is also located within the
organizations R&D function. This group identifies potential markets on which to
focus and tracks market trends. Individuals in this group are responsible for long-
term and burgeoning projects and focus more on learning rather than on delivering
quick financial results.

SEEK OPEN I NNOVATI ON TEAM MEMBERS WI TH SPECI ALI ZED
SKI LLS AND BACKGROUNDS.

The results of this study indicate that best-practice organizations look for specific
skill sets when staffing their open innovation teams. The employees sought for these
teams tend not to be new hires to the organization. The best-practice organizations
in this study look beyond the skill sets of a traditional R&D employee to include the
ability to work with others in the organization to identify and communicate
innovation needs. Several of the best-practice organizations also look for individuals
with an entrepreneurial mindset to ensure that their innovation teams can work
creatively and quickly with limited resources. These finding are in line with previous
research on the needs of open innovation initiatives. In the book A Guide to Open
Innovation and Crowdsourcing, Matthew Heim emphasized that open innovation teams
should have a minimum of the following attributes:
an entrepreneurial mindset,
the ability to enact change in the organization,
the ability to work with and facilitate collaboration across business functions,
a process orientation,
listening skills,
articulation skills,
the ability to see patterns and trends across business units and processes,


page 31
networking and communication skills, and
intellectual curiosity.
10

Because of the need for open innovation staff members to facilitate collaboration,
identify needs, and enact change, these employees are often developed within the
ranks rather than acquired from outside the organization.
Although all the best-practice organizations in this study have defined to some
extent the skill sets needed for staff members within their open innovation efforts,
some have also identified deal-making skills that are critical for their success. These
skills emphasize the need to consider the innovation partner rather than focusing
strictly on the needs of the organization.
BT has developed a set of criteria for the staff members in its centralized innovation
group. All members must have enough experience with technology to articulate to
other BT employees how new technology features will translate into business
benefit. They must also be able to establish relationships with both internal
stakeholders and external partners. Open innovation staff members who work with
external partners must have project management skills that include relationship
development in addition to the more traditional process skills. Staff members who
work with innovation activities involving other BT employees must be connected
within the organization so that they can help keep employees engaged.
General Mills has also established requirements for its open innovation team
members, but these requirements vary depending on the initiative. Its X-Squad
seeks team members who are entrepreneurial, can scout for new sources of
innovation, can determine the needs of their assigned lines of business, articulate
those needs to others, and identify the talent needed to address the needs. General
Mills iSquad looks for team members with a variety of backgrounds. However,
these team members take continuing training to further develop their consumer
empathy. Some employees within this team are trained in improvisational acting
because of the amount of time they spend facilitating groups.
When interacting with potential innovation partners, the external collaboration
initiative at General Mills is motivated by the goal of being the partner of choice.
This means that all interactions with a partner can influence whether it will consider
working with General Mills on future innovation opportunities.

10
Matthew Heim. Leadership Issues and Challenges in the OI World. In: Paul Sloane, ed.
A Guide to Open Innovation and Crowdsourcing. Korgan Page, 2011.

page 32
At Amway, the open innovation team is part of the organizations R&D function.
Most of the team members are experienced Amway employees with long tenures in
product development. The staff members in this team, therefore, have knowledge of
both the organization and of its product development process.
When negotiating deals, Amways open innovation team members are encouraged
to keep the needs of the other party in mind rather than seeking to secure only
Amways interests. Staff members are encouraged to consider whether, if the roles
were reversed, Amway would sign a proposed deal. If not, staff members must
reconsider the deal to ensure that the needs of the other party are met.
Cisco is selective when bringing new team members into its emerging technologies
group. Successful staff members have an entrepreneurial background, which enables
them to understand how to grow a business. Other successful staff members have
backgrounds as strategy consultants, which gives them the ability to think
strategically and also approach problems differently. These individuals are also able
to influence and convince others to make investments in new ideas.
Successful staff members in Cornings emerging market and technology group have
the ability to function well amid uncertainty and ambiguity. This helps individuals
within this group manage long-term and burgeoning projects that do not provide
immediate results.


page 33
PMI
Seek open innovation team members with specialized skills and backgrounds.
The Economist Intelligence Units 2009 report Talent strategies for innovation identified
multiple challenges that organizations face in talent acquisition and management.
From an internal perspective, the following challenges are among the top identified
in the report:
Insufficient internal collaboration and resource sharing among different parts of
the organization53 percent
Talent strategy is not effectively aligned with the business strategy44 percent
Lack of appropriate training opportunities for key staff36 percent
Lack of labor pool with appropriate skills31 percent

External challenges also impact talent acquisition. The following external challenges
are identified in the report:
Greater global competition for talent45 percent
Desire of employees to switch jobs frequently43 percent
Increasing labor costs42 percent
Lack of skilled graduates for entry-level jobs36 percent
11

According to various studies, global CEOs clearly understand that human capital is
critical for their organizations success. Almost three-quarters (71 percent) of CEOs
responding to IBMs 2012 Global CEO Study see human capital as a key source of
sustained economic value. CEOs also understand the implications of nonexistent or
poor talent management within organizations, which include:
decreased product or service delivery quality,
difficulty innovating effectively,
cancelled or delayed key strategic initiatives,

11
Economist Intelligence Unit. Talent strategies for innovation. Economist Intelligence Unit,
2009.

page 34
inability to achieve growth forecasts, and
inability to pursue a market opportunity.
12

Across all industries, the competence of personnel is second only to execution
performance in criteria required for organizational success, according to the PMI-
funded Best Industry Outcomes study. The study found that many organizations are
experiencing difficulty in finding suitably qualified people to manage their projects.
Interestingly, in most industries, fewer than half of the respondents report that their
projects are fully resourced, and just over half indicate that their project managers
have the authority needed to effectively lead their projects.
13

The Economist Intelligence Units 2009 report Talent strategies for innovation found that,
of the 11 top-rated innovation skills, the majority are soft skills rather than
technical or business skills.
Creativity51 percent
Ability to collaborate40 percent
Ability to learn quickly35 percent
Ability to solve problems30 percent
Self motivation25 percent
Ability to work across functions23 percent
Entrepreneurial skills22 percent
Knowledge transfer skills17 percent
Networking skills11 percent
14

Unfortunately, senior business executives are finding it more challenging to recruit
individuals with the skills their organizations need. The 2013 GE Global Innovation
Barometer, for which 3,100 global corporate executives were interviewed, found
declining levels of confidence among those executives that the higher education
system is effectively preparing tomorrows innovators. Across 20 regional markets,
only executives in India, the United States, Mexico, the United Kingdom, Russia,
Germany, and South Africa showed growing confidence in their countries
educational systems between 2012 and 2013. Overall, among the 20 markets,

12
IBM Global Business Services. Global CEO Study. IBM, 2012.
13
Institute, 2012.
14
Economist Intelligence Unit. Talent strategies for innovation. Economist Intelligence Unit,
2009.

page 35
confidence levels declined by 6 percent, from 61 percent in 2012 to
55 percent in 2013. Half of the respondents felt that their national governments
should encourage a stronger entrepreneurial culture in higher education systems, and
44 percent felt government should better align curricula with business needs.
15

Global executives face another critical issue in sourcing talent: major demographic
changes. Booz & Companys 2009 report Global Talent Innovation Strategies for
Breakthrough Performance painted a clear picture of a work force in transition. In todays
global economy, the vast majority of educated workers are women and people of
color. In addition, only 22 percent of todays college graduates come from North
America and Western Europe. While their numbers in the work force grow, women
and people of color remain underrepresented in management ranks. At the same
time, there is a major generational shift occurring worldwide. Baby boomers, those
born in the mid-1940s to the mid-1960s, are remaining in the work force longer than
their parents generation. That pressure is challenging upward mobility of their
successor generation, Generation X. Generation X is being squeezed on the other
end by Generation Y, those born between 1979 and 1994, who will make up close to
75 percent of the global work force by 2025. These three generations have different
work styles, preferences, and profiles, and employers have to determine how to
recruit, develop, and retain individuals with such diverse requirements.
16

Organizations in which talent management aligns with organizational strategy have an
average project success rate of 72 percent, whereas organizations in which talent
management is not effectively aligned to organizational strategy have an average
project success rate of 58 percent, according to PMIs 2013 Pulse of the Profession In-
Depth Report: The Competitive Advantage of Effective Talent Management. Those
organizations understand the need to provide training in soft skills such as leadership,
conflict management, and negotiation (85 percent) while also making training a
priority (84 percent). They also have active performance management systems (66
percent) and integrate talent management across the organization (62 percent).
17

BT has a focus on talent management that extends beyond just project management
skills and capabilities. Being a highly technical company, BT targets talent
development in a way that ensures project managers bring more systemic talents to
their projects. So project managers must have strong stakeholder engagement skills,
demonstrate an understanding of business strategy in how they approach their work,
display inquisitiveness and openness to innovation, and have the ability to

15
GE. GE Global Innovation Barometer. GE, 2013.
16
Booz & Company. Global Talent Innovation Strategies for Breakthrough Performance. Booz &
Company, 2009.
17
Project Management Institute. Pulse of the Profession In-Depth Report: The Competitive
Advantage of Effective Talent Management. Project Management Institute, 2013.

page 36

communicate effectively with senior-level executives. Most importantly, BT sees its
project managers as translators: they translate customer needs and requirements in
high-level terms into prototypes the company can turn into new offerings.
The problems stemming from having poorly defined development paths for staff are
being recognized. Although many organizations still have a strong career ladder
mentality, some organizations are shifting to a more development-centric career
management framework. That framework often combines the following
characteristics:
specialized career paths to build key capabilities, set role expectations, and clarify
accountability and
developmental assignments that help individuals expand their skills and
experience without a defined path forward.

Organizations may use specialized career paths when they identify capabilities that
are strategically important to the business and its achievement of strategy. Project and
program management have evolved into specialized roles defined by organizations to
support innovation, new product/service development, and other activities that
deliver value to customers.
Innovation is a critical organizational capability that resides in many individuals
within an organization rather than a specific role. Thus, organizations are creating
opportunities for individuals to contribute to innovation projects to build their
capabilities, rather than establishing new roles or functions. This exposure can be
achieved through lateral moves to positions that allow staff to gain new skills and
business insight. Work assignments can be structured to create developmental
challenges that test some of the critical skills, particularly soft skills, associated with
innovation activities. Clear objectives and performance assessments can help to
evaluate developmental measures that may point to new opportunities.
Booz & Companys 2009 Global Talent Innovation Strategies for Breakthrough Performance
report suggests that organizations identify talent segments within their staff. For
example, the study defined pivotal staff as those who have highly specialized skills,
knowledge, and abilities that drive competitive advantage and contribute a
disproportionate share of the companys strategic objectives. The study also
identified core staff who are critical for executing strategy. Identifying those individuals
could facilitate targeting staff for developmental opportunities.


page 37
To be a 21st century organization, Booz & Company recommended that
organizations explore:
a diverse and global talent pool;
systems that enable people to work effectively and collaboratively through virtual
and face-to-face means;
flexible work arrangements that focus on overall work performance rather than
performance during work hours;
incentives that encourage employees to build leadership, business, and technical
skills; and
discontinuous career paths that allow people to move in and out of different
assignments or roles, take leave or sabbaticals to refresh, etc.
18

18
Booz & Company. Global Talent Innovation Strategies for Breakthrough Performance. Booz &
Company, 2009.

page 38
Open Innovation Processes

1. Integrate and align the open innovation process with other relevant
processes to ensure key entities are involved at critical points.
2. Embrace broad and specific scouting for new ideas.
3. Invite participation in open innovation via experiences.

I NTEGRATE AND ALI GN THE OPEN I NNOVATI ON PROCESS
WI TH OTHER RELEVANT PROCESSES TO ENSURE KEY ENTI TI ES
ARE I NVOLVED AT CRI TI CAL POI NTS.

The best-practice organizations in this study are clear on their definition of
innovation. Simply put, innovation encompasses ideas put into action to generate
value. Successful and agile innovation processes have multiple stages, beginning with
early-stage business case development and related processes that should be
integrated seamlessly with the organizations later-stage processes for new product
or service development and commercialization. There is a strategic link between
innovation and execution. In this study, the best-practice organizations have holistic
systems in which innovation is not separate from the rest of the business, beginning
with early-stage ideas.
An important definition deserves mention here. In How Companies Win, Rick Kash
and David Calhoun note, Innovation is finding unsatisfied profitable demand and
then fulfilling it.
19
Therefore, innovation has no constraints. Applying open
innovation practices to the most significant strategic initiatives, or demand pools,
creates a culture that embraces innovation.
A larger percentage of the best-practice organizations in this study have fully
implemented a formal process for fostering and vetting new ideas, compared with
the sponsoring organizations and the larger population of 297 organizations
participating in APQC's Open Standards Benchmarking in innovation (Figure 3.1).

19
Rick Kash and David Calhoun. How Companies Win. HarperBusiness, 2010.

page 39
Existence of a Formal Process for Fostering and Vetting New Ideas

Sources: APQCs Open Standards Benchmarking in innovation, Open innovation study detailed
questionnaire
Figure 3.1

In many industries, innovation success is related to speed to market. Several best-
practice organizations in this study link their innovation processes to their execution
frameworks so they can quickly get to market. The best-practice organizations in
this study also tend to have a strong project management/product development
stage-gate process. Stage-gate processes alone are not a differentiator, but they are
necessary to compete in todays markets, especially when faster time-to-market is
key.
Figure 3.2 shows that the best-practice organizations lead the other organizations
surveyed by tracking a greater extent of projects through a gated process. APQCs
Open Standards data in Figure 3.2 shows a more diverse set of answers to the
question, compared with the studys best-practice organizations and sponsoring
organizations.

6%
11%
11%
20%
15%
17%
20%
0%
25%
25%
0%
25%
25%
0%
0%
0%
0%
0%
0%
25%
75%
0% 25% 50% 75% 100%
1 No formal process
2
3
4 Developing a formal process for fostering and
vetting new ideas
5
6
7 Has fully developed a formal process for fostering
and vetting new ideas
Best-Practice Organizations (N=4) Sponsoring Organizations (N=4) Open Standards (N=298)

page 40
Extent Organizations Track Product or Service Innovations Through a
Stage-Gate Process

questionnaire
Figure 3.2

Although success is more achievable when an organization fully aligns all related
processes to reduce cycle time, minimize knowledge loss at transition points, and
engage key stakeholders, it is important to note that process is not the only
important factor. It is just as important to have the right people involved at relevant
steps. Leaving out stakeholders can kill an open innovation deal quickly.
Stakeholders can include the following:
MarketingDoes this new product, service, or change make sense from a
marketing perspective? Will it be viable in the marketplace?
LegalTo minimize late-stage delays or killed open innovation opportunities,
engaging the legal function early in the process helps gain buy-in and speed up
needed approvals and reviews.
PurchasingInvolving the purchasing or procurement function avoids delays
from excessive negotiation or a one-sided deal.
Executive sponsorWith the budget to purchase technology, the executive
sponsor can help remove barriers and hasten the speed to market.

6%
9%
17%
15%
18%
18%
17%
0%
0%
0%
0%
50%
25%
25%
0%
0%
0%
0%
25%
25%
50%
0% 25% 50% 75% 100%
1 No open innovation initiatives are tracked
2
3 Open innovation initiatives are tracked but not
in stages
4
5 Only major open innovation initiatives tracked in
stages
6
7 All open innovation initiatives tracked in stages

page 41
The sourcing of ideas from external organizations and internal employees is part of
BTs concept-to-market (C2M) idea development process (Figure 3.3). This process
has four stages:
1. idea,
2. proposal,
3. business case, and
4. delivery.
BTs Concept-to-Market Process

Note: MFU is a market-facing unit within BT.
Figure 3.3

BTs open-ended idea stage involves sourcing and filtering ideas from internal and
external sources of innovation. BT moves a concept into the proposal stage when it
is deemed worthy of consideration for a business case. During the proposal stage
the idea is articulated and validated, which can involve conducting early customer
trials, codevelopment with customers, and proof-of-concept development. This
stage takes 60 days or fewer to complete.

page 42
Once the proposal stage is complete and the relevant BT business unit has validated
the idea, it can move into the business case development stage. BT then conducts
trials of the product or service. These can be small-scale trials that evaluate how the
product or service will work or large-scale trials that evaluate how customers will use
the product or service. This stage lasts 120 days from business unit validation to
customer trial. Once trials are completed and a full business case is developed, the
business unit responsible for the technology confirms project approval.
During the delivery stage, BT completes any development necessary to get a quality
launch for the new product or service. The process ends with a full commercial
launch for the product or service.
BT has also established an accelerated development process called C2M Lite
(concept-to-market lite) for ideas that do not need complex validation processes. An
idea is selected for acceleration for several reasons: if BT needs to verify that it is
not infringing on intellectual property owned by another organization, that it has the
security needed for a service to be put through a trial, or that the idea is compatible
with mainstream architecture. BT created C2M Lite to facilitate a fail fast, fail
cheap environment that makes product market trials more efficient. The process
involves testing and validating minimum marketable features of potential products
and services using early market testing. The results of the testing and validation are
then used to support decisions on creating business cases for potential products and
services. With the accelerated process, trials can be shortened to 60 to 90 days.
At Amway, a formal, enterprise-wide process guides innovation and can be applied
to multiple types of innovation, including business model innovation. As shown in
Figure 3.4, the process consists of four distinct phases:
1. technology surveillance,
2. R&D exploration,
3. product development, and
4. business sustaining.


page 43
Amways Overarching Innovation Process

Figure 3.4

The technology surveillance phase involves identifying ideas and taking them
through early concept development. According to Amway, thousands of ideas enter
its innovation funnel each year, but only about 150 reach the second phase, R&D
exploration.
During R&D exploration, Amway further narrows its portfolio and creates a project
proposal and business case for each idea. Ideas are presented to Amways
technology review board at key milestones during R&D exploration, and this group
ultimately decides which ideas move forward and receive additional funding.
Approximately 20 to 30 projects each year reach Amways business case
development phase, where they are refined using a formal stage-gate process called
idea to market (ITM). During this phase, the project management function creates a
project brief, which is a contract among the development groups, Amways
marketing function, and representatives from the markets where the product will be
initially launched. The project brief defines each idea further and lays out exact
details regarding scope, costs, and the timeline for development and launch.
Approximately 10 to 15 projects reach this point each year, 90 percent of which
ultimately result in product launches.

page 44
The business sustaining phase of Amways innovation process begins once the
product is launched and addresses ongoing evaluation and continuous
improvement.
One important observation about Amways integrated process is that there is an
overlapping transition period between phases rather than a sharp handoff. This
gradual shift helps team members with critical knowledge ensure that all relevant
information is communicated and that the receiving team members have time to
absorb the information and preserve continuity in the project. This clear
acknowledgement of the need to capture and transfer knowledge is echoed in
APQCs knowledge management research. (More information on putting knowledge
in the flow of work can be found in APQCs Knowledge Base.)
In a different look at innovation processes, the Cisco emerging technologies groups
framework (Figure 3.5) begins with its team looking for new ideas for new
businesses using an open innovation approach. The next step is to filter and shape
the idea by developing a prototype and a proof of concept to decide if Cisco should
make the next level of investment and, like a venture capital firm, invest seed
funding to create that new business. During the incubate phase, Cisco has a set of
milestones to manage the process to start a business. Cisco brings in the founding
team or creates a team and gives it considerable freedom to refine the idea.
Ciscos Emerging Technologies Group Incubation Framework

Figure 3.5

One of Ciscos critical success factors is that a member of the business incubation
team stays with the startup businesses even when they go to market in the accelerate
phase. When entering a new market, Cisco has found that startup teams often lack
some of the expertise needed to achieve the scale necessary for a billion-dollar
business.


page 45
After Ciscos accelerate phase, the emerging technologies group either places the
startup into another mainstream business unit or suggests exiting completely. At any
time, the emerging technologies group tends to have three to four startups
operating. However, Cisco does not expect a 100 percent success rate on these new
businesses, and when a project is cancelled, people are redeployed to other projects.
Similarly, Corning has a high-level process to monitor its effectiveness in converting
innovation opportunities created with an understanding of customers and markets
into revenue. Cornings emerging market and technology group begins by creating a
road map to identify attractive markets and screen opportunities. It also assembles
academics and specialists from business and industry to investigate a particular area
of opportunity. This process requires cross-functional participation from marketing,
commercial, manufacturing, and individuals from different business units within
R&D.
Corning then builds its innovation portfolio by selecting projects and aligning
resources. Selected projects move through Cornings stage-gate innovation process,
established in 1987 (Figure 3.6). The innovation process uses five stages and gates to
accelerate time-to-market, ensure projects proceed efficiently, and provide clear
goals and guidance to project teams. The process keeps investments and risks in
check by continuously reprioritizing projects. As a project progresses, risk and
uncertainty decrease as knowledge and cost (or the size of the project) increase.
Managed by the corporate innovation and process group, Cornings process
involves a cross-functional team from marketing, technology, manufacturing, and
R&D.
Cornings Innovation Process

Figure 3.6

page 46
At General Mills, the strategy and innovation group is comprised of smaller
subteams with different processes for generating innovative solutions to the
organizations needs.
General Mills iSquad explores opportunity areas using its I
3
process (Figure 3.7).
The first two stages in the process (immersion and interaction) require the team to
conduct research to both understand the nature of the problem from a business
point of view and to experience the problem from the consumer point of view. The
third stage of the I
3
process is idea creation, or developing solutions to the problem.
General Mills I
3
Process

Figure 3.7

Another General Mills catalyst team, the externally-focused X-Squad, has a three-
part process for partnering for connected innovation. The first part looks at internal
collaboration, the second looks at collaboration with trusted partners, and the third
part looks at collaboration with new partners. This team focuses on finding
solutions rather than ideas; a solution could be a technology that results in a new
benefit or technical expertise that could bring a solution or a new product to
General Mills. The X-Squad developed a process called X
3
to assess a particular
need and find a solution to that need (Figure 3.8). This process focuses on finding a
technology rather than developing new products.


page 47
General Mills X
3
Process

Figure 3.8

In the first stage of General Mills X
3
process, the problem is identified and refined
so that the solution will adequately address the need. Hypotheses are developed in
the second stage of the process, and in the third stage talent that can find a solution
to the problem is identified. Individual projects that address a specific phase of the
X
3
process (known as X
3
a La Carte) can be completed. These can take the form of
internal alignment sessions, problem definition sessions, the creation of a talent list
to address a particular problem, or a direct on-site connection to a potential solution
to a problem.
General Mills Sparks team is a relatively new group that often leverages the work of
the iSquad and X-Squad to develop ideas into actionable product opportunities. The
Sparks team holds online and in-person sessions to generate as many ideas as
possible and then quickly weeds out ideas that will not work. It uses convergent and
divergent thinking for generating and refining ideas.
For product development, General Mills uses a standard stage-gate process that it
has adapted to meet its needs. The process emphasizes the need to ask the right
questions at the right time, have the right individuals involved, and maintain
alignment within the organization. The process begins with strategy development
and ends when the product has been in the market for six months.
To facilitate the faster development of a potential product, General Mills created an
in-context experimentation team. This teams method of new product development
provides early learning on hunch ideas for potential products. The organizations
innovation entrepreneurs and a support system lead the development, but the
in-context experimentation team finds both internal and external groups that can
move the early development along.


page 48
EMBRACE BROAD AND SPECI FI C SCOUTI NG FOR NEW I DEAS.

When scouting for new ideas, the best-practice organizations in this study focus on
both a specific list of needs that they revisit regularly and on broader trends still
within a defined arena. In the broader type of scouting, designated employees
monitor the landscape that is relevant to the organizations future. These scouts
gather and share information on emerging trends, upcoming or current threats, new
players in the market, and even acquisitions to target. Effective scouting is often
enhanced by in-person relationships and access to the tools that will help find those
new relationships.
HOW THE BEST-PRACTI CE ORGANI ZATI ONS DO I T
BTs external scouting group maintains a set of technologies that BT is interested in
(specific) but also looks for technologies that BT could expand into (broad but
focused). Each scout researches about 300 companies per year. Staff members often
meet with representatives from these external companies to vet their business
models and technologies. BT also finds potential partners at conferences, meetings,
and networking events and through recommendations from venture capital groups
and industry blogs.
BTs scouting group captures data on every company it evaluates and stores the
information in a central repository. For each company selected as a potential
partner, the scouting group creates a one-page description that can be circulated
within BT and presented during a monthly call. The group also maintains
documents that discuss broader trends in BTs lines of business.
Senior managers at BT often come to the scouting group with a particular need they
want to address with new technologies. Staff members within the scouting group
conduct background research to understand what must be addressed by the
solution, as well as the key players and trends in the area. Scouts then identify and
meet with various companies that may provide a solution for the need, narrow the
group of potential companies down to a core group, and present the core group to
the senior managers. For every company presented to a senior manager, scouting
group staff members have investigated five to 10. Once the potential partners have
been presented to senior management, the senior managers and scouting staff
members discuss the potential impacts of partnering with the companies.
To keep informed of new developments in the telecommunications industry, the
scouting group conducts benchmarking with BTs industry peers. Benchmarking
allows the group to track new developments among North American
telecommunications organizations that can then be applied to BTs European
markets.
Similarly, Amways open innovation team relies heavily on a network of technology
scouts who seek potential sources of external innovation. For needs-based scouting,

page 49
the scouts strive to locate technologies meeting Amways specifications. Over time,
the team has improved its scouting practices by learning to look beyond the most
obvious sources. For example, scouts in the beauty category began to visit spas and
meetings of dermatologists looking for innovations. Often, the technologies the
scouts uncover must be adapted before Amway can apply or use them. These
repurposed technologies have been some of the open innovation teams biggest
successes.
To identify broader trends, Amways scouts regularly attend academic, technology,
and other conferences, as well as tap into the organizations networks. To do their
jobs effectively, scouts must have a deep understanding of the fields in which they
operate and keep up-to-date on scientific and technical advancements. This allows
them to know which ideas are feasible, which are truly innovative, and which might
be adapted to address Amways needs.
Cisco, like the other best-practice organizations, casts the net wide for breakthrough
ideas. As a decentralized enterprise, Cisco has many pieces and stakeholders for
innovation. The emerging technologies group scouts for ideas by talking to
customers and other external parties, scanning for sentiments in employee and
external groups, talking to venture capitalists, and following market developments.
Cisco sees more of the venture spend moving to earlier-stage investments.
Therefore, Cisco is developing relationships with several early-stage business
incubators and accelerators in order to stay current on new formative developments
while offering them mentoring.
Within General Mills X-Squad, innovation entrepreneurs define the needs of their
business or function and then scout for solutions. These innovation entrepreneurs
look for organizations across the world that can provide General Mills with new
technologies, and they seek new talent that can provide the organization with new
solutions.
The X-Squad is looking at other ways of connecting with new partners for
collaboration. On occasion, it conducts indigenous innovation tours to identify
innovation that is unique to several regions across the globe, most recently focusing
on China and India. To expand its scouting reach, General Mills also partners with
organizations in other countries. For example, it partners with an organization in the
Netherlands that serves as a resource for introductions to new products and
technologies. It also works closely with an organization in China to help scout for
innovation in that area. General Mills also uses analytics software to map expertise
across the globe to gain a visual representation of where talent is located.


page 50
I NVI TE PARTI CI PATI ON I N OPEN I NNOVATI ON VI A
EXPERI ENCES.

There is nothing like first-hand experiences to engage employees, customers, and
other partners in the open innovation process. This best practice extends the
findings APQC documented in the 2012 best practices report Putting Knowledge in the
Flow of Work. In that report, APQC examined how best-practice organizations
integrate knowledge sharing and collaboration for employees to the point where
these activities are no longer viewed as separate pursuits but rather as integral parts
of the work being done. Those organizations strive to embed collaboration in
innovation, project management, and daily work, but they also sponsor knowledge-
sharing events that take employees out of their routines. Although not technically
part of the normal work flow, these events are in the flow of business because they
address issues that are vital to organizational strategies and priorities. The employees
who participate in these events do not see them as frivolous distractions from their
core duties but rather as opportunities to directly contribute to their organizations
innovation and continuous improvement goals.
20
The best-practice organizations in
this study extend the practice to include events and contests involving external
partners such as suppliers and customers.
Additionally, allowing customers and other partners to interact with early prototypes
and other potential new products or services helps engage them in the innovation
process and makes the new offering more real and tangible for them. Third-party
suppliers are often happy to participate in the innovation process, given the
increased likelihood of them receiving new supply contracts when their customers
products and supply chain needs shift.
Contests and events help get employees and external partners involved.
Contest and events create urgency, help create buzz on social media, strengthen the
relationship between the parties by building a sense of fun, and tend to give
contributors a benefit for participating (often in the form of prizes, points, or other
rewards). They can also influence an organizations culture to be more open.
HOW THE BEST-PRACTI CE ORGANI ZATI ONS DO I T
To turn insights into business opportunities, General Mills Sparks team coordinates
a global expo in which 30 to 50 ideas are presented to business teams as tangible
prototypes. The Sparks team often works with graphic designers to provide business
teams with a representation of the potential product. These expos can lead to the
business teams taking action on some of the presented ideas. Smaller expos are also
held for individual business teams.

20
APQC. Putting Knowledge in the Flow of Work. APQCs Collaborative Benchmarking, 2012.

page 51
General Mills also organizes an annual two-day technical conference during which
representatives from across its innovation, technology, and quality group present
work from the product lines and share best practices. The conference features
keynote speakers and eight to 10 tracks with 400 presentations or posters authored
by 800 individuals. The conference is open to anyone within General Mills, but the
majority of its approximately 1,400 attendees come from the innovation,
technology, and quality group.
General Mills X-Squad has designed several events to engage external partners in
innovation. In 2009 the team initiated supplier summits, which it holds every two
years to share technical or innovation needs and address how strategic suppliers can
collaborate with General Mills to address those needs. Each summit also features an
awards presentation. The supplier summits have resulted in increased collaboration
between General Mills and its strategic suppliers. The team also organized an
informal event with key suppliers on the lawn of General Mills headquarters to
generate new product innovations.
Like General Mills, BT holds several contests and events for employees, customers,
and partners. Employees can participate in BTs My Customer Challenge Cup, a
contest in which teams compete to develop new ideas. The contest has quarterfinals,
semifinals, and a grand final level, and with each level the teams gain greater
exposure within the company. Teams that complete their projects are given a blue
ribbon award regardless of whether they make the quarterfinals of the competition,
and this award is noted in each team members profile on BTs internal directory.
Leaders of winning teams are often promoted within the organization.
Hothouses are three-day competitive events that BT adopted from the software
industry and are similar to hackathons. These hothouse events bring together 80 to
90 individuals from across business units and external groups with an interest in a
particular product or service. In addition to BTs customers, participants can
represent BTs marketing, customer support, and engineering functions and include
external suppliers and partners. BT has dedicated facilities to hold these events and
assigns two facilitators to each event.
During a hothouse event, BT facilitators split attendees into cross-discipline teams
and give them a problem to solve. They also ensure that each team has the
technology, data, and files that it needs to develop a solution. The teams present
their developments daily to a judging panel of senior executives for the business unit
that will own the product or service and, if possible, to customers as well. The
winning team has the most points at the end of the three-day period. Teams are
encouraged to steal ideas from each other so that the winning idea is the
combination of the best ideas developed during the hothouse. The solution
developed during an event can vary from a prototype of a software or service
offering to a customer experience design for a product or service. A hothouse can
also yield a delivery plan for getting a product or service to market quickly and
competitively. The team that developed the solution is kept informed or engaged
during the development process.

page 52
The purpose of BTs hothouses changes depending on the stage of idea
development; early on in the process a hothouse could be held to further refine the
idea, whereas later in development a hothouse could be held as a way to accelerate a
business case and product trial. To ensure it obtains maximum benefit from each
hothouse, BT will stop planning one if there is a lack of available individuals with
the necessary skills or a lack of sponsorship.
BT holds 40 to 45 hothouses per year, with about half managed by dedicated
hothouse staff. BT has developed a self-run hothouse kit that allows any business
unit to create and run a hothouse on its own. The success rate for hothouses at BT
is about 30 percent to 40 percent. In one successful example, a new product was
rolled out to the market within 12 months following the hothouse.
As a different type of event, Ciscos I-Prize is a global innovation competition
seeking great ideas from outside the company. With senior leader visibility within
Cisco, the CEO launched the first I-Prize competition in 2007, and the second time
he helped announce the winners. The I-Prize competition has evolved over time.
Cisco is now running regional contests in various countries, which helps other
entities build their own open innovation capabilities.
There are several tangible and intangible benefits to Cisco from the I-Prize contests.
The company sees interesting ideas that can leverage its technologies and help build
innovation capabilities outside of Cisco. By reading all the submissions, Cisco gets
insight into trends and sentiments. These contests also expose Ciscos technologies
to contestants and the media, as well as generate sales opportunities. Cisco has
gained expertise in managing innovation challenges through its work with the
I-Prize. It has acquired experience in framing the problem to solve, targeting the
challenge, communicating about the event, finding participants, securing judges,
helping people collaborate, and leveraging its own technology. Cisco has found that
clearly laying out who is responsible for activities in each phase helps recruit new
participants and ensures clarity.
Looking internally, Cisco gathers ideas from employees via its I-Zone platform. In
2006, I-Zone 1.0 began in the emerging technologies group as a wiki, which was one
of the first times the entire employee population at Cisco was invited to submit
ideas for innovation. In the platforms first year, employees submitted about 800
ideas. I-Zone 2.0 has incorporated more social aspects and provides better
collaboration (including voting) around new ideas that are submitted. A senior
leader typically promotes new ideation challenges by sending out broad
communication to drive employees to I-Zone. A Cisco employee can contribute in
three ways: submit an idea, vote on an idea, or comment on an idea. In 2010, Cisco
launched Smartzone, which took open innovation for employees, especially in the
services organization, to the next level using the I-Zone platform. Employees use
Smartzone to submit and champion ideas.
Additionally, Cisco has an annual global Launchpad competition as a talent
development effort and a means of generating innovative customer solutions. In

page 53
four global locations, a six-person cross-functional team (with high-potential,
manager-level employees) is assigned a challenge to solve in six weeks. There are
two challenges, with two teams working on each. Each team works with an internal
Cisco consultant during the process, and the teams present to senior vice presidents
shark tank style. The winning team receives personal compensation plus seed
money for the project itself. Having senior vice presidents as judges helps the
projects get sponsorship as they move forward. These competitions expose senior
leaders to others in the organization who are focused on innovation, which helps
drive culture change from the top down and bottom up.
Like the other best-practice organizations, Amway strives for a culture in which
innovation is encouraged and promoted. To surface innovation within the work
force, the organization uses events called 5x5s, during which employees present
ideas for new products, technologies, or business process changes. Each participant
showcases his or her idea in five minutes using only five slides. At the conclusion of
each 5x5 event, Amway selects a winner whose idea receives funding and resources
to support further development.
Customer showcases allow the organization to give customers and other
partners first-hand experience with new and potential products and services
in an immersive context.
Several of the best-practice organizations in this study have created facilities where
partners can interact with potential new products or services. These facilities are
typically experiential and fun. These innovation centers can bring suppliers,
customers, and others together to show how new knowledge can be integrated into
products and services. Having tangible prototypes that customers can see and touch
helps the organization quickly assimilate customer needs. Highly realistic
visualization and immersion experiences are helpful to open innovation.
In 2011, Corning shared its vision for the near future in a video called A Day Made
of Glass that shows how glass, partnered with other technologies, can affect
everyday lives. In 2012, Corning released with A Day Made of Glass 2 to continue
the story about a more connected world that expands Cornings glass innovations
into additional locations and applications. The company is engaged in research and
collaborative partnership opportunities that will help make the vision for the near
future in both videos become a reality.
BT holds annual innovation showcases for its customers that present a blend of
current BT services, offerings in development, and third-party innovation from
around the world. BT creates displays that put the featured services in context; for
example, the health care showcase looks like a hospital. Demonstrations can be held
in each of the showcase areas. BT uses its innovation showcases to test innovations
with customers, as well as to present BT as an organization that customers can use


page 54
as an innovation partner. At each showcase, BT hosts 150 to 200 customer
accounts, as well as influencers and stakeholders, such as government
representatives and members of the press. Customer representatives, generally at the
C-suite level, are often invited to attend if they are in a deal-making process with
BT.


page 55
PMI
Integrate and align the open innovation process with other relevant processes
to ensure key entities are involved at critical points.
The PMI-funded Best Industry Outcomes study found a clear connection between
project and program management and innovation. As the Best Industry Outcomes study
found, project and program management involve:
planning and then creating some product or service that at the point of inception exists only
in the imagination of the person or people who are promoting it. The process of planning
these activities, therefore, involves imagining a series of steps that may or may not work out
as planned, each of which may have unforeseen consequences. It could be described as a
process of enfolding an envisaged future into a known present, and can be conveniently
labeled as innovation.
21

Understanding the distinction between project and program management can be
challenging. According to PMIs A Guide to the Project Management Body of Knowledge
(PMBOK Guide), a project is a temporary endeavor undertaken to create a unique
product, service, or result. It has a specific scope of work associated with it, internal
resources assigned to it, a budget, and a schedule by which the project output is
expected to be delivered. A program often begins with a concept and a set of desired
business benefits. There is no clear plan or path for how to convert the concept into
something that can deliver the benefits. To deploy the strategy, the organization
centralizes the management of groups of related projects under the umbrella of a
program. For example, building an airplane requires building and then assembling
wings, a tail, etc., to the fuselage. Each piece of the plane is a unique project with its
own design, manufacturing process, and assembly process. In the end, all of the
pieces must come together seamlessly for the plane to function as intended. The
oversight of the entire airplane design and assembly is a program.
22

The Best Industry Outcomes study also identified variances in the use of organizational
project management systems across industries:
Portfolio management is used more significantly in financial services, with 60
percent of organizations reporting usage. About one-third of organizations in

21
Institute, 2012.
22
Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK
Guide)Fifth Edition. Project Management Institute, 2013.

page 56
the utility (38 percent) and IT/telecommunications (33 percent) industries use
portfolio management.
Program management is predominantly used in the aerospace/defense (75
percent), pharmaceutical (70 percent), and IT/telecommunications (62 percent)
industries.
Fewer than half of organizations across industries reported using project
management methods. The highest usage rates were in the aerospace/defense
(44 percent), engineering/construction (41 percent), and IT/telecommunications
(40 percent) industries.
Only about one-quarter of organizations reported having support and tools for
project management, and they were mostly in the utilities (38 percent),
engineering/construction (35 percent), and IT/telecommunications (35 percent)
industries.
23

Project and program management capabilities are core to enabling the delivery of
innovation. A 2012 Franklin Covey/PricewaterhouseCoopers LLC global study on
the current state of project management revealed that as many as 97 percent of
respondents believed project management was critical to business performance and
organizational success, and 94 percent believed project management enables business
growth.
24
PMIs 2013 Pulse of the Profession study found that when standardized
practices are used throughout the organization, 70 percent of projects meet goals and
business intent. When they are not used throughout, only 47 percent of projects meet
goals.
25

Both innovation and project management can benefit from an integrated
methodology that customizes generic approaches and techniques to the unique needs
and practices of an organization. A methodology is a documented approach for
integrating regularly interacting or interdependent practices, techniques, procedures,
and rules that determine how best to plan, develop, control, and deliver a defined
objective. A methodology usually incorporates and integrates three important
elements:

23
Institute, 2012.
24
Franklin Covey and PricewaterhouseCoopers LLC. Execution-Focused Leadership: Balancing
Short-Term Survival with Long-Term Sustainability. Franklin Covey and PricewaterhouseCoopers
LLC, 2012.
25
Project Management Institute. Pulse of the Profession: The High Cost of Low Performance.

page 57
1. how an organization conducts its business, including its requirements and
processes;
2. key aspects of the organizations culture and capabilities, as well as the
environment, industry sector, and context within which the organization
operates; and
3. proven, recognized best practices or techniques for accomplishing intended
results.
Organizations may benefit from having an integrated innovation and project
management methodology in many ways.
The methodology provides a repeatable approach that can be used across the
organization.
The methodology centralizes required documents, templates, and tools so the
organization does not have to constantly reinvent its approach.
The methodology standardizes repeatable processes, which then allows for
consistent reporting to organizational decision makers.
Constant improvement and refinement are incorporated as lessons learned.
The organization can provide training and development aligned with the
methodology.
The methodology can provide greater assurance that those steps deemed critical
by the organization are being completed.

Without calling itself out as such, BTs innovation team is highly projectized. Its
hothouse events use project teams to explore innovative ideas that lead to service
prototypes. Those prototypes can lead to business cases for bringing new service
offerings to market. Project managers participate in most aspects of the innovation
process so that project flow is maintained and helps accelerate speed to market.
Enhanced flow reduces the concept-to-market time frame within BT.
Like BT, General Mills appears to have project management linked to driving
innovation processes and project execution. For example, iSquad members are
innovation facilitators. Similarly, the Sparks team converts insights into business
opportunities.
General Mills collaborative processes capture meaningful intelligence from which a
plan of action can be implemented. The processes allow General Mills to engage with
its suppliers, potential partners, and customers to deliver innovative products


page 58
to market. Further, General Mills wants to be known as the strategic innovation
partner among its suppliers. Its connected innovation strategy is making strides
toward that goal.
Because Cisco is highly decentralized and all employees are encouraged to explore
innovative opportunities, Cisco has invested in building organizational capabilities to
support innovation. Its Services Innovation Excellence Center helps to build
innovation competencies among staff, provides tools and resources to support
innovation workshops and collaborative activities, sponsors contests and
competitions to spur innovation, and coaches and assists individuals trying to elevate
their ideas.
The challenge is that many organizations value innovation but do not effectively
enable it by investing in their project and program management capabilities. PMIs
2013 Pulse of the Profession study found that organizations risk losing about 14
percent of every dollar invested in a project as a result of projects not meeting their
goals and the resulting lost investment. The study also found that only 54 percent of
organizations value project management. Perhaps as a result of the undervaluing of
project management, project success rates continue to decline. Since 2008, the
percentage of project managers reporting that their projects met their original goals
and business intent has declined by 10 percent, from 72 percent in 2008 to 62
percent in 2012. Today, fewer organizations are providing training in project
management tools and techniques, investing in developing their project management
competence, and/or actively maturing their project management practices.
26

PMIs 2012 Pulse of the Profession In-Depth Report: Organizational Agility found that
more than two-thirds (71 percent) of organizations with high levels of agility have
established project management offices and encourage work across organizational
silos (67 percent). Some organizations have launched these offices to establish
and/or mature their project management capabilities and thus their ability to execute
strategy.
27
Project management office activities can range from building project
management processes and tools that others implement to fully managing
organizational programs and projects. The percentage of organizations with project
management offices, or a similar centralized project management department, is
increasing, according to PMIs 2013 Pulse of the Profession study. Nearly seven out of
10 organizations (69 percent) have a project management office, up from six out of
10 (61 percent) in 2006, when PMI first began tracking this. Organizations are
increasingly establishing project management offices with enterprise-wide
responsibilities, which are growing more rapidly than those that serve a department,

26
27

page 59
region, or division of an organization. Compared to their department-specific,
regional, and divisional peers, enterprise-wide project management offices are more
focused on strategic aspects of project management, such as training, managing
portfolios, establishing metrics, and developing core project management maturity.
28

These findings suggest that as more enterprise-wide project management offices are
created, more projects will align with the business goals of the organization and
project management will be executed more strategically.
Beyond project and program management, Lean principles have application within
innovation efforts. Flow is one of the key Lean principles. Flow means that systems
and processes are structured to ensure a smooth transition from one developmental
phase to the next without interruption, rework, or stoppage. Flow leverages the
resources dedicated to the project by ensuring that the right people are involved at
the right time to keep the projects forward progression. Flow also reduces non-
value-adding activities, such as handoffs, redundant tasks, and waiting. Integrating
innovation with program/project management processes helps to ensure a smooth
flow from ideation to commercialization, as best-practice organizations BT, Cisco,
and General Mills demonstrated.
When Amway established its open innovation team, it formalized its innovation
process and established business rules to guide projects between when a need is
established and the beginning of the formal stage-gate process. The organization
developed standard criteria for assessing projects and instituted a series of
checkpoints to ensure that only the best ideas moved forward. If Amway can bring a
consumer need, viable technology, and business value together in a potential product,
then it continues to pursue the opportunity; but if any element is missing, then the
project is either recycled for additional incubation or put on hold until circumstances
change.
Cornings external technology collaborations group is a bridge to help internal
projects succeed by sourcing external capabilities when needed. Typically,
technologists identify collaborators based on the needs of a particular project.
Occasionally, the external technology collaborations group assists technologists in
identifying potential collaborators. The external technology collaborations group
manages government and university relations and collaborates within the R&D
function of Corning. The group connects Corning scientists with outside entities.
This work initiates from requests from scientists, project managers, and program
managers. Based on the objectives, group members select the best method of
collaboration and assist in selecting collaborators. Requests are also received from
internal customers when scientists know what entity they would like to

28

page 60
collaborate with. The group also manages contracts through the life cycle of
collaboration and conducts post-collaboration interviews to measure and track the
benefits of the collaboration.
Invite participation in open innovation via experiences.
At APQCs 2013 knowledge management conference, CEO Carla ODell stated,
Innovation occurs at the boundaries of many disciplines. Organizational project
management is based on interdisciplinary integration. Team members from
knowledge management, innovation, project management, engineering, product
development, operations, marketing, legal, acquisition, and other functions must
contribute and collaborate to achieve business results. Organizational project
management must enhance open innovation practices. To do that, organizations
must develop and sustain project management skills at world-class levels.
Strengthening interdisciplinary project teams is an important approach organizations
have deployed to increase their agility. Why? Interdisciplinary project teams ensure
that the people with the right talents, skills, and knowledge collaborate to drive
execution and find creative solutions to challenges that may surface during the
project.
The best-practice organizations in this study recognize those connections and have
created integrated links into their processes. BT, for example, is in an industry in
which speed to market is critical. Time lost to hand-offs and knowledge transfer
interrupts flow and can affect project performance. So BT engages project managers
in the early stages of evaluating new ideas to enhance a smooth flow from ideation to
development to launch. Innovation staff, engineers, project managers, marketing
team members, and others work shoulder to shoulder on project execution.


page 61
Open Innovation Measurement
and Improvement

1. Seek compelling measures for open innovation.
2. Use change management to drive commitment to open innovation.

SEEK COMPELLI NG MEASURES FOR OPEN I NNOVATI ON.

Measures allow an organization to gauge the effectiveness of its open innovation
efforts. These measures must be compelling in order to capture organizational
interest and tell a story that people will listen to. APQCs 2012 study Using Metrics
that Drive Bottom-Line Value found organizations can take the following key steps
to ensure they have the right measures:
align measures with strategic goals by having senior management support,
obtaining stakeholder feedback, and linking measures to high-impact business
processes;
align individual measures with departmental or group measures;
use voice of customer feedback from external and internal customers to identify
and validate measures, as well as define customer-centric measures;
maintain a healthy performance measurement system with a balance of leading
and lagging indicators;
limit the number of measures to less than five for the average business process;
involve senior leaders in the measurement process from the beginning;
take a holistic view of process measurements by using a diverse blend of
measures; and
assign an owner for the measurement system to maintain consistent collection
and reporting approaches.
29

29
APQC. Using Metrics that Drive Bottom-Line Value. APQCs Collaborative Benchmarking,
2012.

page 62
According to Matthew Heim, there are two predominant schools of thought on
how to measure open innovation. Tracking individual successes within the stages of
the innovation process is the most common approach. Once a success is tracked, its
cost is compared with an estimate of what the cost would have been to develop the
new capability internally. Heim points out that this approach requires tracking and
reporting at many different levels and within various departments where open
innovation is practiced. Because this approach can often be confusing and
overwhelming, it often leads to mixed results.
The second approach, according to Heim, requires an enterprise-wide mandate to
see a significant percentage of new product ideas and non-core development
solutions through open innovation channels rather than developing them
internally. With this approach, R&D spending as a percentage of revenue is
benchmarked before open innovation is implemented, and then it is tracked
annually after the implementation. Tracking is done at the highest levels of the
company. This less common and more strategic approach was first introduced by
Procter & Gamble in its Connect+Develop program.
30

There is a consensus among the best-practice organizations in this study that
product success in the marketplace (e.g., market share) is a vital measurement for
open innovation. In other words, did the collaboration or partnership pay off in a
financially viable new commercial offering? The majority of best-practice
organizations in the study stress that an organization must beware of placing too
much emphasis on return on investment (ROI) to measure open innovation
effectiveness because it can lead to short-term thinking.
In addition to outcomes like revenue and market share, Figure 4.1 shows that the
best-practice organizations look at input measures, such as the number of ideas
submitted, and in-process measures, such as the number of ideas that move forward
to the next stage.

30

page 63
Measures Used to Evaluate Open Innovation Efforts

Figure 4.1

As mentioned, the number of ideas submitted and the rates of implementation and
adoption of ideas are important measures. However, every best-practice
organization participating in this study has fewer than 50 percent of its ideas survive
the filtering-out process. Individuals within an organization and its partners have to
be comfortable with their ideas being filtered out. The measurement and
documentation of this is important in the event that ideas are revisited at a later
time. In addition to the hard measures for open innovation in Figure 4.1, the best-
practice organizations in this study also look at softer measures or indicators to
measure and improve their performance in open innovation.
BT uses a balanced scorecard approach to its innovation measures and sets both
leading and lagging measures for the different stages of the innovation process. The
organization recognizes that balancing short-term successes with long-term thinking
is a specific challenge when it comes to measuring innovation. BT tracks a range of
metrics related to open innovation, including:
revenue generated from new services;
revenue generated from contacts made at BTs innovation showcases;
cost savings generated from new services, systems, or technology as a result of
innovation initiatives;
67%
0%
0%
0%
33%
33%
33%
25%
75%
75%
75%
75%
75%
100%
0% 20% 40% 60% 80% 100%
Other
Number of idea submissions
Improved efficiency
Implementation/Adoption (e.g., number of ideas
that moved forward)
Revenue growth (percentage change over time)
Direct revenue from open innovation ideas that
were implemented
Product success in the marketplace (e.g., market
share)

page 64
cost avoidance resulting from ideas submitted by BT employees through its new
ideas scheme;
the number of ideas fed into the pipeline from companies that went through an
innovation showcase; and
the number of ideas progressing to each stage of BTs C2M process, with a goal
of a 5 percent improvement in cycle time for each stage over the prior year.

Measuring the number of ideas across certain milestones or phases is also important
because it offers value to individual innovation initiatives.
Amways open innovation team tracks a range metrics related to open innovation,
including:
number of ideas screened,
number of technologies presented to the organizations technology review
board,
number of technologies that advance through the three technology readiness
levels (a measure used by open innovation teams to help order the project by
progress and maturity) and how much time they spend at each level,
number of conversions to business case, and
number of conversions to product.

Amways open innovation team has also found collecting and sharing success stories
to be useful in communicating the value that open innovation generates for the
organization.
Ciscos emerging technologies group focuses on building new markets and pushing
innovations forward faster. Projects are tracked through rigorous timelines. Cisco
uses many different measures depending on the phase the innovation is in. To avoid
projects being killed too early, initial measures for startups are not the same as
measures used in the core business. However, customer satisfaction and product
quality are measured at each stage.
Although its measures differ from those of the emerging technologies group, Cisco's
Services Innovation Excellence Center maintains a focus on the business impact of
innovation. The centers key metrics include the financial and non-financial impact
of implemented ideas, as well as innovation maturity level and progress from
awareness, to competence, and then to excellence. Innovation maturity is the
foundation for a certification program in development with components for the
level of organizational maturity and an individual certification program based on
individual skill mastery and business impact.

page 65
To evaluate Ciscos Smartzone idea pipeline, the center looks at:
the number of participants per organization size,
the number of active participants,
the number of ideas submitted per quarter,
the number of ideas incubated,
the number of ideas implemented, and
the number of ideas graduated in the last two quarters.

Executives and business unit leaders at General Mills meet twice a year to discuss
the product pipeline, set expectations and evaluate performance using new product
measures. Measures reveal product sustainability in the marketplace, product
incremental sales, and an analysis of margin and profit.
General Mills uses a variety of measures to evaluate the success of its connected
innovation efforts. It monitors:
the percentage of launches enabled by external innovation,
the percentage of sales enabled by external innovation,
the percentage of cost savings enabled by external innovation,
sales per headcount (with the recognition that innovation is not the only factor
that can affect this measure), and
cost savings per headcount.

General Mills is also developing measures to evaluate the quality of an innovation
partners service and its innovation potential.
Cornings operating divisions use a variety of measures to track open innovation
success. Aside from measuring the percentage of new products introduced to the
market in the last three years and the number of patents filed by its scientists,
Corning evaluates improved efficiencies and product success in the marketplace.

USE CHANGE MANAGEMENT TO DRI VE COMMI TMENT TO
OPEN I NNOVATI ON.

Open innovation is a change to the way most organizations have conducted
research and development. To get employee buy-in, an organization looking to
collaborate with external sources has to carefully manage the change. The

page 66
organizations leaders must encourage buy-in across the organization and address
fears that open innovation will replace peoples jobs or reduce their roles.
APQCs 2005 study Realizing Change: Knowing When and How to Successfully
Change found that best-practice organizations gain buy-in for change by having a
commitment from the highest levels of the organization, aligning change to the core
strategy, having a model or methodology to guide the journey, and communicating
the strategic message of change and a change culture. Change rarely occurs within
an organization without some cultural resistance.
31

An organization can use reward systems to encourage individual and group
behaviors to change. According to Heim, The key behaviors that drive success in
both the business unit and the open innovation program is speed to acquire new
knowledge, speed to develop new innovations, and ultimately, speed to market.
32

Amway put forth a great deal of effort in managing change within its organization.
When Amway decided to launch its open innovation program, the open innovation
team had to find a way to engage senior leadership, managers, and scientists in the
product development function. Because Amway was successfully producing new
products and growing, many of the organizations members did not understand why
there was a push to change existing processes. In order to facilitate change, the open
innovation team created a presentation that promoted the benefits of open
innovation and highlighted the reasons why Amway needed to make adjustments to
its approach. However, changes to Amways culture could not occur without senior
leadership support driving the change. Even though its open innovation initiatives
began at the grassroots level, Amway found that its open innovation team had to
make a formal case to leadership to ensure that there was ongoing support and
funding for the initiative.
Amway experienced the following types of cultural resistance when it rolled out its
open innovation processes:
Pocket vetooccurs when the open innovation team identifies a potential
technology but is unable to get the marketing and product development
functions to confirm whether they are interested in it;
My needs are secretoccurs when there is difficulty getting product
development, marketing, and other areas of the business to communicate their
needs and the technologies they would like the open innovation team to find;

31
APQC. Realizing Change: Knowing When and How to Successfully Change. APQCs Collaborative
Benchmarking, 2005.
32

page 67
Deep pockets, short armsoccurs when product development and
marketing functions do not want to fund the development of a particular
technology that they have expressed a need for or interest in;
Speed waitingoccurs when product development and marketing
functions cannot decide whether or not they are interested;
Not invented hereoccurs when there is an assumption that internally
developed technologies are inherently better, which creates concern among
organization members that jobs will be at risk due to external sourcing; and
I dont have timeoccurs when the product development function neglects
technologies it brought to the open innovation team due to an excess of
projects.

Although Amways open innovation team has not overcome all cultural resistance, it
has been able to overcome some. Amway has been able to mitigate the challenge
my needs are secret by creating a technology planning process that forces product
development, marketing, and other internal stakeholders to communicate their
needs in a clear and concise manner. Amway has made considerable progress against
the not invented here challenge as employees have realized the value of bringing
in external technologies to create more internal product development work.
Cisco experienced many challenges with seeking innovation in new markets, and
some of the challenges had to be overcome by changing the organizations culture.
The following are five challenges that Cisco believes large organizations often
struggle with when seeking innovation in new markets, along with descriptions of
how Cisco manages those challenges.
1. Too much moneyCisco approaches this challenge by creating a sense of
urgency and intentionally starting lean when it incubates a business. The
team thinks fast when projects are in startup mode and are only given
enough money to get to the next milestone.
2. Too much timeCisco mitigates this challenge by executing projects
quickly through prototyping and piloting. With markets moving faster,
Cisco tries to push an idea to market in 12 to 18 months.
3. Too many peopleCisco handles this challenge by creating small teams
that are empowered to move quickly. These teams act as startups. Cisco
makes an effort to have fewer than 50 people on a team before the first
shipment of a product.
4. Too much loveCisco mitigates this challenge by having new technology
startups operate in stealth mode for the first 18 months, which allows them
to get to market at the fastest rate possible. Projects are taken out of stealth
mode when they are ready for market so that the sales and service

page 68
organizations can be involved. The emerging technologies group then does
the necessary work to move the new technology into the organization. By
delaying the new technologys entry into the mainstream, Cisco avoids
having too much involvement from internal groups that want to be part of
a high-profile project.
5. Too much hateCisco avoids this challenge by encouraging its emerging
technologies group to leverage senior executive champions, as well as
keeping startup units together during incubation.
6. Black sheepCiscos emerging technologies group focuses on incubation
and what it does best. Having this focus helps the group avoid being the
outcast or being considered negatively by others in the organization.
General Mills attitude regarding innovation has shifted from a focus on only
sourcing innovation internally to a focus on actively seeking innovation from both
internal and external entities. Prior to 2005, company policy was not to evaluate,
accept, or fund ideas generated outside of the organization. However, after
recognizing that its focus was leading to mainly small, close-in product line
extensions, General Mills benchmarked externally and researched other innovation
programs to compile best practices. The strategy and innovation group then
adopted its current organization of smaller catalyst teams to support the
implementation of these best practices.


page 69
PMI
Seek compelling measures for open innovation.
According to John P. Kotter, a Harvard Business School professor emeritus widely
regarded as a father of business strategy, Strategy should be viewed as a dynamic
force that constantly seeks opportunities, identifies initiatives that will capitalize on
them, and completes those initiatives swiftly and efficiently.
33
Strategy is a plan of
action for achieving the vision and mission of the organization. It translates the
vision and mission into benefits and changes that will deliver maximum value to
stakeholders, thus ensuring continued growth and a sustainable competitive
advantage in a chosen market. Benefits, value, and changes from implementing
organizational strategy may be realized in any or all of the following key areas:

In todays increasingly competitive global environment, organizations are constantly
seeking ways to improve their capabilities and performance in the delivery of strategy.
So although business measures and value are critical metrics of innovation,
organizations should also evaluate their execution performance. A 2010 Franklin
Covey/PricewaterhouseCoopers report Execution-Focused Leadership: Balancing Short-
Term Survival with Long-Term Sustainability found that CEOs identified their
organizations three greatest challenges as: excellence in executing strategy
Strategic Value
New market entry/market
expansion
Brand equity/market image
Technology breakthrough
New product/service development
Financial Value
Increased revenue
Exclusive value creation (intellectual
property and patents)
Expected ROI
Cost reductions/savings
Operational Performance
Increased productivity
Improved delivery of value to
customers
Improved service levels
More efficient/effective processes
Increased quality
Relationship Quality
Greater trust
Strategic alignment with suppliers,
partners, etc.
Improved communication
Stronger integration/collaboration
Increased loyalty

33
John Kotter. Accelerate! Harvard Business Review, November 2012.

page 70
(55 percent); consistent execution of strategy by top management (47 percent); and
speed, flexibility, and adaptability to change (47 percent). However, most CEOs did
not feel that their organizations were particularly effective at executing their
programs and projects.
34
Since execution performance affects business measures and
value, it is critical that organizations evaluate that performance and target
underperforming areas for improvement.
At Amway, after-action reviews allow its open innovation team to evaluate what
worked, what did not, and why. Even when a project is discontinued, something is
learned, and Amway tries to focus on this aspect when projects are eliminated or put
on hold. The Amway open innovation team reports that it is not uncommon for a
project to be shelved and then subsequently resurrected and brought to market.
Companies structure their metrics to reflect factors that are critical to their
organizations. Best-practice organization Corning assesses the outcomes of its
projects to determine if objectives were achieved, costs were avoided, capital
expenses were reduced or avoided, new inventions were created, and new thought
leadership was established. Therefore, managing this knowledge and maintaining its
portfolio of ideas is vital to the organizations innovation model. Some discoveries
that are not ready for larger scale scrutiny may be shared with strategic partners to
address a niche or smaller segments of the market before they become part of the
organizations global operation.
Within General Mills, product performance visibility is critical. The organization
maintains a performance dashboard to evaluate how well products are being adopted
by consumers.
Cisco has taken a different approach to measuring the performance of its innovation
activities. It has unique metrics for its startups to evaluate them as they mature. Once
matured, they have to meet established corporate metrics.
Use change management to drive commitment to open innovation.
There are many change management principles associated with innovation. At the
highest level, strategy execution occurs in a dynamic environment. Thus, the needs to
manage the changes within that dynamic environment, maintain strategy alignment,
and ensure cross-organizational integration with strategic change are critical
capabilities for successful execution and benefits realization across a portfolio of

34
Franklin Covey and PricewaterhouseCoopers LLC. Execution-Focused Leadership: Balancing
Short-Term Survival with Long-Term Sustainability. Franklin Covey and PricewaterhouseCoopers
LLC, 2010.

page 71
programs and projects. Similarly, organizations need to effectively and smoothly
assimilate the impact of change resulting from the implementation of the projects
and programs. Both objectives require organizational change management.
Research continues to show the importance of effective change management in
strategy execution. The IBM 2012 Global CEO Study of more than 1,500 CEOs,
general managers, and public sector and business leaders found that complexity and
change are presenting challenges that more than half of the CEOs believe their
organizations cannot manage.
35

Organizational leaders are starting to respond to the need for more effective change
management. PMIs 2012 Pulse of the Profession In-Depth Report: Organizational Agility
found that organizations with strong change management practices have high to
moderate levels of agility. Those organizations effectively detect and evaluate changes
in the external environment (52 percent compared to 7 percent of organizations that
are minimally effective) and identify and leverage significant changes (39 percent
compared to 12 percent for minimally effective organizations).
36
Those results echoed
findings from the 2011 Pulse of the Profession study, which found that 71 percent of
portfolio and project management office leaders within organizations felt that
managing change was one of the most critical success factors for projects.
Corning has changed its culture by encouraging its employees to share new ideas and
collaborate across teams in order to increase efficiencies, reduce time to market, and
realize ROI and operational goals. By widening its external strategic alliances and by
partnering with suppliers and research firms, it has been able to sustain a competitive
advantage and deliver innovative products to its customers.
Ciscos emerging technologies group aims to align with the business units priorities,
which allows for the emerging technologies group to adjust as priorities shift. This
group has also learned how to navigate the Cisco culture in order to launch initiatives
and startups while at the same time balancing being good corporate citizens with the
need to function as startup entrepreneurs.
Strategyand the portfolios, programs, and projects that evolve to realize strategy
are often in a state of transition due to the constant push and pull within and outside
of organizations. Internal organizational dynamics add complexity to strategy
execution. Such dynamics include a shared understanding of the strategy and how
staff roles support its achievement, as well as shifting priorities among and within a

35
IBM Global Business Services. Global CEO Study. IBM, 2012.
36

page 72
portfolio of programs and projects. PMIs 2013 Pulse of the Profession report revealed
that communicating the significant objectives of a program or portfolio and sharing
the vision for the initiative across an organization are major contributors to engaging
employees and achieving higher levels of program or project success.
37

37

page 73
Open Innovation Enablers

Enablers in This Section
1. Seek hands-on support from and exposure to senior leadership.
2. Recognize internal and external contributors for their ideas.
3. Match portfolio management to the innovation and organizational
strategies.
4. Focus on the open innovation process and players first, and then find
the tools to help.
5. Capture lessons learned, and continuously improve the open
innovation process.

To increase the number of high-quality ideas sourced and generated, as well as to
increase the speed of open innovation, the best-practice organizations in this study
embrace certain enabling practices, processes, and tools. Although the adoption of
these enablers is not in itself a best practice, it furthers the success of open
innovation efforts.

SEEK HANDS-ON SUPPORT FROM AND EXPOSURE TO SENI OR
LEADERSHI P.

Enthusiastic and engaged senior leaders can play a vital role in enabling a successful
open innovation initiative and help accelerate a shift in the companys culture
toward openness and collaboration. This support goes beyond just speaking about
the importance of open innovation to actively being a part of the process. Senior
leaders in the best-practice organizations in this study tend to take a more active role
in open innovation than at the sponsoring organizations and the larger population
of 279 organizations participating in APQCs Open Standards Benchmarking in
innovation (Figure 5.1).


page 74
Senior Management Involvement in Open Innovation Process

questionnaire
Figure 5.1

Executive sponsorship can help remove roadblocks and drive participation in open
innovation efforts. This support can help managers spend less time overcoming
barriers and more time enhancing innovation productivity. New open innovation
programs often have an R&D manager or director rally people to participate across
the organization, as well as develop internal and external networks.
Cornings CEO has hands-on involvement in innovation. The CEO sits on its
growth and execution council, to which program managers present open innovation
projects. Having the exposure to and input from executive leadership helps provide
direction for scientists in the organization. It also encourages scientists to create
more innovative ideas to present to senior leadership.
Cisco has found that having strong senior executives as champions elevates
innovation and ensures that it happens. Executives at the most senior level evaluate
company-wide innovation, and it is customary for senior leaders to promote new
ideation challenges and send out broad communications to drive employee
engagement in innovation.
2%
8%
11%
15%
16%
23%
25%
25%
25%
0%
25%
0%
0%
25%
0%
0%
0%
0%
0%
25%
75%
0% 20% 40% 60% 80% 100%
1 Not actively involved
2
3
4 Communicates broadly about open
innovation
5
6
7 Takes an active sponsorship role

page 75

RECOGNI ZE I NTERNAL AND EXTERNAL CONTRI BUTORS FOR
THEI R I DEAS.

Rewarding and recognizing both internal and external idea contributors helps
generate goodwill and, in turn, higher-quality ideas. APQCs 2012 Best Practices
Study Improving the Flow of Knowledge in Product Development found that
reward systems are distinct from the other methods of recognition because they
verify that the organization is serious about capturing new ideas and motivating
individuals to contribute. Some individuals within an organization participate in
knowledge capture and transfer initiatives based on intrinsic motivation. Intrinsic
motivation is typically associated with acceptance, status within the organization,
and honor. Extrinsic motivation can take the form of gift cards, employee awards,
monetary bonuses, a flattering e-mail to an employees boss, or organized activities.
38

The data from this study shows that all five of the best-practice organizations
reward and recognize idea contributors. The majority of sponsoring organizations
also recognize employee and external contributions. Organizations in this study use
a variety of formal and informal methods to reward and recognize contributors for
their idea submissions (Figure 5.2). The best-practice organizations often use reward
systems that provide mentoring and professional development to idea contributors,
as well as time to work on innovative projects of interest.

38
APQC. Improving the Flow of Knowledge in Product Development. APQCs Collaborative
Benchmarking, 2012.

page 76
Methods of Reward and Recognition for Idea Contributors

Figure 5.2

Cisco, BT, and Corning have multiple events that reward internal idea contribution.
Cisco has surveyed its engineers to find out what drives them to innovate. The top
two incentives are time to work on innovative ideas followed by having that
innovation work affect their career in terms of visibility with senior executives and
potential promotions. Consequently, the services organization has an innovation
catalyst award for significant contributions, which provides individuals with visibility
with executives and promotions. This award recognizes initiative, persistence, and
the building of skills. Recipients report feeling respected by their peers and being
seen as innovative.
BT has multiple ways of recognizing and rewarding idea contributions. BT
financially rewards employees who submit original ideas through its new ideas
scheme. The company tracks employees who are key players in bringing an idea to
launch and rewards them accordingly. By creating such a list, BT has an informal
expertise locator of known productive contributors. BT also gives teams that have
exceeded efficiency expectations a dedicated percentage of time to devote to
innovation. BT structures that time by giving those employees a research question
to address.
100% 100%
75% 75%
100%
0%
50%
100%
50%
0% 0%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Formal
recognition
(e.g.,
identification in
a publication or
on a website)
Informal
recognition
(e.g.,
recognition by a
supervisor or
manager)
Monetary
awards
Nonmonetary
awards
Rewards
systems
Other

page 77
Corning uses both formal and informal recognition and rewards for its idea
contributors. Cornings scientists are recognized for idea generation, publication of
papers, presentations to the community, and presentation of scientific posters.
Details on patent holders are displayed in common spaces. Corning focuses on the
prestige of being recognized for patents rather than on monetary rewards. However,
monetary rewards tied to how well a new product performs are part of its year-end
evaluation process.
In addition to rewarding innovative employees, Cisco and General Mills also reward
external idea contributors. Ciscos global innovation competition rewards idea
contributors outside of the organization. The rewards for its I-Prize were initially
monetary, but for upcoming regional contests Cisco has planned to offer mentoring
and in-kind services (e.g., legal and marketing assistance that will help winners move
their companies forward). General Mills offers both monetary and service-based
(e.g., packaging design for a contributing organization) rewards for its external
partners.

MATCH PORTFOLI O MANAGEMENT TO THE I NNOVATI ON
AND ORGANI ZATI ONAL STRATEGI ES.

Open innovation projects, like other projects in an organization, need to be tracked,
assigned resources, and guided. Portfolio management involves identifying,
prioritizing, managing, and controlling projects, programs, and other related work to
achieve strategic business objectives.
39
For open innovation projects, it is important
to match the level and type of portfolio management to the innovation and
organizational context. APQCs best practices report Portfolio Management: Optimizing
for Success found that when the portfolio management process is linked to other
processes in an organization, the overall performance of the organization is
optimized.
40

Amway has a technology review board that prioritizes and aligns projects in its
queue and assigns resources. Project summaries are submitted to the technology
review board, which then decides whether to allocate funding and resources. The
board is made up of R&D middle management, as well as representatives from
procurement and marketing when needed.

39
Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK
Guide)Fifth Edition. Project Management Institute, 2013.
40
APQC. Portfolio Management: Optimizing for Success. APQCs Collaborative Benchmarking,
2007.

page 78
Additionally, open innovation teams at Amway use a measure called the technology
readiness level to order projects by progress and maturity. Ideas are evaluated based
on efficacy/functionality, market assessment, safety and regulatory adherence,
intellectual property/exclusivity, and commercial viability. There are three
technology readiness levels.
1. Level 1 indicates the potential for a technology to solve a problem or
address an opportunity.
2. Level 2 indicates that a technology has been developed in a laboratory, has
been tested, and is supported by the industry.
3. Level 3 indicates that a technology has been proven effective, meets
customer needs, and warrants a well-defined business case.
For Ciscos services organization, there are top-down and bottom-up components
to its innovation portfolio. Cisco does not track a directed portfolio for the bottom-
up component because the focus is more on employee engagement and customer
satisfaction. For its top-down approach, Ciscos targeted innovation is evaluated
from an investment perspective by an existing portfolio management process at the
services level.

FOCUS ON THE OPEN I NNOVATI ON PROCESS AND PLAYERS
FI RST, AND THEN FI ND THE TOOLS TO HELP.

To avoid expending unnecessary resources to automate or enhance an ineffective or
inefficient process, best-practice organizations focus on understanding the
innovation process and the stakeholders involved before looking at which tools to
use to make it better, faster, or cheaper. Clarifying the roles involved and the way
the process works can make it easier to establish criteria for the types of tools
needed. Once the process and players are established, then the organization can
search for the proper vehicles to enable its innovation efforts. The best-practice
organizations in this study also tend to use tools (at least initially) that they already
have available, and their approach evolves as their open innovation effort matures.
Ciscos approach to tools for innovation focuses on the goals the organization
wants to achieve first and then on finding the right tools to help accomplish those
goals. To help with idea capture, generation, and evaluation efforts, Cisco has
adopted commercially available tools such as Brightidea and Spigit.
To capture internally generated ideas, Cisco has a platform called I-Zone. After the
internal success of I-Zone, Cisco replicated it externally in 2007 with its launch of
the first I-Prize. Cisco chose a tool from Brightidea for the first I-Prize. Cisco then

page 79
chose to use the Brightidea tool internally in 2008 with I-Zone version 2.0. I-Zone
version 2.0 allows Cisco to take advantage of the social aspects of the tool and
enables more collaboration around new idea submissions through features such as a
voting function.
To drive engagement in open innovation, Cisco has used gamification as a tool for
external challenges, although it has recently been used internally. (Cisco used Spigit
as the platform for its second I-Prize because of its prediction market capabilities.)
Cisco used gamification to give I-Prize participants points to invest in ideas in a
virtual market similar to the stock market. Cisco also allowed participants to select a
small percentage of the ideas that would move forward. Idea contributors could
then encourage others to rally behind and invest in their ideas so that they could
advance to the next round.
Corning has adopted tools as a means of facilitating documentation and
collaboration among its scientists. To enable scientists to submit ideas or post-
project issues that need input, Corning uses forums in Microsoft SharePoint.
Corning also uses SharePoint to distribute recorded after-action reviews among
principal investigators and to document project failures. Cornings scientists use
Microsoft electronic lab notebooks to track R&D progress. These notebooks also
increase collaboration among scientists by providing a virtual workspace.
For Amway, software solutions were not the starting point for its open innovation
process. It put the resources and projects in place and adopted tools to help track
them. Amway primarily uses Microsoft SharePoint to track projects and resources
and to manage content related to potential technologies. Amway also uses a custom-
built technology database.

CAPTURE LESSONS LEARNED, AND CONTI NUOUSLY I MPROVE
THE OPEN I NNOVATI ON PROCESS.

Capturing lessons learned provides best-practice organizations with a rich
opportunity to streamline open innovation processes by helping them avoid past
mistakes and adopt proven practices. APQC research has identified seven steps for
a successful lessons learned approach.
1. Determine the strategic objectives for the lessons learned process.
2. Support current project and process teams through adaptation and
application.
3. Foster reuse in other projects or domains where sources and recipients are
not the same.

page 80
4. Create governance processes and clearly define roles.
5. Design the lessons learned process.
6. Ensure participation.
7. Measure the impact of the lessons learned process.
41

Capturing lesson learned is important to ensuring that knowledge flows throughout
an organization. Collection of knowledge is one of the seven steps in APQCs
Knowledge Flow Process (Figure 5.3).
42
In a lessons learned process, critical
knowledge is created, identified, collected, reviewed, shared, made accessible, and
used. Enhanced collaboration and having a formal knowledge management effort
can minimize rework and helps identify expertise within an organization (and among
partners).
APQCs Knowledge Flow Process

Figure 5.3

Capturing and transferring lessons learned can be made easier with a searchable
repository. However, the focus should not be on the tool, but rather on getting the
lessons learned process baked into the open innovation process. It has to be
embedded into processes, tools, and templates for people to use and reuse it.

41
APQC. Cutting the Cost of Not Knowing: Lessons Learned Systems People Really Use. APQCs
Collaborative Benchmarking, 2010.
42
APQC. Tips to Enable Knowledge Flow. APQC Knowledge Base, 2012.

page 81
Figure 5.4 shows that a larger percentage of this studys best-practice organizations
than sponsoring organizations use internal collaboration software and staff meetings
as vehicles to capture and share failures and lessons learned from open innovation.
This shows that the role of people and collaboration is more important than the
tool used to store and access the information.
Documentation of Failures/Lessons Learned from Open Innovation Effort

Figure 5.4
Corning has a formal knowledge management program that allows the company to
leverage its history, culture, and employee tenure while being agile enough to keep
pace in competitive markets. Corning captures failures and lessons learned through
written documentation of all technology findings; these are accessible to everyone in
the organization.
Amway regularly re-evaluates projects to aggressively winnow down its pipeline. The
open innovation team uses after-action reviews to evaluate which open innovation
efforts worked, which did not work, and why. It documents those evaluations to
monitor progress. Amway believes there is something to be learned even when a
project is stopped. Projects can also be shelved for a certain period of time and then
brought to market at a later time.
Every time Cisco conducts an I-Prize contest, leaders first ask what can be done
better or changed from the last iteration. Figure 5.5 presents lessons learned from
Cisco that are applicable to both internal and external innovation challenges.
0%
33%
33%
33%
0%
33%
25%
0%
25%
50%
75%
75%
0% 20% 40% 60% 80% 100%
Other
My organization does not track failures or
lessons learned from the open innovation effort
Internal communications
Organizational intranet or database
Internal collaboration software (e.g., SharePoint)
Staff meetings

page 82
Ciscos Innovation Challenge Lessons Learned
Consideration Best Practices Ciscos Recommendation
Goals

Clear objectives
Follow-up actions defined
Create internal enthusiasm
for innovation, new ideas
at all levels of company
Lift visibility of innovation
within venture capital,
technology cluster, and
academic communities
Contest Design
Decide: broad vs. specific
challenge
Thoughtful framing of
challenge
Incentives line up with
objectives and promote
desired behavior
Designed to produce
desired outcome
Must be clear about what
you are asking people to
contribute
Not all incentives need to
be cash; recognition,
visibility to senior
executives, and impact to
career are powerful
motivators
Participant
Roles and
Desired
Behaviors
Promote collaboration
(80 percent will help
develop idea rather than
submit idea)
Moderator communicates
frequently to participants
to show that someone is
listening
Provide feedback
Define participant,
moderator, evaluator, and
judge roles
Ask participants to
comment, vote, and refine
ideas, not just submit ideas
Active moderator/sponsor
participation
Executive
Stakeholders
Executive sponsor
visibility crucial
Funding/Resources for
implementation of
winning idea identified

Executive sponsor
launches challenge and
participates as judge (or
picks winning ideas)


page 83
Evaluation
Criteria
Defined during campaign
design and clearly
communicated to
participants and judges
Make evaluation process
quick and easy for
evaluators and judges
Decide how and who is
going to pick winning
idea(s)
Resources
Dedicated program
manager
Judges for each phase
identified and they
understand evaluation
criteria
Determine what resources
and assistance to provide
participants to
refine/develop promising
ideas
Budget for program
includes tools, marketing,
and rewards
Provide resources to help
develop most promising
ideas

Marketing Plan
Communication plan
Use social media to drive
participation
Share success stories after
completion of campaign
Promote culture of
innovation and desired
new behaviors
Intellectual
Property
Bring legal function into
planning process as
partner
Intellectual property due
diligence built into
evaluation process
Be clear about intellectual
property to partners and
suppliers
Tools
Enable collaboration;
connect people who can
help
Social/Gaming elements
built in
Aids with evaluation and
communications processes
Tools support
collaboration and facilitate
team creation
Enable viral marketing
Figure 5.5

page 84
PMI
Seek hands-on support from and exposure to senior leadership.
Too often, the term executive sponsor conjures up the image of a disconnected
executive whose main responsibility is to initiate a project and then come in for the
victory lap when it is all over. But an engaged executive sponsorwith a vested
business interest in the project from kickoff to closecan mean the difference
between success and failure. Indeed, one of the most common reasons why projects
fall short is a lack of executive sponsorship and management buy-in, according to
KPMGs 2010 New Zealand Project Management Survey.
43

Despite the strategic importance of the role, the KPMG survey found that 68 percent
of companies do not always have an effective sponsor. In addition, PMIs 2010
government program management study found that 81 percent of program managers
at U.S. government agencies said that strong support from at least one executive-level
sponsor had a high impact on program success.
44

The executive sponsors key responsibilities follow.
1. Provide clear direction for the project and how it links with the
organizations overall strategy. By making the effort to draw a clear
connection from project to strategy, sponsors provide team members with a
sense of purpose. And that can serve as a major motivational tool.
Organizations cannot execute strategic initiatives unless they can effectively
communicate their strategic alignment and business benefits. According to
PMIs Pulse of the Profession In-Depth Report: The Essential Role of
Communications, many organizations admit that they are currently not placing
adequate importance on effectively communicating critical project
information, especially when explaining the business benefits of strategic
initiatives to stakeholders at all levels of a project. As revealed in the report,
55 percent of project managers agree that effective communications to all
stakeholders is the most critical success factor in project management.
45

43
KPMG. New Zealand Project Management Survey. KPMG, 2010.
44
Project Management Institute. Program Management 2010: A study of program management in the
U.S. Federal Government. Project Management Institute, 2010.
45
Project Management Institute. Pulse of the Profession In-Depth Report: The Essential Role of
Communications. Project Management Institute, 2013.

page 85
2. Help the project team ensure the project is on time, on budget, and on
scope. The role of the sponsor starts at the very origin of the project.
Sponsors not only lead the project through the selection process until it is
formally authorized but also play a crucial role in the development of the
initial scope and charter.
3. Provide feedback on status reports, and ensure they reach the
necessary stakeholders. As the project progresses, sponsors must also relay
any information, requirements, progress reports, or warnings from the
project manager. Sponsors should have consistent interaction with team
members, including at project meetings. This will help sponsors stay on top
of the projects progress and demonstrate to the team that the organization
is invested in the project.
4. Champion the project at the executive level to secure buy-in. Sponsors
must act as liaisons to the organizational stakeholders by communicating
how the project will integrate into their overarching strategy and goals.
Perhaps the most important role for the sponsor is as project advocate. As
such, effective sponsors must know how to convey the project vision to
anybody who can influence the outcome. When companies close the gap
between the developers of the strategy and those who must execute it,
projects are more successful. Organizations that report more frequent
project communications, particularly surrounding the business benefit and
contribution to strategy, average significantly more successful projects versus
organizations that communicate that same information less frequently,
according to PMIs Pulse of the Profession In-Depth Report: The Essential Role of
Communications.
46

Executive sponsorship of strategic projects is critical for program and project
success. PMIs 2013 Pulse of the Profession study found that more than three-quarters
of projects (79 percent) at high-performing organizations enjoy active project
sponsors, compared to less than half (43 percent) at low-performing organizations.
47

Within BT, executive sponsorship is critical for successful innovation. Business unit
executives jointly invest with the innovation team in research and development. That
support and collaboration early on ensures that innovation projects have the
resources and executive oversight required to proceed.

46
Ibid.
47
Project Management Institute. Pulse of the Profession: The High Cost of Low Performance.

page 86
Since 2005, General Mills has conducted innovation reviews twice per year in which
executives engage with business leaders to gain greater insight into product
development projects. The reviews help to ensure that the executives understand the
projects and have input into the product pipeline.
At Cisco, the Services Innovation Excellence Center was formed in 2010 to provide a
vehicle for employees with valuable knowledge to showcase their ideas. Within two
years, the program has grown to having three senior vice presidents as sponsors and
drawn the attention of other senior vice presidents.
Match portfolio management to the innovation and organizational context.
Organizational project management provides a means for organizations to improve
the delivery of strategy through portfolio, program, and project management.
Organizational project management is a strategy execution framework utilizing
project, program, and portfolio management, as well as organizational enabling
practices to consistently and predictably deliver organizational strategy producing
better performance, better results, and sustainable competitive advantage.
Organizational project management aligns the development of strategy with
implementation through the deployment of a portfolio or portfolios of programs and
projects for the creation and delivery of strategic business results. Alignment also
harmonizes the strategic aspirations of the organization with operations or business-
as-usual to ensure optimum assignment of talent, knowledge, and capital resources.
Through the merging of organizational integration and alignment, organizational
project management provides the most effective means for implementing and
maximizing the delivery of strategy.
Portfolio management balances investment and risk and represents what an
organization wants to be in the future, versus what its operations are today. Portfolio
management centralizes the selection and management of projects, programs, and
related work to achieve specific strategic business objectives. An organizations
portfolio of programs and projects represents those investments in change that
leadership believes to be most significant and necessary for the organization to
succeed in its chosen market(s). Therefore, the deployment of strategy through the
right mix of both internally and externally facing initiatives is an important step in the
successful implementation of strategy. Not only is the deployment of strategy into a
balanced portfolio crucial, it is also the most leveraging step in the allocation of
scarce organizational resources.
Further, the deployment of the portfolio is not a one-time activity. Although a
portfolio is typically deployed to represent a specific planning period, it must be
reviewed periodically in the context of a rapidly changing global environment to
ensure its continued relevance and ability to deliver intended business results.
Accordingly, the mix of initiatives represented in the portfolio may undergo change
over both the short- and long-term horizons. As the portfolio is adjusted and those


page 87
adjustments transition to the program and project levels, effective change
management ensures ongoing alignment and integration with the evolving strategy
across the organization.
Portfolio management helps to enable innovation to fulfill an organizational vision.
In the PMI-funded study Project Portfolios in Dynamic Environments: Organizing for
Uncertainty, a research paper by authors Brian Hobbs and Yvan Petit outlined four
high-level goals for strategic portfolio management.
Strategic directionShow a clear link between organizational strategy and the
portfolio of programs and projects.
BalanceEnsure a mix of low-risk and high-risk projects.
AgilityShift the portfolio in response to dynamic changes in the organization
or its markets through:
Sensingidentify and filter changes that affect the portfolio to ensure the
organization is choosing the right programs and projects.
Seizingalign projects to organizational capabilities and resources so the
organization can fully leverage opportunities.
Transformingrealign available resources and structures to drive strategic
objectives.
ValueMaximize the return on all programs and projects within the portfolio.
48

PMIs 2012 Pulse of the Profession In-Depth Report: Portfolio Management found that
highly effective organizations are twice as likely to look to portfolio management to
enable innovation as those that are minimally effective. Highly effective organizations
have staff who spend 75 percent more of their time on portfolio management. In
organizations where managers focus on strategic as well as departmental goals, 70
percent of projects meet or exceed their forecasted ROI.
49
For portfolio management
to succeed, executives and other staff need to understand and support portfolio
management. Organizations must be equipped with the right portfolio management
tools and practices.
BTs core processes focus on bringing concepts to market. BTs centralized
innovation group is responsible for qualifying ideas after they have been sourced
from an initiative. After ideas are qualified they enter BTs formal process for

48
Yvan Petit and Brian Hobbs. Project Portfolios in Dynamic Environments: Organizing for
Uncertainty. Project Management Institute, 2012.
49
Project Management Institute. Pulse of the Profession In-Depth Report: Portfolio Management.

page 88
bringing concepts to market. BT executives measure benefits realization by how well
BT packages existing and evolving services with pricing strategies that meet customer
needs. The innovation team therefore has a direct interface with corporate strategy.
That strategy provides the portfolio inputs into the innovation system. The
innovation system then authorizes strategic projects and programs for exploration
and development.
Capture lessons learned, and continuously improve the open innovation
process.
Organizations need to continuously focus on improving all of their business
processes and practices. That improvement process requires the use of change
management practices to effectively transition from the current state of performance
to the desired state.
As effective as it currently performs, BTs Applied Technology Centre continues to
evolve. Since its inception about five years ago, it has added new capabilities such as
external scouting for evolving technologies and services that BT can add to its
portfolio. The company has created internal competitions and a virtual platform to
cultivate innovative ideas from its staff. All of these efforts have evolved with
connections to the innovation teams core characteristics: alignment with the strategic
portfolio, strong executive sponsorship, and effective collaboration.
Cisco faces a different change management challenge based on its decentralized
culture. Cisco has a lot of projects and explorations going on behind the scenes that
are not visible to the rest of the organization. Thus, there is duplicative work,
projects that should be killed, and other unproductive activities the organization has
recognized that it needs to address. Ciscos Service Innovation Excellence Centers
change management opportunity is better internal integration of innovation activities
that balances the desire for freedom and creativity with effective use of resources,
collaboration, and alignment with strategy.


page 89
Research Champion: Project
Management Institute
PMI is the worlds largest not-for-profit membership association for the project
management profession, with more than 650,000 members and credential holders in
more than 185 countries. PMIs worldwide advocacy for project management is
supported by globally recognized standards and credentials, an extensive research
program, and professional development opportunities.
Stephen Townsend, Director, Global Alliances and Networks
PMIs director for global alliances and networks, Stephen Townsend has worked
within PMI since 1999 in member services, chapter and community relations,
business and government relations, and PMIs global development activities. He has
nearly 30 years of experience in nonprofit leadership and management.
Chris Landes, Manager, Market Research
In his role as manager of market research for PMI, Chris Landes leads, directs, and
implements PMIs market intelligence processes and programs, which expedite the
collection and assessment of data and the evaluation of business opportunities and
offerings. He identifies priority opportunities and new business areas aligned with
organization and operational strategies that provide measurable improvement
toward advancing project, program, and portfolio management, as well as customer
satisfaction.
About This Research
SUBJ ECT MATTER EXPERTI SE
Matthew Heim, Ph.D., Executive Vice President, inno360
Matthew Heim is executive vice president at inno360, a global open innovation
search and management software organization. Heim has guided many companies
through the development of new growth-oriented innovation strategies, which
incorporate cutting-edge collaborative open innovation models. He has more than
25 years of global executive management experience in strategic planning,
innovation, and large-scale systems change. Prior to joining inno360, Heim served as
president of NineSigma, an open innovation service provider. He has also served on
two university faculties and authored and co-authored many books, journal articles,
and white papers on innovation and strategy, including SMEs and Open Innovation:
Global Cases and Initiatives (IGI Global, 2012) and A Guide to Open Innovation and
Crowdsourcing (Kogan Page, 2011).


page 90
Christopher W. Miller, Ph.D., NPDP, CEO and Founder, Innovation Focus
With more than 20 years of experience in facilitating, speaking, writing, and
consulting about innovation, Christopher W. Miller is the CEO and founder of
Innovation Focus. His firm specializes in the discovery stage of NPD and is
responsible for numerous significant innovative products across an array of
companies. He often works with interdisciplinary, high-performance teams on
product development, customer interaction, and rapid project completion. Miller
has held positions in information systems and market research with two Fortune
500 companies. In addition, he initiated several business ventures. He is a past
president of the board of the Product Development and Management Association
(PDMA) and remains an active volunteer. Miller is a regular guest lecturer at
universities and conferences and is a published author, with works including a series
of growth forum articles for PDMAs Visions magazine and chapters in each PDMA
ToolBook.
Marisa Brown, Director, Research Services, APQC
As director of APQCs research services, Marisa Brown focuses on researching best
practices and benchmarks and publishing original content to APQC members and
the public. Her research services team conducts research and publishes both
quantitative and qualitative information in the areas of human capital management,
financial management, supply chain management, product development/innovation,
knowledge management, and business excellence. Since 2002, Brown has been
integrally involved as a project manager and subject matter expert in all aspects of
APQCs innovation and product development research.
METHODOLOGY
The research in this report was collected using APQCs award-winning best
practices study methodology. The process began in the fall of 2012 when the APQC
team compiled a list of potential best-practice organizations based on secondary
research; APQC past research and knowledge of open innovation programs; and
recommendations from the studys sponsoring organizations, subject matter experts,
and PMI, the research champion.
After assembling a list of more than 130 potential best-practice organizations, the
APQC study team conducted a multistep screening process to refine the list and
identify the most suitable candidates. First, APQC approached each organization on
the target list to assess its interest in and qualifications for participating as a best-
practice organization. Then team members administered a short screening survey
followed by telephone interviews with the process owners at a subset of qualified
and interested organizations to better understand each organizations processes and
practices and determine whether it was a good fit for the scope of this research.
Finally, APQC presented 10 candidate organizations to sponsoring organizations at
the best-practice organization selection virtual meeting in January 2013.

page 91
From the 10 final candidates, the sponsoring organizations selected five to
participate as best-practice organizations: Amway, British Telecommunications plc
(BT), Cisco Systems Inc., Corning Inc., and General Mills Inc.
APQCjoined by representatives from PMI, the subject matter expert team, and
sponsoring organizationsconducted a virtual or in-person site visit with each
selected best-practice organization. Key leaders hosted the site visits in accordance
with a discussion guide supplied by APQC. Representatives from the sponsoring
organizations provided valuable input into the design of the site visit guide and
participated in the site visits. The APQC study team prepared a written case study of
each site visit and submitted it to the best-practice organization for review and
approval.
In addition, APQC asked each best-practice organization and sponsoring
organization to complete a detailed questionnaire about its open innovation
practices and processes. Findings are embedded throughout this report.
The study wrapped up with a two-part knowledge transfer session. The first was an
in-person networking event held in conjunction with APQCs annual knowledge
management conference on May 2-3, 2013, with the theme Using KM to Boost
Creativity, Innovation, and Competitiveness. The second part was a virtual session
on June 4, 2013, during which APQC, PMI, and the subject matter experts
presented the report and findings to all study participants.
ACKNOWLEDGMENTS
APQC would like to thank all the participants in this collaborative best practices
study. The sponsoring organization representatives provided valuable input
throughout the study by helping to design the site visit guide, influencing the
selection of the best-practice organizations, and participating in the site visits.
A special thank-you is extended to the representatives from the five best-practice
organizations, who took time out of their busy schedules to participate in this study.
The representatives received no compensation or reimbursement for their time or
travel. Each representative from the best-practice organizations went out of his or
her way to guarantee the success of this study.
The study research champion PMI, as well as subject matter experts Matthew Heim
and Christopher Miller, provided valuable insights and perspectives throughout the
project.


page 92
Case Study
Amway
ORGANI ZATI ON OVERVI EW
Amway is a privately held direct-selling company offering a range of consumer
products. A family-run organization headquartered in Ada, Mich., Amway reported
revenue of $11.3 billion in 2012, having nearly doubled its sales over the past five
years. It has 15,000 employees, as well as a network of 5 million distributors who
sell products on the organizations behalf.
Amway produces and distributes products in three categories:
1. nutrition,
2. beauty, and
3. home (including water treatment, air treatment, and other durable goods).
During its first 25 years in business, Amways business focused primarily on North
America. Over the past several decades, it has expanded its geographic focus by
emphasizing growth in Asia and other parts of the world. The organization now
operates in 80 countries and territories, with 90 percent of its business originating
outside the United States.
R&D FUNCTI ON
Amways research and development function has, at its core, a culture of continuous
innovation. Its primary goals are to:
consistently exceed the expectations of its key stakeholders;
deliver products, solutions, and services that bring sustainable double-digit
growth to the enterprise; and
attract and retain top-level R&D talent from around the globe.

According to Senior Principal Scientist Rodney Johnson, Amways R&D function
emphasizes scientific credibility and maintaining its reputation as a leader in
innovation and development. The organization holds 900 patents worldwide, with
another 900 patents currently pending. R&D staff are expected to share their
findings with the broader scientific community; Amway boasts more than 75


page 93
university association memberships, more than 300 trade association memberships
(including 40 leadership positions), and more than 200 published presentations and
publications.
Like Amway as a whole, the R&D function is globally dispersed, with major
facilities in Michigan, California, and China. In addition to manufacturing facilities in
China, it runs farms in Brazil, Washington State, and Mexico where it grows plant
materials used in nutritional products.
Amway invests heavily in technology assets, especially those related to testing
products and ensuring they are safe and effective. Johnson said that Amways
clinical testing for nutritional and beauty products is more typical of a
pharmaceutical model, but the organization considers this testing vital to prove the
products do what they are supposed to do.
Amway also partners extensively with academic organizations in order to maintain
an understanding of the fundamental science behind its R&D efforts. Working with
academic advisory boards allows Amway to maintain a science-based mindset and
ensure its products take advantage of the latest advancements. If you look at the
continuum from science to technology to development, then you need to have a
very good understanding of that entire realm, Johnson said.
GROWTH THROUGH I NNOVATI ON
Traditionally, Amway has focused on a direct-selling model, in which distributors
called independent business ownersmarket and sell products to customers and
receive bonuses for recruiting additional distributors. The organization has been
successful in expanding this business model across the globe and capturing market
share in rapidly growing Asian markets. However, in the early 2000s, the senior
leadership realized that growth through regional expansion would ultimately tail off
as Amway ran out of new markets to enter. To continue to grow at its current rate,
the organization expanded its focus to increasing its share of the markets in which it
already operated.
In response, senior leaders launched an initiative called Growth Through
Innovation, which increased Amways focus on developing and acquiring new
products. According to Senior Principal Scientist Ron Sharpe, Products became a
lot more important to what we were doing than just the business model.
In addition to product innovation, the R&D function was encouraged to think
about innovation in broad terms and re-evaluate how it conducts market research,
the processes that guide product design, and how products are packaged. Business
model innovation was also part of the initiative, with Amway looking at new ways to
market and distribute products and services.

page 94

THE I NNOVATI ON PROCESS
A formal, enterprise-wide process guides innovation at Amway. As shown in Figure
1, the process consists of four distinct phases:
1. technology surveillance,
2. R&D exploration,
3. product development, and
4. business sustaining.
Amways Overarching Innovation Process

Figure 1

The technology surveillance phase involves identifying ideas and taking them
through early concept development. According to Sharpe, thousands of ideas enter
Amways innovation funnel each year, but only about 150 reach the second phase,
R&D exploration. During this phase, Amway further narrows down its portfolio
and creates a project proposal and business case for each idea. In-depth feasibility

page 95
testing is conducted, and details related to development costs and potential suppliers
are fleshed out. Ideas are presented to Amways technology review board at key
milestones during R&D exploration, and this group ultimately decides which ideas
move forward and receive additional funding. Approximately 20 to 30 projects
reach business case development each year.
Ideas that successfully pass through R&D exploration enter the business
development phase, where they are refined using a formal stage-gate process called
idea to market (ITM). During this phase, the project management function creates a
project brief, which is a contract among the development groups, Amways
marketing function, and representatives from the markets where the product will be
initially launched. The project brief defines each idea further and lays out exact
details regarding scope, costs, and the timeline for development and launch. Sharpe
estimates that 10 to 15 projects reach this point each year, 90 percent of which
ultimately result in product launches. The business sustaining phase begins once the
product is launched and addresses ongoing evaluation and continuous
improvement.
The high-level innovation process in Figure 1 is most closely aligned with product
innovation, but Amway applies it to other types of innovation, such as business
model innovation. The R&D function has been using this process since 2007, but it
was rolled out to the rest of the business in 2013.
STRATEGY

Implementing a Strategy for Open Innovation
A new technology group within the larger R&D function manages the R&D
exploration phase of Amways innovation process. Historically, this team focused
on internal R&D. The prevailing attitude was that Amway could develop anything it
required and internal development was better because the organization would have
full control over any intellectual property. There was little oversight, and few
projects were ever discontinued. Often, individual researchers made decisions about
which projects to pursue.
A lot of what was going on was long-term experienced scientists saying, Hey, I
think this is cool, Im going to go work on that, Sharpe said. Over time, Amway
recognized that this was a suboptimal way to meet its innovation needs.
After conducting a retrospective five-year analysis of its innovation pipeline, the
organization determined that it was producing primarily incremental innovation.
This lack of breakthrough innovation ultimately spurred the business case for
chartering a dedicated open innovation team. The idea was that, with more
flexibility and a less aggressive timeline, the open innovation team could focus on
longer-term projects with the potential to provide more value than the incremental

page 96
innovation on which Amway had previously focused. Open innovation was
designed as a place for ideas to incubate and grow.
When Amway established the open innovation team, it formalized its innovation
process and established stricter business rules to guide projects between when a
need is established and the beginning of the formal stage-gate process. The
organization developed standard criteria for assessing projects and instituted
checkpoints to ensure only the best ideas moved forward.
Before developing its open innovation approach, Amway benchmarked with
organizations it knew had strong open innovation programs and learned what
worked for them. Although the organization hired a few people experienced in open
innovation at the start of the program, most of the open innovation team was
formed by reallocating existing staff. Sharpe identified a critical success factor:
Because these individuals had experience with Amway, its culture, and its product
development process, they were better equipped to make good decisions about
specific innovations and the open innovation approach as a whole.
Open Innovation Process Overview
Figure 2 shows Amways R&D exploration process, which includes:
identifying a technology or a need,
discovering it,
evaluating it, and
turning it into a solution (i.e., a marketable product).

This process guides ideas acquired from external partners, as well as internally
developed ideas.


page 97
Amways R&D Exploration Process

Figure 2

Needs are identified during an annual technology planning process designed to
detect new or unfilled consumer needs and needs within the businesses. According
to Sharpe, the technology planning process allows Amway to look at all its potential
projects and filter them down to the handful most likely to add value to the bottom
line. This more strategic approach helps take decisions out of the hands of
individual researchers, who tend to select projects based on how interesting they are
rather than their feasibility and commercial viability.
Once Amway decides which opportunities to pursue, the R&D leadership selects
the best approach for each. If the group has the right resources and capabilities to
develop a particular technology, then it may assign that project to internal
development. However, if the organization does not have the right skill set or
decides it does not want to invest in a given area, then the open innovation group
may conduct external technology mining to find an appropriate third-party partner.
Sharpe described this as the heart of Amways open innovation approach. Once
started, all projects are subject to the same checkpoints and evaluation criteria,
regardless of whether they are developed internally or externally.

page 98

Open Innovation Model
In describing Amways open innovation model, Sharpe cited the difference between
creativity and innovation. Creativity, according to Sharpe, includes all new ideas
anything that a scientist or inventor might pursue out of curiosity or interest.
Innovation, by contrast, represents the subset of ideas that have a practical
application and potential to fill a need. For an idea to be an innovation, someone
ultimately has to be ableand wantto use it.
Amways open innovation model focuses on three tenets:
1. establishing well-defined needs,
2. building external networks, and
3. finding and evaluating technology.
Establishing Well-Defined Needs
Amway thinks about innovation strategically as a combination of creativity, potential
value to the business, and strategic fit. For the organization to pursue an idea, the
idea must not only be feasible but also have a clear market and align with the long-
term goals of the organization. For example, Sharpe said that even if Amway
surfaced a revolutionary innovation in fuel efficiency, it would not pursue it since it
is not involved in the automotive market.
In its innovation process, Amway strives to bring together a known consumer need,
a viable technology, and an opportunity to create value for the business. Figure 3
shows how those factors funnel through the innovation process (which is detailed
along the bottom of the figure). Defined as the application of skills and knowledge
to meet a need, a technology in Amways terminology can refer to any aspect of an
innovation including design, materials, process, or information.


page 99
Combining Consumer Needs, Viable Technology, and Business Value

Figure 3

If the organization can bring a consumer need, viable technology, and business
value together in a potential product, then it continues to pursue the opportunity.
But if any element is missing, then the project is either recycled for additional
incubation or put on hold until circumstances change. For example, if there is a
clear customer need and the potential for business value but the technology is not
ready to be manufactured and marketed, then the project is put in stasis until
scientific advancements make the technology more viable.
Embracing open innovation has caused the open innovation team to broaden its
thinking in terms of the products and services Amway offers. In the beauty
business, for instance, Amway traditionally focused on what Sharpe refers to as
lotions and potionsproducts available at the beauty counter. However, as the
team began to evaluate potential innovations, it realized that some needs could be
met more effectively by devices or other types of beautification solutions. The team
has also evaluated opportunities to expand the business model and offer beauty
services.

page 100

Building External Networks
Robust networks are a vital part of Amways open innovation model. Figure 4
depicts the sources the organization uses for networking including internal business
units, customers, suppliers, manufacturers, consultants, and competitors.
Networking for Open Innovation

*SAB = scientific advisory board
Figure 4

The open innovation team started small in building its networks by reaching out to
existing suppliers and consultants with which Amway had relationships. By talking
to these individuals, the team was able to identify key contacts with knowledge of
specific technology areas.
In addition, scientific advisory boards help identify and locate bleeding-edge
technologies. In putting together these boards, R&D focused on recruiting active
members, not just figure heads. Board members attend one or two board meetings
per year and provide one-on-one consulting to the open innovation team. Over

page 101
time, board members have recommended their own contacts to join the boards,
which allows Amway to strengthen its network and ensure the right strategic mix of
board members to meet current innovation goals.
Scientific advisory board members, especially those from academia, have brought
promising startups to the open innovation groups attention. In addition, Amway
looks at its customers and internal business units (some of which conduct their own
local product development) as potential sources of innovation. According to Sharpe,
foreign governments also serve as sources. He explained that, because venture
capital is not readily available in countries like Korea, their national governments
sometimes provide seed money to small, innovative companies. Eager to realize
their investments, the governments are valuable resources to help Amway get in
touch with organizations developing cutting-edge technology in those countries.
Sharpe sees collaboration with competitors as the ultimate step in network building.
Amway has not yet worked on a major project with a direct competitor, but it has
experimented in smaller, more indirect ways.
Finding and Evaluating Technology
Amway refers to its open innovation approach as focused, in that 80 percent to 90
percent of the external innovations it sources are based on specific needs articulated
during the technology planning process. The strategy does provide some flexibility
to pursue innovations that do not address identified needs but that the team believes
will fit well in the business and generate value. However, the open innovation team
tries to limit this type of activity to 20 percent or less of its total portfolio.
Because of this focused approach, the open innovation team relies heavily on
technology scouts who go out into the field and locate technologies meeting
Amways specifications. Over time, the team has improved its scouting practices by
learning to look beyond the most obvious sources. For example, scouts in the
beauty category began to visit spas and meetings of dermatologists looking for
innovations. Often, when a scout encounters a significant breakthrough innovation,
it is not positioned to meet Amways exact needs. However, the scouts are able to
analyze the technologies and see how they might be applied in a different way.
According to Sharpe, these types of repurposed technologies have been some of the
open innovation teams biggest successes.
Change Management and Cultural Barriers
When launching the open innovation program, the open innovation team needed to
sell the concept to senior leadership, as well as managers and scientists within the
product development function. Many people across the organization did not
understand why the existing processes needed to change, given that Amway was
producing new products and continuing to grow.
The open innovation team created a presentation to promote the benefits of open
innovation and the reasons why Amway should modify its approach. The

page 102
presentation began by pointing out that Amway needs to generate $48 million in
new business every month to achieve 5 percent organic growth. It emphasized that
the organization does not have as many resources to devote to internal product
development as some of its competitors. For example, Amway has 35 scientists
developing beauty products, which is far less than other cosmetic manufacturers.
The presentation went on to explain that Amway could make up for this disparity in
resources by partnering with third parties to develop and market their technologies.
Reaching out to a broader network would allow the organization to level the playing
field and innovate at the same rate as its larger competitors. You dont have to
originate the research to profit from it, Sharpe said.
In describing the open innovation teams efforts to promote the business case for
open innovation, Sharpe emphasized the importance of securing senior leadership
support. You cant just start a program like this and not make sure you have
support at the highest levels of the company to make it go, he said, also noting
that open innovation can start as a grassroots initiative, but ultimately the team must
make a formal business case to leadership in order to ensure ongoing support and
funding.
After selling the open innovation concept to upper management, the open
innovation team still faced cultural barriers in rolling out its processes with product
development and marketing. Sharpe described most resistance as falling into the
following categories:
Pocket vetorefers to when the open innovation team identifies a
promising technology but cannot get the marketing and product development
functions to respond concerning whether theyre interested;
My needs are secretrefers to the difficulty of getting product
development, marketing, and other parts of the business to articulate their needs
and the technologies they would like open innovation to find;
Deep pockets, short armsrefers to situations in which product
development and marketing express a need and are interested in a particular
technology but do not want to fund its development;
Speed waitingrefers to when product development and marketing cant
decide whether or not theyre interested;
Not invented hererefers to the assumption that internally developed
technologies are inherently better and, if the organization sources externally,
jobs will be at risk; and
I dont have timerefers to product development neglecting technologies
brought to it by open innovation due to an excess of projects.


page 103
Although the open innovation team has not completely overcome these barriers, it
has been able to mitigate many of them. For example, the technology planning
process has forced product development, marketing, and other internal stakeholders
to lay out their needs in a straightforward manner. In addition, employees have
realized that bringing in external technologies actually creates more internal product
development work because the organization must grapple with unknown
technologies and shape them to its needs. According to Sharpe, the biggest ongoing
challenge is dealing with time constraints and people who still feel overwhelmed by
too many projects.
OPERATI NG THE I NNOVATI ON ECOSYSTEM

People
Amways open innovation team is part of the organizations broader R&D function.
The open innovation team manager reports directly to a vice president within R&D,
and technology scouts report into the open innovation team. Most members of the
open innovation team are experienced employees with long tenures in product
development. Each is assigned to a specific technology area related to Amways core
product categories (i.e., nutrition, beauty, and home).
Amway strives for a culture in which innovation is encouraged and promoted. For
example, it supports a guerilla innovation team that meets monthly to pursue radical,
out-of-the-box ideas. To surface innovation within the broader work force, the
organization uses events called 5x5s at which employees present ideas for new
products, technologies, or business process changes. Each participant showcases his
or her idea in five minutes using only five slides. At the conclusion of each 5x5
event, Amway selects a winner whose idea receives funding and resources to
support further development. In addition to the 5x5 events, employees are
encouraged to bring their innovative ideas directly to the appropriate R&D groups.
Amway has had more success with this approach than with employee ideation
portals, which require a lot of time to manage and have not yielded significant
results for the organization.
Internal Partnerships
A critical ingredient in the open innovation teams success has been and building
partnerships with other parts of the organization (Figure 5). By consulting the
product development, marketing, procurement, and technical regulatory functions
early on, the open innovation group is better able to assess the feasibility of projects
and whether they are worth pursuing. You can innovate more effectively if you
find ways to work with smart people inside and outside the company, Sharpe said.


page 104
Partnerships Between Open Innovation and Other Business Functions

Figure 5

Amway finds it is particularly important to involve the marketing function early in
the process. Although the open innovation team may see value in a technology from
an R&D perspective, marketing has a different perspective and evaluates
innovations according to its own criteria. Early feedback from marketing helps the
open innovation team determine whether a product is ultimately saleable before it
invests too heavily in development.
The open innovation team has also built a strong partnership with the procurement
function, which provides access to a critical knowledge base. For example, when
open innovation began identifying promising external technologies, it realized
thatbeing made up of scientists and product development expertsit did not
have the appropriate skills to negotiate the needed agreements. To address this, the
team tapped the procurement function to create a strategic sourcing position within
open innovation. A procurement representative supplies all the competencies
required to scope, negotiate, and execute deals with third parties from which
Amway wants to acquire intellectual property.
Amway recognizes that working with procurement has provided many advantages,
but the open innovation team is especially appreciative of its help clarifying

page 105
objectives from the outset. In procurement, the goal is usually to negotiate deals
with the maximum benefit to Amway, but the open innovation team is more
interested in building mutually beneficial relationships with its partners. This has
required procurement to shift its mindset slightly when working with open
innovation.
Process
Figure 6 depicts Amways open innovation process. The fundamentals of the
process were put in place in 2005, but the process has evolved significantly over the
ensuing years, with the open innovation team adding governance structures and
checkpoints to infuse more rigor into its activities.
Open Innovation Process

Figure 6

A detailed description of each chevron, along with the evaluation criteria used
during the various stages, follows.
Identify Needs
The open innovation cycle begins with Amways annual technology planning
process, which determines the organizations innovation agenda for the year and
how to allocate resources. The plan is shaped by the long-term business strategy in
combination with market intelligence, including:
competitive insightswhat competitors are doing, how Amways products
and services compare, and where the organization needs to invest in order to
keep up;
consumer insightswhat consumers want in each product area and how
strongly those needs affect sales;
marketing insightsthe brand identity and message; and
technology insightspatent trends and innovations coming out of academia
and suppliers.


page 106
Synthesizing these inputs, Amway generates a plan that lays out which projects it
will pursue over the coming year, which it will discontinue, and the level of
resources devoted to each. The business strategy informs the technology plan, but
the plan also feeds back into the business strategy by specifying innovations the
organization should pursue to maximize its growth. In this way, the organization
strives to balance technology push (i.e., innovations it pursues based on
opportunities it finds) with market pull (i.e., innovations it actively seeks out to meet
customer and business needs).
Although technology planning is an annual process, some aspects occur quarterly or
even more often as the open innovation team re-evaluates customer and business
needs and discovers promising new innovations.
Discover
The next step in the process, discovery, involves identifying technologies to address
the needs identified in the technology plan. As noted, Amway uses a network of
technology scouts to research potential sources of external innovation. These scouts
regularly attend academic, technology, and other conferences, as well as tap into the
organizations networks. To do their jobs effectively, scouts must have a deep
understanding of the fields in which they operate and keep up-to-date on scientific
and technical advancements. This allows them to know which ideas are feasible,
which are truly innovative, and which might be adapted to address Amways needs.
Most scouts are also knowledgeable about negotiating and the intellectual property
implications of various deals.
A key tool used in the discovery process is a technology profile, which is a detailed
definition of the specific technology or solution Amway is seeking. Each profile
outlines:
the characteristics of a desired technology,
its intended purpose or use,
existing technologies in the same category, and
any deal breakers (i.e., things that should be taken off the table in sourcing
potential innovations).

Shared with internal staff in procurement and R&D as well as with external
partners, the profiles help people across Amway understand what the open
innovation team is looking for and filter through ideas to find the right technologies.
Evaluate and Refine
Once a potential technology is identified, the next step is to refine it and evaluate its
feasibility. Scouts perform initial assessments to determine which projects enter the
pipeline. If a technology passes this first test, then the open innovation team
compiles a brief summary describing the technology and its potential impact.

page 107
Summaries are limited to one page to avoid excessive detail that is difficult to
understand and/or time-consuming to review.
The summary is submitted to Amway's technology review board, which makes the
final decision regarding whether funding and resources are allocated. The board
consists of R&D middle management, along with representatives from procurement
and marketing on an as-needed basis. During an initial review, the technology
review board evaluates each idea based on:
1. Relevance to the technology planDoes it meet an identified need?
2. Commercial viabilityCan it be produced at a reasonable cost?
3. Alignment to innovation and business strategiesIs it applicable to
key markets?
Depending on the answers to these questions, the review board either assigns
resources, discontinues the project, or shelves it until a later date. The open
innovation team reports that it is not uncommon for a project to be shelved and
then subsequently resurrected and brought to market.
As projects move forward, the open innovation team uses a measure called
technology readiness level to articulate the maturity and progress of each
technology. Technology readiness is a standard, composite measure based on the
following criteria:
Efficacy/FunctionalityDoes the technology work as intended, and what is
the likelihood of it ultimately being incorporated into a product or service?
Market assessmentWhat is the market size and market strategy? What
alternative technologies are available, and how do they compare to the
technology being evaluated?
Safety and regulatoryWhat safety and regulatory compliance issues exist in
the potential markets?
Intellectual property/ExclusivityAre there patents or other intellectual
property associated with the technology? Can Amway obtain exclusive access?
Commercial viabilityCan the technology be manufactured at a reasonable
cost? What does the supply chain look like? What are the details regarding
agreements, licensing, and the competitive environment?

The readiness scale has three levels.
Technology readiness Level 1 indicates that a technology has the potential to solve a
problem or address an opportunity but remains at the conceptual level. A scout has

page 108
conducted initial feasibility testing, but knowledge of the technology is based
primarily on secondary literature, rather than direct experimentation or studies. The
likelihood of commercial success for technologies assessed at this level is zero
percent to 20 percent.
Technology readiness Level 2 indicates that a technology has been developed in a
laboratory, has been tested, and is supported or accepted by the industry. It has also
been evaluated by representatives from the legal, technical regulatory, and marketing
functions. At this level, the likelihood of commercial success is 20 percent to 60
percent.
Technology readiness Level 3 indicates that a technology is proven effective, meets
a precise customer need, and has a well-defined business case. Additional feasibility
testing has been conducted by product development and a third-party intellectual
property vendor responsible for performing final intellectual property and patent
searches. The likelihood of commercial success for technologies assessed at this
level is 60 percent to 80 percent.
Develop Solution
During the solution development phase, Amway works to convert the acquired
technology into a product. The open innovation team engages the marketing
function and secures its buy-in for the project, conducts testing and focus groups,
defines the business case, and begins to develop more precise projections regarding
sales and profitability.
During this phase, opportunities are prioritized based on the following criteria:
Commercialization timelineHow quickly can the technology be brought to
market, and does that time frame align with marketings needs and
expectations?
Technical feasibilityIs the technology ready to be developed into a product
and brought to market?
Potential valueDoes the technology represent a significant business
opportunity?

Although projections are fleshed out at this stage, the open innovation team strives
to evaluate each technologys commercial potential and role in the portfolio much
earlier. Even though the forecasts are rough estimates, they indicate scalewhether
a technology will have a large, medium, or small effectand help the team
determine which projects should move forward.


page 109
Advocate Solution
Johnson said that advocating for specific solutions is vital to the success of Amways
open innovation program. In some cases, the open innovation team uses persuasive
communication and marketing to overcome resistance to externally sourced
technologies.
Sharpe said, If Im passionate about a technology and I think its got value to the
business, I almost have to run a political campaign across the company to get it
elected.
As part of this strategy, the open innovation team promotes the innovation to
marketing and upper management in order to ensure they understand what the final
product might look like and how it might be used. If the open innovation team gets
a sufficient number of high-level managers interested in an innovation, then it is
much easier to secure support and resources from the rest of the product
development function.
Develop Product
Assuming a project passes through the entire process and clears all the hurdles, it
enters Amways traditional stage-gate product development process. At this point,
all uncertainties have faded, and a rigorous timeline is established to guide the
solution through to its initial product launch.
Insights on the Process
Johnson said that, even though Amway has a rigorous and well-defined open
innovation process, some innovations do not follow the process exactly. The
process has built-in flexibility to accommodate different technologies, markets, and
partnerships. For example, an acquisition can take many forms, ranging from a
simple agreement to purchasing a company. The process is often not linear but
iterative, where the team receives feedback and then cycles back to test and refine a
technology further, thus ensuring it meets the necessary criteria.
Johnson also pointed to the importance of After-Action Reviews where the open
innovation team can evaluate what worked, what didnt, and why. Even when a
project is discontinued, something is learned, and Amway tries to focus on this
aspect when projects are eliminated or put on hold. The culture has to encourage
openness to things not turning out as planned, Johnson said. Youre still gaining
from it, and theres still value.
Tools
According to Johnson, software solutions are not a critical piece of Amways open
innovation process. The team uses Microsoft SharePoint to track projects and
resources and manage content related to potential technologies. It also maintains a
custom-built technology database and uses standard online patent and literature
services. Other tools and facilitated approaches include:

page 110
a manually created technology pipeline map (Figure 7) showing the product
categories on which open innovation is focused and the status of the various
projects within those categories;
global focus groups that provide feedback on prospective products; and
partnerships with consultants who crowd-source technologies on Amways
behalf in response to specific needs and challenges.

Open Innovation Technology Pipeline Map

Figure 7

Johnson said that tracking and reporting is a potential area for improvement for the
open innovation team. When the team first launched, it evaluated various tools but
did not implement them, in part because it didnt know what its exact needs were.
Now it is looking for tools that match its process. This has made it more challenging
to find the right tools, but Johnson and Sharpe are glad the team chose to define its
process before deploying technology, which they deem a less important element.

page 111
When the open innovation team was formed, it was interested in setting up a Web
site to crowd-source ideas from the broader public. But the team did not prioritize
this aspect of open innovation in its initial stages. As the team talked with peers
operating these types of sites, it ultimately decided that the potential return did not
justify the resources required to sift through the submissions.
EVALUATI NG THE SUCCESS OF OPEN I NNOVATI ON
The open innovation team tracks a range metrics related to open innovation,
including:
the number of ideas screened,
the number of technologies presented to the technology review board,
the number of technologies that advance through the three technology
readiness levels and how much time they spend at each level,
the number of conversions to business cases, and
the number of conversions to products.

The organization is working to improve its assessments concerning net present
value (NPV), including the percentage of NPV from open innovation at the
business case stage and the percentage of revenue from open innovation leading to
new product launches.
The open innovation team also collects and shares success stories as compelling
evidence of the value open innovation has generated for the organization. For
example, individual products resulting from the open innovation program in the
nutrition category have generated $45 million in global sales.
Lessons Learned
Johnson and Sharpe shared the following lessons learned from their experiences
establishing and developing Amways open innovation process.
Re-evaluate projects regularly and be aggressive in winnowing down the
pipeline. If you want to be innovative, you really need to be able to kill
thingsand kill things without consequences, Sharpe said.
Have a process to deal with unsolicited ideas, even if you do not actively seek
ideas from the public through channels such as an ideation Web site. Amways
open innovation team gratefully acknowledges the submissions it receives; this
responsiveness is important to Amways brand reputation.
Establish robust networks, and take the time to nurture them. Many of the open
innovation teams best technologies came through its external network, often
from the third or fourth person in a string of contacts.

page 112
Think broadly, and expand your boundaries. The open innovation team has
found that the best ideas do not originate with the traditional supply base. They
come from start-ups, government-funded technologies, and other untraditional
sources.
Move quickly, and be communicative. Once a promising external idea is
identified, let the owner know that youre evaluating it and provide frequent
progress updates. If you decide not to move forward, then the owner know as
soon as possible, rather than simply not responding.
When negotiating deals, make sure that the other party has the resources it
needs and is properly motivated, rather than simply securing your own interests.
The test I use is: Would you sign this deal if you were sitting at the other side
of the table? Sharpe said. If youre not willing to do that, then you may want
to look at it again.
Strive to understand what motivates potential partners. For many small
organizations, money is not the onlyor even the primarydriving factor. For
example, the open innovation team works with start-ups operating on
aggressive timelines; treading water for six months while Amway conducts
clinical testing can be a challenge for them. In these cases, the open innovation
team often negotiates deals where, if it decides to walk away after conducting
clinical trials, the partner receives ownership of the clinical study. This ensures
that the partner gets something of value even if Amway never brings the
product to market.
Build long-term relationships with sources of external innovation. Once you
partner with someone, its a lot easier to partner with them again.
Focus on high-impact technologies with the potential to drive significant
growth within the business. Dont spread your time and resources across
numerous small projects that dont add a lot of revenue.

page 113
Case Study
British Telecommunications plc
(BT)
OVERVI EW
BT is a telecommunications company based in the United Kingdom. It was founded
more than a century ago as a government-owned company but was privatized in
1984. Its revenue for 2011-2012 was $30 billion (USD). BT has more than 89,000
employees worldwide and more than 26 million customers in 170 countries.
BT sits in one of the most competitive markets in the United Kingdom, with about
200 voice competitors and about 250 Internet competitors. It provides voice,
broadband, and business services including information and communications
technology, conferencing, collaboration, cloud, and security and is rolling out fiber
broadband services in the United Kingdom. It has four key lines of business: BT
Retail (which serves the consumer and business markets in the United Kingdom);
the wholesale market (which resells infrastructure to other telecommunications
companies, including mobile operators and BTs competitors); Openreach (which
connects homes and businesses to the Internet); and global services (which sells
information and communications technology services to large, corporate
enterprises).
Many of BTs recent initiatives have been driven by innovation. For example, the
organization is investing in entertainment through BT Vision, an IPTV service that
provides television programs over broadband lines. BT was recently awarded access
to 38 Premier League soccer games, as well as rugby and other sports. The company
established more than 5 million Wi-Fi hotspots across the United Kingdom and was
the Official Communications Provider for the 2012 Olympics in London.
Innovation and Open Innovation Program
BT has a centralized innovation group that is connected to and services the
organizations business units. The group acts as a resource that any business unit can
use when it has an innovation question or an idea that it wants to pursue and
develop. This group not only responds to requests for assistance from business
units but also helps those units adopt innovation. Although this group does not
conduct any delivery work associated with a particular innovation, it will deliver a
prototype if needed. BT has a separate portfolio group that manages the
product/service lifecycle and evaluates current offerings.
BT is a service company, so it is always looking for new service offerings to
repackage and distribute at the lowest cost and with the best customer service.

page 114
The centralized innovation group has 45 staff members, with five located in Silicon
Valley and 40 located in the United Kingdom. The group in charge of innovation
through research and academic partnerships has about 200 staff members. With the
exception of the staff conducting research, all parts of the centralized innovation
group report to the managing director of external innovation.
The centralized innovation group at BT is funded through a discretionary fund for
the CIO/CTO function of the organization. The budget for this fund amounts to
about one-quarter of the research and development budget for the organization.
Because the group of staff conducting research is managed separately from the
other innovation initiatives, it has a larger budget tied to a research plan that must
be approved every year by the business units.
STRATEGY
BTs external innovation group started an initiative to set up a venture fund for
technology startups in Silicon Valley. However, the financial value BT obtained
from its venture fund was extremely small compared to the organizations other
sources of revenue. In addition, BT concluded that minority equity investments did
not adequately serve its innovation objectives. BT determined that a formal internal
innovation team was needed with the resources necessary to address BTs needs.
In its current innovation program, BT seeks to obtain solicited and unsolicited ideas
from both internal and external sources. Its innovation strategy classifies innovation
as coming from the following sources:
customers,
partners,
employees,
research, and
academia.

BTs research and academic partnerships provide more traditional ways of obtaining
new ideas, but the organization has also adopted less traditional methods of
sourcing innovation, such as collaboration events and employee competitions.

People
BT has a set of criteria for its staff members in the centralized innovation group.
Members of this group must have sufficient experience with technology to be able
to translate new technology features into business benefit when speaking with
internal staff. In addition to having an interest in innovation, these staff members
must also be able to build relationships with internal stakeholders and external

page 115
partners. Staff members that work with partners must have project management
skills that extend beyond process and numbers to relationship development so that
the team can take the needs of business units and translate them into potential
innovations. Staff members that work on innovation initiatives involving BT
employees must also have connectivity within the organization to keep employees
engaged.
Incentives for Innovation
BT rewards its employees for idea generation in a variety of ways.
Individual employees can submit new ideas through the organizations New Ideas
Scheme program; the best ideas lead to financial rewards of up to 30,000. BT
tracks the names of employees who submit ideas, as well as those who help refine it.
The organization then compiles a core group of individuals that were instrumental
in bringing an idea to launch and rewards the individuals accordingly.
Employees can also participate in BTs My Customer Challenge Cup, a contest in
which employees participate in teams to develop new ideas. The contest has quarter
finals, semifinals, and a grand final level, and with each level the teams gain more
exposure within the company. Teams that complete their projects are given a blue
ribbon award regardless of whether they make the quarter finals of the competition,
and this award is noted in each team members profile on BTs internal directory.
Leaders of winning teams are often promoted within the organization.
BT recently developed its Time to Innovate program as a way of rewarding
employees. The organization was inspired by a Google program that gives
employees a dedicated amount of time to devote to innovation. BT conducts a
quarterly review of engineering teams that have exceeded efficiency expectations.
These teams are granted 10 percent to 15 percent of their time to dedicate to
innovation. To give structure to the program, the selected employees are given an
innovation challenge to address. BT expects that employee efficiency will increase as
employees aspire to be part of the Time to Innovate program.
Engagement
BT uses a variety of methods for maintaining employee engagement with innovation
initiatives. The organization publishes an internal print magazine with profiles about
employees that have generated exceptional ideas. An online version of the magazine
is maintained on BTs intranet site and features additional content. Employees are
also sent top-down communications about the organizations innovation efforts in
order to highlight the support and involvement of senior managers.
Process
BT divides its innovation initiatives based on the source of innovation (customers,
partners, employees, research, or academic partnerships). BTs innovation initiatives


page 116
are listed in Figure 1. Many of its initiatives involve external sources such as
customers or academic institutions. Each initiative has its own process for sourcing
ideas.
Innovation Sources and Initiatives at BT

Figure 1

Once ideas are sourced from an initiative, they can be further qualified through the
organizations Innovation Central program before entering BTs formal process for
bringing concepts to market.
Innovation with Customers
BT has established two primary processes for innovating with its customers:
hothouse events and innovation showcases.
Hothouses: Hothouses are three-day competitive events that BT adopted from the
software industry. These events bring together about 80 to 90 individuals from
across business units and external groups with an interest in a particular product or
service. In addition to BTs customers, participants can represent BTs marketing,
customer support, and engineering groups and include external suppliers and
partners. BT has dedicated facilities to hold these events and assigns two hothouse
facilitators to each event.

page 117
During a hothouse event, attendees are split into cross-discipline teams. BTs
optimal number of teams for a hothouse is five to eight, but at least three teams are
needed and a maximum number of nine to 10 is acceptable. A facilitator gives teams
a problem statement to solve. The second hothouse facilitator ensures that each
team has the technology, data, and files that it needs to develop a solution.
At the end of each day the teams present their developments to a judging panel
made up of senior executives for the business unit that will own the product or
service. If possible, BT has customers on the judging panel as well. The panel
awards points to each of the teams based on their work results, with the winning
team being the one with the most points at the end of the three-day period. The
teams are encouraged to steal ideas from other teams so that the winning idea is the
combination of the best ideas developed during the hothouse event.
The solution developed during an event can vary from a prototype of a software or
service offering to a customer experience design for a product or service. A
hothouse can also yield a delivery plan for getting a product or service to market
quickly and competitively. After the event, BT's Applied Technology Centre works
with the business unit that will own the product to ensure that deliverables for the
product rollout are met. The team that developed the solution is kept informed or
engaged in the development process.
Hothouses can occur at any time from when an idea is first introduced to the
completion of its business case. The purpose of the hothouse changes depending on
the extent of development done on the idea up to that point. That is, early in the
idea development process, a hothouse event could be held to further refine the idea,
whereas later in the development process, a hothouse could be held as a way to
accelerate a business case and product trial.
Planning for a hothouse takes from four to eight weeks and involves identifying
individuals that should participate, making sure that travel is arranged for those
individuals, and making sure that the appropriate technologies are available for the
event. Once individuals for a particular hothouse event have been identified and
invited, they are given relevant reading material so that they have the background
information needed to participate.
BT holds about 40 to 45 hothouse events per year, with about half run by staff
dedicated to organizing and running the events. BT has also developed a self-run
hothouse kit that allows any business unit to create and run a hothouse on its own.
The success rate for hothouses at BT is 30 percent to 40 percent. To ensure that
maximum benefit is obtained from each hothouse, the organization will stop the
planning an event if there is a lack of available individuals with the necessary skills
or a lack of sponsorship.
Two examples of successful hothouses at BT are related to the products BT Trace
(a supply chain visibility service) and BT Pharma Cloud (a computing platform that

page 118
conducts drug analysis in the cloud). The development of both products was
accelerated through hothouses, with 12 months passing from the hothouse event
held for BT Trace to the products rollout.
Innovation Showcases: BT holds annual innovation showcases for its customers
that present a blend of current BT services, offerings in development, and third-
party innovation from around the world. BT creates displays that put the featured
services in context; for example, the health care showcase looks like a hospital.
Demonstrations are held in each of the showcase areas. BT uses its innovation
showcases to test innovations with customers, as well as to present BT as an
organization that customers can use as an innovation partner.
At each innovation showcase, BT hosts 150 to 200 customer account events, as well
as influencers and stakeholders such as government representatives and members of
the press. Customers are often invited to attend if they are in the deal making
process with BT. Customer representatives are generally at the C-suite level.
In recent innovation showcases, BT has featured technologies by Idomoo Ltd. and
Seculert. Both are Israeli-based companies, with Idomoo specializing in personalized
advertisement videos. One of BTs customers became interested in this company
after attending an innovation showcase and is now preparing to initiate a trial of the
service. Seculert provides a service for detecting hidden malware and viruses.
Another of BTs customers is currently trying this service after seeing it at a BT
innovation showcase.
Innovation with Partners
BTs primary means of innovating with business partners is through external
innovation scouting and through its applied technology and rapid prototyping
program.
Scouting: The scouting initiative at BT focuses on finding organizations that have
technologies that BT can then package and offer to its customers. It generally does
not provide funding for outside organizations, but on a case-by-case basis it will
provide funding to bring a specific innovation to market. This group primarily acts
in Silicon Valley because of the concentration of innovative companies in the area.
However, scouting staff members also focus on London, Israel, the Boston area,
and Asia when looking for potential partners.
The scouting group maintains a set of technologies that BT is interested in but also
looks for technologies that BT could expand into. Each scouting staff member
researches about 300 companies per year. Staff members often meet with
representatives from these companies so that they can qualify them with regard to
their business models and technologies. Many of the companies evaluated by BT
come to the organization on their own because partnering with BT would give them


page 119
exposure in Europe. However, BT also finds potential partners at conferences,
meetings, networking events, and through recommendations from venture capital
groups and industry blogs.
The scouting group captures data on every company it evaluates and stores the
information on a Microsoft SharePoint site. For each company selected as a
potential partner, the scouting group creates a one-page description that can be
circulated within BT. The group organizes a monthly call during which three to four
potential partners are presented to BT staff, with the companies one-page
descriptions provided to call attendees. The group also maintains documents that
discuss broader trends in BTs lines of business.
Each member of the scouting group has access to the C-level of BT because these
senior-level employees want to stay informed on trends in the industry and potential
opportunities for expanding BTs service lines. Members of the scouting group also
prepare presentations for the board of BT and participate in business unit strategy
meetings.
Senior managers often come to the scouting group with a particular need they want
to address with new technologies. Staff members within the scouting group conduct
background research to understand what needs to be addressed by the solution, as
well as the key players and trends in the area. Scouting group staff members then
identify and meet with various companies that may provide a solution for the need,
narrow the group of potential companies down to a core group, and present the
core group to the senior managers. For every company the senior manager is
presented, scouting group staff members have investigated five to 10. Once the
potential partners have been presented to senior management, the senior managers
and scouting staff members discuss the potential impacts of partnering with the
companies.
An example of a new BT service offering that came through the scouting group is
Dolby Voice. This service was conceived when BTs scouting group learned that
Dolby Laboratories was developing surround sound technology that could be used
in a phone call. BT wanted to license this technology to differentiate itself from
other audio conferencing services. A deal was then completed, and BT began
offering the Dolby Voice service in March 2013.
To keep informed of new developments in the telecommunications industry, the
scouting group conducts benchmarking with BTs peers. This allows the group to
track new developments among North American telecommunications organizations
that can then be applied to BTs European markets.
In addition to serving BTs internal customers, the scouting group conducts
innovation sessions by request for some of the organizations external customers.
The group also does contract consulting for external organizations that are
interested in telecommunications innovation. This consulting can involve

page 120
presentations on potential customers, meetings about trends in the industry, and
visits to customers. The scouting group limits the number of external consulting
arrangements so that it can adequately serve internal customers.
Applied Technology Centre: The Applied Technology Centre at BT provides
rapid prototyping services, generally before the business case for a new product or
service is approved. Specifically, it provides the following services with regard to
new offerings:
concept demonstrators,
working prototypes, and
early market testing.

Concept demonstrators are early-stage visualizations of potential products or
services to show to customers and internal staff. It is a mechanism for quickly and
cheaply visualizing a concept to demonstrate potential customer experience and
benefit. Working prototypes or proofs of concept provide the technical feasibility of
the potential product or service. These build confidence within the business units
for a particular offering and provide early insight into implementation.
The Applied Technology Centre also conducts early market tests of potential
products or services with customers. This usually involves 20 to 50 customers
testing a service within their homes or, in the case of a service offered to other
organizations, a group of 50 people in a company testing out the potential service.
The testing allows BT to see which features customers use and how the customers
use the product or service. It also allows BT to determine whether customers are
willing to pay for the product or service and whether the customer experience is
what BT wants it to be.
Two products that were developed with partners through the Applied Technology
Centre are fiber-sensing technology and Facelook devices. Fiber-sensing technology
was adapted from a sensor that is attached at the end of an optical fiber line to
detect disturbances. However, BT worked with external organizations to apply the
technology in the oil and gas industry to detect leaks in pipelines. The Facelook
product connects a webcam to a television using a wireless router. This technology
is currently being tested in the United Kingdom to connect elderly patients with
their doctors to provide better access to health care and is also being used to
connect homebound patients with family members or local Red Cross volunteers to
combat loneliness and isolation.
Innovation Through Employees
BT enables employee innovation through its New Ideas Scheme and My Customer
Challenge Cup programs.

page 121
New Ideas Scheme: BTs New Ideas Scheme is a crowd-sourcing initiative aimed
at its employees. All of BTs employees have access to the initiatives platform
(Figure 2), through which they can submit an idea, vote, or comment on ideas. Idea
submissions identify ways to run the business more efficiently, ways BT can save
money, new products, and new features for existing products.
BTs New Ideas Scheme Platform

Figure 2

New Ideas Scheme has a four-stage process for the acceptance and launch of ideas:
1. submission,
2. evaluation,
3. adoption, and
4. launch.

page 122
A staff member is responsible for reviewing idea submissions and removing
duplicates. About 40 percent to 50 percent of the ideas submitted through the portal
are removed as duplicates. Ideas are also removed at the submission stage if rework
must be done before they can be further evaluated or if they are already under
development elsewhere within the organization.
A group of about 100 evaluators review the remaining idea submissions. Evaluators
are BT employees that come from different units within the organization and are
typically experts in their fields. Ideas that progress past the evaluation stage are
prepared for adoption, which involves identifying a product manager or operational
manager who will own the idea. About 3 percent of submitted ideas make it to the
adoption stage.
New Ideas Scheme has dedicated staff members that keep employees engaged with
the initiative and also notify idea submitters of the status of their submission. If an
idea is rejected, then these staff members provide guidance to the submitter on how
to improve future submissions. The staff members also run idea campaigns that
present a specific problem to a select group of employees for solution generation.
Participating employees may be selected based on their business units or job
functions.
BTs Broadband Boost program and Frame Circuit Identification program are two
success stories from New Ideas Scheme. Broadband Boost is a program in which
field engineers upgrade old wiring and replace routers and hubs for end users on
behalf of their communications providers. The program originated from the idea
that BT could have its field engineers provide additional services to maximize
service time. The program now results in 5,500 visits per week related to upgrades
and improvements. The Frame Circuit Identification program originated with a pen
designed by a BT employee for testing dead circuits. The pen was inexpensive to
make and resulted in10 times faster testing (as well as more accurate testing) than
was achieved with previous equipment.
My Customer Challenge Cup: My Customer Challenge Cup is a competitive event
for BT employees that runs for several months at a time. Teams of four to eight
employees address a specific issue that usually involves improving the customer
experience. Each team develops a solution for the issue and produces a presentation
that describes the idea and the deliverables for implementation of the solution.
Teams progress from quarter finals to semifinals to a grand final, and at every level
the advancing teams present their ideas to increasingly senior managers.
Innovation Through Research and Academic Partnerships
BTs global engineering headquarters is at Adastral Park in the United Kingdom,
which is a facility the organization shares with 44 other companies. Much of BTs
research and subsequent development is conducted at this location.

page 123
Core research at BT is in partnership with the customer-facing teams and covers the
full range of products and services BT offers. Research is divided in practices such
as security, consumer applications, network services and infrastructure, operations,
and information and communications technology.
BTs research staff are encouraged to keep track of technology developments and
trends, as well as conduct applied research. Research staff members stay up-to-date
so that they are able to evaluate the feasibility and potential benefit of new
technologies developed by suppliers, which aids BT in determining whether to
invest in a new technology. All research staff are encouraged to publish scientific
papers externally and regularly lead industry and technical standards bodies.
BT also conducts research through its partnerships with about 25 universities
around the world. It has partnerships with universities in the United Kingdom, the
United States, China, and the Middle East. BT sponsors specific research projects at
these universities related to subjects of interest to BT, such as big data projects, data
analytics, and improvements to BTs technical offerings.
BT has a large patent portfolio generated by its research organization, which it
continues to enrich, maintain, license, and use defensively.
Qualification of Ideas
Once ideas have been sourced from external or internal sources, they may be shared
with BTs Innovation Central group, which creates a case study for the idea to
determine whether it would succeed. This allows BT to evaluate the feasibility of an
idea before much time is invested in its development. The Innovation Central group
works on approximately 40 projects per year, with project times ranging from 2
weeks to 6 months.
The group also receives ideas from business units that need help developing a
business case for a new technology or service. These ideas are usually not on the
units road maps, so the units want to know if it is reasonable to pursue an extra
project. In this scenario, the Innovation Central group conducts research to
determine the potential market for the technology or service offering.
The group is also approached by members of the scouting group that have
identified a new opportunity for BT. In these situations, the Innovation Central
group looks at the commercial case for the opportunity and then obtains input from
senior management to decide whether to take the opportunity to the next stage.
During these projects, the Innovation Central group may create prototypes or
conduct customer trials.
For BT to determine whether or not to act on an opportunity, the Innovation
Central group must determine if the opportunity lines up with organizational
strategy, if the opportunity fits with BTs operations, and if BT has the channels to
pursue the opportunity.

page 124
Moving Ideas Forward
The sourcing of ideas from external organizations and internal employees is part of
BTs larger idea development process called C2M (i.e., concept-to-market). As
Figure 3 illustrates, the process has four stages:
1. idea,
2. proposal,
3. business case, and
4. delivery.
BTs C2M Process

Figure 3

The idea stage is open ended and is the stage in which ideas are sourced and filtered.
The idea stage encompasses both internal and external sources of innovation. A
concept moves into the proposal stage when it is deemed worth consideration for a
business case. During the proposal stage the idea is articulated and validated, which
can include conducting early customer trials, hothouse events, and proof-of-concept
development. This stage takes 60 days or less to complete.

page 125
Once the proposal stage is complete and the relevant BT business unit has validated
the idea, it can move into the business case development stage. During this stage BT
conducts trials of the product or service. These can be small-scale trials that evaluate
how the product or service will work or large-scale trials that evaluate how
customers will use the product or service. This stage lasts 120 days from business
unit validation to customer trial. Once trials are completed and a full business case is
developed, the business unit responsible for the technology provides written
confirmation that the project has been approved and accepted.
The concept can then move into the delivery stage. During this stage BT completes
any development necessary to get a quality launch for the new product or service.
The process ends with a full commercial launch for the product or service.
BT has also established an accelerated development process called C2M Lite
(concept-to-market lite) for ideas that do not need complex validation processes.
Figure 4 illustrates the C2M Lite process.
BTs C2M Lite Process

Figure 4

An idea is selected for acceleration if BT needs to verify that it is not infringing on
intellectual property owned by another organization, that it has the security needed
for a service to be put through a trial, or that the idea is compatible with mainstream
architecture. BT created C2M Lite to facilitate a fail fast, fail cheap environment
that makes product market trials more efficient. The process involves testing and

page 126
validating minimum marketable features of potential products and services using
early market testing. The results of the testing and validation are then used to
support decisions on creating business cases for potential products and services.
With the accelerated process, trials can be shortened to 60 to 90 days.
Protecting Intellectual Property
BT primarily uses patents as a way of protecting itself against infringement from
other organizations, although anyone at BT can hold a patent. BT has over 4,300
patents and patent applications covering approximately 1,100 inventions.
When working with existing or potential partners in a hothouse event, BT develops
agreements with these parties that outline the intellectual property that existed prior
to the hothouse. These agreements specify that any new intellectual property
developed in the hothouse belongs to BT, but this may vary depending on whether
a partner is being paid to participate in the Hothouse or if the resulting idea is an
improvement on an existing technology owned by the partner.
Tools
Overall, BT does not rely heavily on tools for its innovation sourcing. Its technology
scouting group uses Microsoft SharePoint to store information on companies that
the group has researched. BTs New Ideas Scheme uses Brightidea software as the
platform for employee idea submission and evaluation.
BT uses return-on-investment measures across its innovation initiatives, although
the organization recognizes that balancing short-term successes with long-term
thinking is a specific challenge when it comes to measuring innovation. BT has a
balanced scorecard approach to its innovation measures, with both leading and
lagging measures at the different stages of the innovation process.
BT tracks the revenue generated from new services, as well as revenue generated
from contacts made at BTs innovation showcases. BT also tracks cost savings
resulting from new services, systems, or technology generated as a result of its
innovation initiatives. It does not separate these savings by innovation initiative. BT
tracks cost avoidance resulting from ideas submitted by BT employees through New
Ideas Scheme. The organization also tracks the pipeline resulting from companies
that went through an innovation showcase.
BT also monitors the number of ideas that progress to each stage of its C2M idea
development process, although certain milestones are of more importance to
individual innovation initiatives. For example, the number of ideas progressing to
the business case stage is of more significance to New Ideas Scheme, and the
number of concepts progressing to the delivery stage is of more significance to the
hothouse and innovation showcase programs. On the 2013 scorecard, BT had 20
ideas cross into the business case stage and 10 projects move to the delivery stage.

page 127
BT also tracks the time for ideas to transition to each stage of the C2M process.
Although the organization has established target time frames for each stage to be
completed, it aims for a 5 percent improvement in cycle time for each stage over the
prior year.
BTs centralized innovation group also has a softer measure related to what the
organization has termed thought leadership nuggets. These are ideas proposed by
members of the centralized innovation group that are new to a particular business
unit. These ideas could be new technologies or services, new applications of a
particular technology or service, or the ending of BTs investment in a particular
technology that may become obsolete. Thought leadership nuggets must be
approved by the CEO of the affected business unit. The centralized innovation
group has a target of five to 10 Thought Leadership Nuggets per year.
Lessons Learned
After BTs initial venture fund was set up in Silicon Valley, it became apparent that
an external innovation function at BT could not be successful without a function to
sell the benefits of external innovation within the organization. This is particularly
true for the external scouting group, which must not only be able to identify
technologies that could benefit BT but also present these to the business units.
Overall, the centralized innovation group has established credibility with BTs
business units and has gained senior management support. The group also has the
support of BTs CEO, which has been integral in gaining acceptance across the
organization.
CONCLUSI ON
BT has a broad innovation program that seeks to source ideas from a wide variety
of both internal and external sources. Once ideas are generated, BT has different
methods of evaluating and refining ideas before they are moved through the
development process. Through the organizations C2M and C2M Lite processes, BT
ensures that viable ideas are developed and launched as quickly as possible.
Although the organization conducts research, it focuses its innovation efforts on
technology adoption and repackaging rather than materials design. BTs centralized
innovation group facilitates the discovery of new ideas that can help the
organization provide superior service to its customers at the lowest cost possible.

page 128
Case Study
Cisco Systems Inc.
OVERVI EW
Cisco Systems Inc. is a leading global organization in networking, with solutions for
how people connect, communicate, and collaborate. As of the third quarter of 2012,
Ciscos revenue was $47 billion. With 75,000 employees located in more than 150
countries, Cisco primarily sells its products in a business-to-business model to global
firms, governments, and service providers. Almost half of Ciscos sales are
generated outside of the United States.
Ciscos growing services organization represents more than $10 billion in annual
revenue. There are three main parts of Ciscos services organization: technical
services, advanced services, and consulting services.
Ciscos innovation strategy is, simply stated, to build, buy, and partner. The
company builds products and solutions, partners with innovative companies, or
acquires new technologies and companies. Cisco has purchased more than 150
companies to access new technologiesand more importantly, to the people who
developed those technologiesin order to accelerate its growth in key markets.
Cisco believes in retaining and integrating entrepreneurial leadership from its startup
acquisitions in order to gain a competitive advantage. Cisco positions this talent to
help the organization grow into new business areas. At the same time, these
employees backgrounds influence Ciscos overall culture in an entrepreneurial
direction.
Innovation and Open Innovation
One of the things that has been constant in Ciscos history is that
weve connected things that havent been connected before.
Sharon Wong

Cisco sees the world moving toward the Internet of Everything that has all
people, processes, and things (e.g., mobile devices such as smartphones and tablets)
connected. As of 2013, the majority of the world is not connected to the Internet.
However, Cisco estimates that by 2020, 2.5 billion new people will come online, and
50 billion devices will be connected, thus providing a large growth opportunity for a
networking company like Cisco.

page 129
As a decentralized enterprise, Cisco has many groups and stakeholders for
innovation. This case study primarily focuses on innovation from two perspectives
at Cisco. The first is presented by Sharon Wong, director of business incubation in
Ciscos emerging technology group, part of Ciscos development organization. The
business incubation program has an external focus and looks for new markets to
enter. This group incubates new technologies and partners with Ciscos corporate
development group to scout for technologies and startups in new areas. The second
perspective comes from Lisa Voss who leads innovation leadership and capability
development in Ciscos services organization and focuses on connecting innovation
to the people side of Ciscos business.
Innovation also happens as Cisco employees design new products. From an
engineering perspective, Cisco spends $5.8 billion on R&D globally with 22,000
employees in this area and more than 10,000 patents. There are development centers
in China, India, Europe, and the United States. Cisco collaborates extensively and
co-develops new products and services with its partners and customers.
Cultural Support for Innovation
Innovating globally is critical to Ciscos future.
Lisa Voss

Cisco is considered one of the early pioneers in the technology boom from the
1980s to 1990s. The desire to get out there and solve problems, create and build,
and change things is deeply engrained in the organizations culture and beliefs,
according to Sharon Wong, director of business incubation in the emerging
technologies group. Cisco originated at Stanford University and began with a
handful of people building routers in a living rooma classic Silicon Valley story.
Stemming from that origin, Cisco employees have a high degree of independence,
and the company believes innovation is part of everyones job. The company values
are on employee badges, and innovation is one of the core values. We all have it.
We all carry it, said Wong.
Although there is a lot of diversity in the business models used within Cisco, there is
also a lot of internal collaboration to enable employees to learn from each other and
draw on the best, said Lisa Voss, lead for innovation leadership and capability
development in Cisco Services.
STRATEGY
Cisco is seeking to balance the acts of focusing and leveraging its assets and energy
in existing markets with the acts of continuing to push into new areas in targeted

page 130
ways. The CEO and Ciscos operating committee have defined the top five priorities
for Cisco, and the organization focuses and aligns its resources with a clear strategy
around desired opportunity areas. This focus lays the groundwork for the
organizations innovation efforts.
If Cisco did not focus on innovation, then from a business standpoint it would not
survive in this fast-moving industry. From an employee engagement perspective, the
feeling is that employees would not remain with the company if they did not have
the opportunity to do cool stuff. In the services organization, the feeling is that
without these programs, there would be little consistency, and efforts would be
isolated instead of tied into the larger enterprise operations and strategic priorities.
In development, innovation would happen but likely be slower and smaller without
the emerging technologies group and its programs. It would also be harder to retain
key engineering talent in a competitive market.
Although Cisco has a well-established services organization, at its core the company
has historically been a product business. However, in mid-2013 its business models
are changing as a result of the market shifting more services to the cloud and
products increasingly being offered as services. Cisco is therefore expanding its
services focus with new models that allow it to deliver new services to its customers.
Emerging Technologies Group
Since there are more opportunities than time, people, and money available,
emerging technologies group leaders frequently review if they are putting Ciscos
money in the right places. Would they be better off redeploying those resources to
other places? How do they maximize their odds of success?
Philosophically, Cisco believes it is easier to disrupt an existing market than to create
a new one. Because it is more expensive to create a new market, that is not a way to
achieve fast growth. Cisco is seeking returns within a few years from its new
investments. For market disruptions, Cisco looks at where opportunities exist; for
example, changing the user experience (e.g., via Telepresence) helps transform the
growth rate of a market. In addition, disruption can occur within an adjacent
market.
Services Innovation Excellence Center
To better respond to its changing customer environment, leaders in Ciscos services
organization are driving a culture change and greater employee engagement in
innovation. Ciscos senior vice president of technical services within the services
organization, Joe Pinto, chartered a small program in 2010 as an employee

page 131
engagement effort. The resulting Services Innovation Excellence Center
1
provides a
vehicle for employees with valuable knowledge to showcase their ideas. He brought
Kate OKeeffe to Cisco to lead the program, which leveraged the emerging
technologies group's work to incubate ideas including the process, graphics, and
even the back-end platform. Within two years, the program has grown to having
three senior vice presidents as sponsors, with other senior vice presidents watching
its progress.
The services organization promotes the mantra Strategy x Capability = Results,
and the Services Innovation Excellence Center targets the capability-building part of
that equation by building and strengthening Cisco Services innovation capabilities
globally. Through a combination of training programs, targeted innovation
initiatives, customer engagements, and the Smartzone idea generation platform
(described later in this case study), the center strives to accelerate the success of the
services organization.
Philosophically, the Services Innovation Excellence Center focuses on
empowerment of the enterprise. It does not do innovation, decide which ideas to
fund, or seek to uncover new opportunities. It instead enables organizations within
Cisco to do that for themselves. There are four ways Cisco targets services
innovation: build capability through a maturity pathway, ignite the base with
recognition at the grassroots level to excite employees and drive participation,
imagine the future via targeted innovation that focuses employee efforts, and change
the customer conversation. Cisco sees its strength in technology-enabled
collaborative innovation and wants to help customers leverage their technology-
enabled collaboration.
Open Innovation Model/System
Cisco established its emerging technologies group in 2005 to find new avenues for
growth. As the market share leader in many markets, Cisco must find new markets
in order to grow. The mission of Ciscos emerging technologies group is to cultivate
a steady stream of new businesses with billion-dollar revenue potential, achieve
architectural integration with the rest of organization, and provide growth engine
opportunities for Ciscos foundation and other businesses. The bar for new revenue
potential was set high because, for an organization of Ciscos size to see a material
impact on overall revenue, a new business needs very large aspirations.
The emerging technologies group incubates some startups within Cisco as it seeks
large new markets to enter with the goal to disrupt those markets and generate
revenue for Cisco. These internal startups help retain the entrepreneurial discipline
within Cisco. Second, this incubation process helps shields the innovating groups

1
For additional information on Ciscos Services Innovation Excellence Center, please read
Unleashing Inclusive Innovation at Cisco at www.mixprize.org/story/unleashing-
inclusive-innovation.

page 132
from existing businesses that may end up disrupted by the new technology. Third, it
creates an exciting place to work for Cisco employees who want to be
simultaneously in a startup environment and at Cisco.
Figure 1 shows where the emerging technologies group fits into Ciscos overall
innovation efforts in the upper right quadrant. By focusing on new technologies for
new markets, the emerging technologies group is similar to a venture capital partner
investing in new ventures.
Our math is a lot like venture math.
Sharon Wong

Emerging Technologies Group Growth Model

Figure 1

Approach
Cisco bases its go-to-market strategy in new areas on Geoffrey A. Moores Crossing
the Chasm
2
. The emerging technologies group looks for markets adjacent to Cisco

2
Geoffrey A. Moore. Crossing the Chasm. HarperBusiness, 2006.

page 133
and areas in which other parts of the business are not necessarily investing. That
being said, the group hands over business plans to other parts of the business to
incubate when appropriate.
The emerging technologies group tries to focus on new ideas not on Ciscos road
map already, which is not easy, according to Wong. Figure 2 shows Ciscos opinion
on why large companies often struggle with innovation when entering new markets
and how the emerging technologies group has responded to those challenges.
Challenges with Innovation in New Markets

Issue Implication and Ciscos Approach
Too much money Cisco purposely starts lean when it incubates in order to create a sense of
urgency. When projects are in startup mode, the team has to think fast and only
has enough money to get to the next milestone.
Too much time Markets move very fast and seem to be going faster. Cisco tries to get an idea to
market in 12 to 18 months. The goal is to execute quickly by using prototyping
and piloting to hit the mark.
Too many people Cisco has large, internal teams working on various technologies but wants to
avoid slowing down innovation projects with too many people. Cisco instead
creates small teams and empowers them to move quickly by mimicking a
startup. Cisco wants to have fewer than 50 people on a team before the first
customer shipment.
Too much love Cisco has found that when internal groups discover colleagues developing
something cool, they all want to be a part of it. With a 10-person team, the
startup does not have time to handle requests from dozens of Cisco internal
organizations. Therefore, new technology startups operate in stealth mode for
the first 18 months. This cocoon allows the startups to get to market as fast as
possible. The emerging technologies group takes projects out of stealth mode
when getting ready to go to market in order to involve the sales and service
organizations. The group then lays the groundwork to move the new technology
into the mainstream organization.
Too much hate Many of these startups are potentially disruptive to other parts of Cisco. To
mitigate this effect, the emerging technologies group leverages senior executive
champions and tries to keeps startup units together while incubating.
Black sheep To avoid being considered negatively, the emerging technologies group only
focuses on incubation and what it does best.
Figure 2

page 134
Funding
The senior vice president for Ciscos video and collaboration group, Marthin de
Beer, owns the budget for the emerging technologies group. Therefore, he is the
primary person that needs to be convinced to invest in each opportunity. The funds
in the groups budget must cover the new projects that are being invested in, as well
as those already invested in (with 100 percent Cisco ownership). The reality of the
funding situation diverges from a true venture capital firm because it has to fit into
the corporations budgeting process. The emerging technologies group has decided
it is easier to get money from one source instead of trying to tin cup and seek
money from multiple other sources within Cisco.
Some companies might fund a function like the emerging technologies group from a
CTO fund, but Cisco does not. As a large, functional organization with 75,000
employees, Cisco is not organized around vertical markets or lines of business.
Within that structure, the emerging technologies group fits under the development
organization where it has a small portion of the almost $6 billion that Cisco spends
on R&D.
Intellectual Property
When it comes to intellectual property, Cisco has a broad patent portfolio with
approximately 13,000 patents that may be used defensively against organizations
that aggressively seek (often through lawsuits) to make money from patents they
hold. Cisco actively rewards engineers for filing patents to help protect its
intellectual property.
With crowdsourcing for open innovation, intellectual property issues are complex.
In the case of its external innovation challenge, the I-Prize global innovation
contest, Cisco has evolved in its approach to intellectual property over time in
partnership with its lawyers by recognizing that Cisco has to protect itself while
balancing the needs of the business. The companys approach has shifted from
initially wanting to own all the intellectual property to wanting a broad license for all
of it, to just looking at the ideas with the possibility of future licensing for selected
ideas.
Cisco excludes certain countries and regions from its external innovation
competitions due to local legal restrictions such as export controls that affect
intellectual property. Cisco requires all participants to read and agree to the terms
and conditions, which lists those excluded regions. Cisco employees and their
households are welcome to vote on ideas, but they cannot submit ideas in external
contests. Once it gets to the small percentage of ideas it wants to invest in, Cisco
conducts additional due diligence on each idea. In some countries, Cisco may even
have a local team review ideas submitted in the local language to determine if the
idea can be legally shared with Cisco.
In partnership with the emerging technologies team, the legal team conducts risk
assessments related to intellectual property. At the first phase of its innovation

page 135
contests, Cisco conducts a high-level intellectual property risk assessment for each
idea. During this review, Cisco double-checks to see where submitters are located
and rejects submissions from excluded areas. Beginning in the semifinal stage,
Ciscos legal team conducts a deeper intellectual property risk assessment on each
idea. If an idea raises a major red flag for risk, then it does not move on to the next
round of the contest. Cisco also resends the terms and conditions to each team that
makes it to the finals and has them again accept them.
When licensing intellectual property from I-Prize, Cisco does not always seek
exclusivity for a number of reasons. First, the company believes that the onus is on
itself to execute new ideas as quickly as possible relative to competitors. Second,
Cisco believes that entrepreneurs will be more likely to contribute ideas if they do
not feel that Cisco is going to take their ideas away from them. Last, most of the
ideas Cisco receives require a significant investment to bring to market. Most
entrepreneurs do not have that level of funding, which leads to a desire to partner
with Cisco and its strong marketing and sales channels.
Getting Started
Leadership of the emerging technologies group has been relatively stable over its
seven years. The two executive sponsors are the senior vice president for the video
and collaboration group (representing 23 percent of Ciscos total business) and the
vice president/general manager and chief technology officer for the group. Wong
said these are strong champions for innovation who are well respected at Cisco.
Third-Party Assistance
Cisco has hundreds of university relationships that it actively leverages for technical
challenges or to find the frontiers within various disciplines.

People
Emerging Technologies Team - Business Incubation Team
With only five people in the business incubation team within the emerging
technologies group, it must partner with others in Cisco as it looks at new
technologies and markets. The business incubation team members are responsible
for scouting, writing business plans, and serving as advisers to Ciscos startups as an
advisory, consulting, and support organization. The startups themselves are part of
the larger emerging technologies group. The incubation team has to sell the value of
what it does to the rest of the company.
Hiring the right people into the business incubation team is difficult, said Wong,
even though there is no shortage of talent that wants to work in this group. Being an
entrepreneur is a great background because they know how to grow a business.


page 136
Another valuable background is as a strategy consultant because they can think
differently about a problem and understand how to influence others to invest in
new ideas.
Services Innovation Excellence Team
Cisco Services has 14,000 employees, and the Services Innovation Excellence Center
team is only five full-time employees, plus four contractors. Therefore, the nine
team members must operate through internal partnerships with HR, Ciscos learning
organization, strategy and planning, and Ciscos operating groups.
Cisco does not operate by decree.
Lisa Voss

Because Cisco operates by appetite and by building energy, the center needed to
build momentum, energy, and allies to be successful. Its approach has focused on
starting with the executives who are most ready to achieve some early wins and
supporting passionate grassroots innovators to drive their ideas to incubation.
Startup Teams
To staff its startup teams, the emerging technologies group strives for a mix of
internal Cisco employees and external people. For innovation to be successful, the
organization wants the right set of diverse skills working together with different
viewpoints. The internal Cisco employees are usually fairly senior and know the
Cisco systems. These employees tend to have connections and credibility within the
organization. The external people on the team help bring in outside viewpoints,
energy, and expertise Cisco may not have. Mixing the two groups on the startup
teams has been successful in getting fresh thinking to challenge the status quo while
maintaining critical organizational relationships that help get things done, said
Wong.
Being on an emerging technologies group startup team is a full-time job. The core
leadership team of a startup is a general manager, a head of engineering, and a head
of product management or business development, depending on the business model
for a given initiative. This set of three leaders hires the rest of the team members
and collaborates with the emerging technologies group's business incubation team as
they develop strategy.
Internal Connections
In general, a major way in which progress is achieved at Cisco is via personal
connections and contacts in the organization. The most effective employees at
Cisco are those who have a wide personal network of contacts. The connections


page 137
help smooth the way against obstacles. Cisco also likes to leverage these contacts to
promote new ideas by creating proof points with success stories that go viral
inside the organization from contact to contact.
At the most senior level, the executives meet to look at company-wide innovation.
At the grassroots level, there are several vehicles to bring people together around
innovation including Ciscos innovation summit and innovation leadership forum.
By being in the same conversation space, connections happen, people share
practices, and they often think in compatible ways.
Incentives for Innovation
In 2012, Cisco instituted a technology fund targeted at its distinguished services
engineers and fellows (i.e., the highest rank for engineers on the technology track,
not the management track). These employees can propose and receive funding for
innovative projects that are either not on the road map or are in areas where the
company wants to learn more about particular technologies. Cisco has seen some
success here with cross-unit innovations already in pilot testing. This fund has
helped generate ideas that resolve the challenge of development groups in silos.
Because of the positive early results, this program will be expanded across the entire
development organization.
In terms of incentives for innovation, Cisco has surveyed its engineers to find out
what would drive them to engage in innovation. The top two choices were: 1)
having the time to work on innovative ideas and 2) having that innovation work
affect their career (i.e., recognition). Therefore, Cisco is trying to carve out more
time and space for its engineers to work on ideas for Cisco.
Ciscos emerging technologies group has experimented with monetary incentives
but its experience has shown that it is not difficult to interest employees in the work
the group does. Because Cisco retains employees from its acquisitions, it has many
entrepreneurs who want to be back in a startup environment. These individuals are
especially excited to be in a startup environment that is housed within the comfort,
safety, and security of Cisco, said Wong. Incubation allows the startups to have the
best of both worlds: freedom and flexibility while alleviating angst about not having
enough cash.
In the services organization, there is an innovation catalyst award (for a significant
contribution, not a competition), and the people who have won it report receiving
social benefits that were initially unintended: feeling that they are more respected by
their peers and seen as innovative, while receiving different opportunities they might
not have had before. This positive outcome encourages these employees to
volunteer again and recruit others.
Also in the services organization, at the grassroots level, the Services Innovation
Excellence Center provides a technology platform for employees who have an idea,
the tools to flesh out the idea, and coaching to enable the employee to drive that

page 138
idea forward. The center does not drive the idea; it empowers the employee to do
so. This requires more persistence and creativity than typically required from an
engineer; so once an idea gets into incubation, the catalyst award recognizes this
initiative, regardless of whether the idea succeeds. The award recognizes initiative,
persistence, and skill building, but not the idea itself. Cisco has other venues that
recognize the ideas.
Market and Customer-Driven Innovation
Cisco starts with customer pain points in its approach to innovation, regardless of
whether those needs are actually articulated or known. There are many techniques
for figuring out what the customer pain points are. For example, when prototyping,
Cisco tries to evaluate if its new product is satisfying an unmet customer need. It
also tries to assess whether interest will translate into a buying decision, how much
customers would pay for a new offering, and whether the buyer and the user are the
same. Cisco tries to avoid building things no one will buy or that customers expect
to get free. There is a process and tools for its startups to gather and report
customer insights since ultimately the startup is accountable for revenue.
Increasingly, Cisco will hold a facilitated session with customers to co-create and
brainstorm ideas to solve customer challenges. Cisco brings in partners and
representatives from other parts of Cisco to help.
Process
Emerging Technologies Group
In Figure 3, the emerging technologies groups framework begins with its team
looking for new ideas for new businesses (using an open innovation approach). The
next step is to filter and shape the idea by developing a prototype and a proof of
concept to decide if Cisco should make next the level of investment and, like a
venture capital firm, put in seed funding to create that new business. During the
incubate phase, Cisco has a set of milestones to manage the process needed to start
a business. Cisco brings in the founding team or creates the team and then gives it
considerable freedom to refine the idea.
Ciscos experience has been that when a technology emerges from the incubator, it
will look different than the original concept. Technologies that move successfully to
the initiate phase receive hands-on guidance from the business incubation team.
First customer shipments are usually between the initiate and accelerate phases.
One of Ciscos critical success factors is that a member of the business incubation
team stays with the startup businesses even when they go to market in the accelerate
phase and start selling. When entering a new market, Cisco has found that startup
teams often lack some of the expertise needed to achieve the scale necessary for a
billion-dollar business. To help the startup, the emerging technologies group forms
tiger teams composed of senior members of other functions including marketing,
sales, services, channels, finance, and supply chain operations to help the startup

page 139
team refine and execute its go-to-market strategy. The tiger team helpers can also
guide the startup to make changes that leverage Ciscos strength in the sales channel.
The size of Ciscos investment in these startups can be substantial. Seeking the next
billion-dollar business, Cisco invests millions in starting these units. And although
they may start with three or four people, some of the startup teams have 50 to 100
people by the time they are in the accelerate phase. At any given time, the emerging
technologies group tends to have three to four startups operating. However, Cisco
does not expect a 100 percent success rate on these new businesses. In cases where
the project is cancelled, the people are redeployed to other projects.
Ciscos Emerging Technologies Group Incubation Framework

Figure 3

After the accelerate phase, the emerging technologies group either places the startup
into another mainstream Cisco business unit or suggests exiting completely.
Graduation of a new business is a great experience for the emerging technologies
group. Cisco TelePresence, for example, was a success that came out of the
emerging technologies group and was handed off to a different business unit.
When the emerging technologies group decided to invest in converged buildings
(i.e., buildings where the major systems like heating, cooling, and lighting would be
run over an Internet Protocol (IP) network instead of via different proprietary
systems), it learned a major lesson. That investment led Cisco to take on too many
new things it had to learn: new technology, new channel, and new buyers with
varied decision-making processes. Now, Cisco strives to pick new markets that are a
little closer to where the organization understands what it takes to be successful.
The emerging technologies group invests in one to 2 percent of the ideas it sees
while seeking breakthrough ideas. Since the goal is scale, the emerging technologies
group may combine several ideas or uncover a sentiment around trends in a market.
The group will: take a deeper look at a market from a business and technology
perspective; ask for help from inside Cisco regarding technology; and seek market

page 140
knowledge from customers and the sales and marketing functions. Given that Cisco
makes a multimillion investment when it pulls together teams during the incubate
stage, only one or two ideas a year pass from the filter and shape stage into the
incubate stage.
To put context around Cisco's anticipated results, nine out of 10 Internet startups
fail. And for the remaining Internet startups that survive, the average time to reach
$100 million in revenue is seven to nine years. There is not a typical pattern, other
than it is not a fast or easy goal to achieve.
Sources for Breakthrough Ideas
Cisco casts the net wide for breakthrough ideas. The emerging technologies group
scouts for ideas by talking to customers and other external parties, scans for
sentiments in employee and eternal groups, talks to venture capitalists, and follows
market developments.
Cisco seeks opportunities to create transformation with its technologies through
partnerships. For example, in the retail industry Cisco works with partners to write
software to gather behavioral data on in-store customers using Ciscos cameras,
which yields greater insight and analytics than a point-of-sale system. Combining
technologies such as Ciscos high-definition video cameras and digital signage
systems can leverage gaze detection to change what is displayed on digital signs in
real-time.
The landscape is changing for early-stage investments, and Cisco sees more of the
venture budget moving to earlier-stage investments. Therefore, Cisco is developing
relationships with several early-stage business incubators and accelerators in order to
stay current on new formative developments and offer some mentoring.
Cisco also runs its global I-Prize contests to learn the latest around the world in
places and people it is not currently seeking out (explained in more detail later in
this case study).
Tools
Sharon Wongs philosophy around tools for innovation is to first figure out what
goals she wants to achieve and then find the right tool to help do the job. She
emphasizes that it should not be the other way. As a decentralized organization,
Cisco has many homegrown tools to support innovation; however, it also uses some
commercially available tools, specifically Brightidea and Spigit, for idea capture,
generation, and evaluation. The tools are similar but not the same, and Cisco selects
the platform for contests based on requirements such as the need for local language
options.


page 141
I-Zone for Internal Idea Capture
Cisco gathers ideas from internal employees via its I-Zone platform. In 2006, I-
Zone 1.0 began in the emerging technologies group as a wiki, representing one of
the first times the entire employee population at Cisco was invited to submit ideas
for innovation. In its first year, employees submitted about 800 ideas, with almost
half coming from Ciscos sales teams and many from outside the United States. The
conclusion was that many of people submitting these ideas did not know how else
to bring their ideas to headquarters, thus proving the platform to be valuable.
Because I-Zone was successful internally, Cisco decided to replicate it externally in
2007 with the launch of the first I-Prize for external ideas. Cisco chose a tool from
Brightidea for the first I-Prize. After using the Brightidea tool for I-Prize, Cisco
decided to bring it internally in 2008 with I-Zone version 2.0 to take advantage of
the social nature of the tool and to better collaborate (including voting) around new
ideas that were submitted.
Once other groups within Cisco heard about I-Prize (external) and I-Zone
(internal), they started asking to use these tools for their own purposes (including
sales, HR, operations, services, and others). In 2008, Sharon Wong opened the use
of the I-Zone platform on a limited basis to other parts of Cisco. In 2010, she
opened up I-Zone broadly and enabled any Cisco group to go directly to Brightidea
to establish a new community under the I-Zone umbrella. Cisco links all these
communities, allows ideas to be moved from one to another, and puts all
collaboration tools in one place. To make it easy for people to find, Cisco puts links
to these tools from many different places.
Cisco operates with federated innovation communities where each community is
free to run innovation campaigns in any way it wants for any duration and manage
them itself. This freedom works well at Cisco, said Voss. Although there is no
formal central management, best practices are shared though bimonthly innovation
leadership forum meetings for innovation leaders across Cisco. Lisa Voss from the
Services Innovation Excellence Center described the federated approach: It can be
messy and inconsistent and still deliver a lot of value.
A Cisco employee can do three things in I-Zone: submit an idea, vote on an idea, or
comment on an idea. A senior leader typically promotes new ideation challenges by
sending out broad communication to drive employees to I-Zone.
There are four distinct roles in I-Zone that can be community-specific.
1. Users can enter almost any community on I-Zone. Most of the
communities are open to any employee. Cisco does not assign a set amount
of time for employees to use I-Zone.
2. Evaluators are assigned by the community owner to evaluate ideas. Each
community may have different evaluators.

page 142
3. A moderator or community manager oversees each community, usually
with these privileges only in a specific community. Cisco does not mandate
how to run a community.
4. The site administrator (of which there are fewer) is traditional back-end
IT support with responsibilities to set up the site, assign user privileges, and
perform similar administration activities.
Smartzone in the Services Organization
In 2010, Cisco launched Smartzone, which took open innovation for employees,
especially in the services organization, to the next level using the I-Zone platform.
Cisco has created self-service videos to show employees how to use the system to
submit ideas, which can be in English, Japanese, or Mandarin. Cisco uses substantial
internal marketing campaigns to encourage employees to submit ideas.
In Smartzone, each employee who submits an idea is charged with championing that
idea. If the idea originator does not promote it, then that idea does not progress.
When an employee submits an idea, he or she categorizes it as related to technical
support, people and training, a game changer, or another category. (Incorrectly
tagged ideas can be manually rerouted to the appropriate semimonthly review
committee.) After the initial submission, an ideas potential is evaluated based on
votes received from other employees plus the review committees feedback. If an
idea is judged valuable, then the originator will be encouraged to submit a more
detailed business case.
Ciscos services organization has one employee whose job is managing the
Smartzone platform, shepherd ideas, coach idea originators, scrub ideas, and identify
duplicates. Because this setup is not scalable, the services organization is working to
enable Cisco stakeholder organizations to manage their own versions of this
process.
In Smartzone, there may be duplicate grassroots ideas. The employee who manages
Smartzone encourages all employees to comment on ideas when they see duplicates.
Ciscos typical approach to duplicate ideas is to bring the groups together to find a
better solution, especially when competing for scarce resources. Distinguished
services engineers within Cisco, with deep institutional memory, often serve as
informal links across organizational silos and can also help identify duplicates.
Innovation Summit
On May 8, 2013, Cisco held its fourth innovation summit. It had 2,500 employees
participate in 21 physical locations and online across 35 countries. Cisco engaged
over 90 stakeholders to create and produce the event.
As part of the innovation summit, Cisco has a Launchpad competition as a talent
development effort and a means of generating innovative customer solutions. In
each of the four hubs, a six-person cross-functional team (with high-potential,

page 143
manager-level employees) is assigned a challenge to solve in six weeks. There are
two challenges, with two teams working on each. The team works with an internal
Cisco consultant during the process, and the teams present to senior vice presidents
shark tank style on the day of the innovation summit. The winning team receives
personal money plus seed money for the project itself. Having senior vice presidents
as judges helps the projects get sponsorship as they move forward. These
competitions expose senior leaders to others in the organization who are focused on
innovation, which helps drive culture change from the top down and bottom up.
I-Prize for External Innovation
Ciscos I-Prize is a global innovation competition seeking great ideas from outside
the company
3
. Initially, Cisco hoped to replicate the successful launch of its
internally focused I-Zone. With top senior visibility within Cisco, the CEO launched
the first I-Prize competition in 2007 and 2008, and the second time he helped
announce the winners. But I-Prize has evolved over time. Cisco is now running
regional contests in various countries, which helps other entities build their own
open innovation capabilities.
One example of Ciscos regional I-Prize competitions took place in Russia. Cisco
helped run an open innovation contest to attract investment and ideas for Skolkovo
(www.sk.ru), a planned high-technology business area near Moscow. The first
Skolkovo innovation award attracted 10,000 people and 2,000 ideas from across
Russia, which Cisco had not expected. Judges for the first contest were primarily
Russian entrepreneurs and government officials with only one Cisco representative,
the general manager of Cisco in Russia. Russian television featured the winners.
In 2012 Cisco ran its British Innovation Gateway Award program in conjunction
with the London Olympics. This I-Prize investment focused on innovation in the
United Kingdom within government, schools, and entrepreneurs. The second
innovation I-Prize in the United Kingdom launched in March 2013.
The corporate emerging technologies group ran the first I-Prize contests and over
time has begun to empower local Cisco teams to run the regional contests, with
assistance. This allows Cisco to build a broader capability to run innovation
challenges. As of March 2013, one full-time program manager oversees the I-Prize.
Cisco PR teams in the local countries help with marketing and communications.
Cisco has gained expertise in managing innovation challenges through its work with
the I-Prize. It has gotten experience in framing the problem to solve, targeting the
challenge, communicating about the event, finding participants, securing judges,
helping people collaborate, and leveraging its own technology.

3
Cisco has an I-Prize video case study on YouTube, viewable at:
https://www.youtube.com/watch?v=24QK8cOfO9c.

page 144
There are several tangible and intangible benefits to Cisco from the I-Prize contests.
First, the company sees interesting ideas that can leverage Cisco technologies and
help build innovation capabilities outside of Cisco. By reading all the submissions,
Cisco gets insight into trends and sentiments. These contests also expose Ciscos
technologies to contestants and the media as well as sales opportunities. And Cisco
receives media exposure as the challenge sponsor.
Rewards for I-Prize were initially cash; but in the regional contests, Cisco provides
mentoring and in-kind services such as legal and marketing help that will help
winners move forward. Cisco gives contestants sample videos to help with their
pitches. In addition, a Cisco mentor is assigned to each of the teams in the final
round to help prepare the business case, which contestants have said is very helpful.
Cisco also gives contestants presentation templates that are similar to what would be
used with a venture capital firm.
Over time, Cisco has morphed its contest design to attract more companies and
entrepreneurs rather than individuals or students. As a result, in more recent I-
Prizes, Cisco received fewer ideas but they were higher in quality and more
developed, making them more interesting to Cisco. In a recent Cisco I-Prize global
contest, there were categories for changing the way people live, work, learn, and
play. Cisco received 824 ideas from 2,675 participants representing 156 countries,
and the winning team received $250,000.
Cisco has found that clearly laying out who is responsible for activities in each phase
helps recruit new participants and ensures clarity (Figure 4).


page 145
Cisco I-Prize Roles by Round

Figure 4

Gamification
Cisco has primarily used gamification (i.e., the use of game mechanics and game
design techniques in non-game contexts) for external challenges, but the concepts
are starting to appear internally as well. Cisco chose Spigit as the platform for its
second I-Prize because the prediction market capabilities of the tool could drive
engagement. Cisco gave participants I-Prize points to invest in ideas in the virtual
market similar to a stock market. Cisco saw that participants deeply cared about
what happens to the things they invested in, and many returned daily to check on
their investments. Participants earned points for activities on the site (e.g., submit
an idea and vote on ideas), and there was a leader board for both ideas and peoples
investments. Cisco allowed the crowd to select a small percentage of the ideas that
would move forward. This gave idea originators an incentive to get others to rally
behind and invest in their ideas in order to advance to the next round. On a regular
basis during the contest, Cisco gave away prizes to the people at the top of the
leader boards.

Innovation Portfolio
Ciscos culture fosters a high degree of autonomy, and it is not the Cisco way to
come up with a highly structured, rigid portfolio management approach, according

page 146
to Wong and Voss. As a result, there may be duplication of innovative efforts at the
grassroots level. To address this challenge, there is a concerted push to terminate
projects that should be stopped, and Cisco strives to get better at this.
For the services organization, there are top-down and bottom-up components to its
innovation portfolio. Cisco is not tracking a directed portfolio for the bottoms-up
component because that effort is more about employee engagement and customer
satisfaction. For the top-down part, however, targeted innovation is evaluated from
an investment perspective by Ciscos existing portfolio management process at the
services level that identifies key priority areas.
Measuring the Emerging Technologies Group
The emerging technologies group focuses on building new markets and driving
specific innovations forward faster; therefore, it sets measures set for each phase in
its framework (see Figure 3). When a startup goes through the emerging
technologies framework, there is a rough set of timelines that help determine if it is
on track to graduate.
There are different metrics by phase since what gets measured should change for
emerging businesses as they develop. To avoid killing them too early, startups initial
measures are not the same as measures used in the core businesses. Over time, that
shifts until graduation when the startups need to be ready to be managed by the
same corporate metrics for revenue, margin, and operating expense as they drive
toward profitability. Additionally, there are measures at each stage for customer
satisfaction and product quality.
Cisco worked with consultant Geoffrey A. Moore to create its model for
accelerating and scaling. The emerging technologies group splits the accelerate stage
into two phases: the first phase focuses on acquiring initial customers and shipping
the first customer orders, and the second phase is about scaling early wins into a
broader set of customers. In the second phase, Cisco is looking for traction within a
market and an increase in the number of customers within given markets. Because
these startup teams are small, Cisco seeks to provide these early solutions by market
instead of scattering resources across one-off customers in multiple markets.
I-Prize Measures
Cisco has three categories of measures for its I-Prize program.
1. Brand and participationDid the program position Cisco as a company
focused on innovation around globe?
2. Level of participationDid the program get Cisco exposure to people it
may not have met otherwise?
3. Insights into the case for investment in large new opportunitiesDid
the program results help Cisco decide in which new areas to invest?

page 147
Cisco has relied on social media and viral marketing to promote its contests,
leveraging YouTube, Facebook, LinkedIn, and Twitter. When possible, the I-Prize
team takes advantage of existing Cisco assets to publicize the contest. For example,
Ciscos chief technology and strategy officer has more than a million followers on
Twitter so she was asked to tweet about the contest. Ciscos Networking Academy,
which provides the ability to become a Cisco certified engineer in 165 countries, was
also asked to help publicize the contest to its more than one million students and its
half a million Facebook network. Additionally, Cisco produced several videos for
YouTube about entrepreneurship and innovation, which were posted at regular
intervals during the contest to give people a reason to come back and contribute to
building a community.
Measurement in the Services Innovation Excellence Center
The Services Innovation Excellence Center at Cisco focuses on building
organizational capability so its metrics are different from those for the emerging
technologies group. Although its measures differ, the center maintains a focus on
the business impact of innovation.
The center's key metrics include financial and non-financial impact of implemented
ideas, as well as innovation maturity level and progress from awareness, to
competence, and then to excellence. This maturity is the foundation for a
certification program being developed with components for the level of
organizational maturity and an individual certification program based on individual
skill mastery and business impact.
To evaluate the Smartzone idea pipeline, the center tracks metrics such as:
number of participants per organization size,
number of active participants,
number of ideas submitted per quarter,
number of ideas incubated,
number of ideas implemented, and
number of ideas graduated in the last two quarters.

Participation is also important for the Services Innovation Excellence Center. To
drive participation, Cisco has offered training about the Smartzone process to
1,500+ employees. In addition to WebEx-based training and upcoming e-learning
(which helps with scalability), face-to-face sessions have been offered in multiple
locations around the world.
LESSONS LEARNED
Ciscos emerging technologies group strives to stay aligned to the businesses
priorities; so as business priorities have shifted, so has the emerging technologies

page 148
group. The group has learned how to assemble the right teams with the right people
for its startups. Moreover, it has learned how to navigate the Cisco culture to get
initiatives and startups launchedthat is, balancing being a good corporate citizen
with the need to function as startup entrepreneurs.
One of the challenges Cisco faces is getting managers to release already-busy
employees to work on innovation projects. These employees are typically staffed on
existing projects with tight deadlines tied to their managers priorities. To address
this, the expansion of Ciscos technology fund in 2013 will provide funds for a
contractor or other employee to backfill someone moving to an innovation project.
These technology funds may be used in other ways to give employees who submit
ideas time to work on their innovation projects.
In the services organization, the team documents the ideas submitted and the
resolution for each. It is considered a positive outcome when one of the ideas from
this system is incubated elsewhere within Cisco.
In each step of the way, Ciscos legal team has been completely involved and
supportive. It has not always been easy, but it has been a positive partnership,
according to Wong. Now Ciscos legal team members are seen as experts in
structuring terms and conditions for innovation contests.
Every time Cisco conducts an I-Prize contest, leaders first ask what can be done
better or changed from the last iteration to make it better. The lessons learned in
figure 5 from Cisco are applicable to both internal and external innovation
challenges.


page 149
Innovation Challenge Lessons Learned
Goals
Clear objectives

Follow-up actions defined

Create internal enthusiasm for
innovation, new ideas at all levels of
company

Lift visibility of innovation within venture
capital, technology cluster, and academic
communities
Contest Design
Decide: broad vs. specific
challenge

Thoughtful framing of
challenge

Incentives line up with
objectives and promote
desired behavior

Designed to produce desired
outcome

Must be clear about what you are asking
people to contribute

Not all incentives need to be cash;
recognition, visibility to senior
executives, and impact to career are
powerful motivators
Participant Roles
and Desired
Behaviors

Promote collaboration (80
percent will help develop
idea rather than submit idea)

Moderator communicates
frequently to participants to
show that someone is
listening

Provide positive and
negative feedback

Define participant, moderator, evaluator,
and judge roles

Ask participants to comment, vote, and
refine ideas, not just submit ideas

Active moderator/sponsor participation
Executive
Stakeholders

Executive sponsor visibility
crucial

Funding/Resources for
implementation of winning
idea identified

Executive sponsor launches challenge
and participates as judge (or picks
winning ideas)
Evaluation
Criteria

Defined during campaign
design and clearly
communicated to
participants and judges

Make evaluation process quick and easy
for evaluators and judges

Decide how and who is going to pick
winning idea(s)

page 150
Innovation Challenge Lessons Learned
Resources
Dedicated program manager

Judges for each phase
identified and they
understand evaluation
criteria

Determine what resources
and assistance to provide
participants to
refine/develop promising
ideas

Budget for program includes tools,
marketing, and rewards

Provide resources to help develop most
promising ideas

Marketing Plan
Communication plan

Use social media to drive
participation

Share success stories after
completion of campaign

Promote culture of innovation and
desired new behaviors
Intellectual
Property

Bring legal function into
planning process as partner

Intellectual property due
diligence built into
evaluation process

Be clear about intellectual property with
partners and suppliers
Tools
Enable collaboration;
connect people who can
help

Social/Gaming elements
built in

Aids with evaluation and
communications processes

Tools support collaboration and facilitate
team creation

Enable viral marketing
Figure 5
CONTI NUOUS I MPROVEMENT
Self-examination forces Cisco to look at its investments to see if it is investing in the
right mix in light of its strategy, which is used as a decision-making guide. In an ideal
world, Cisco would like to stop undesired projects more frequently than realistically
happens. Projects are easier to start than they are to stop, said Wong.

page 151
There is a concern that cancelling projects affects morale so that may cause greater
hesitation to even start a new undertaking. Also, given the nature of Ciscos
business, commercializing a new product means the organization has made
customer commitments far into the future, possibly even after the products end of
life. So its not a decision to be made lightly.
Both of the groups discussed in this case studythe emerging technologies group
and the Services Innovation Excellence Centerhave changed as needed over time.
They did not proceed along one path that proved unworkable; rather, the entire
experience has been a process of learning and adaptation. Ciscos biggest takeaway is
that shifting to a greater focus on innovation is fundamentally about change and
doing things differently in the organization. It is about finding a different path
through the existing organization that requires creativity, adaptation, employees to
drive the change, and the willingness of leadership to transform the organization.

page 152
Case Study
Corning Incorporated
OVERVI EW
New York-based Corning Inc. is a manufacturer of specialty glass and ceramics. In
2012 Corning reported $8 billion in sales and employed 29,000 people worldwide.
Corning manufacturers and creates products in six market segments:
1. Display technologies (LCD glass substrates, glass substrates for OLED, and
high-performance LCD platforms)
2. Telecommunications (hardware and equipment)
3. Environmental technologies (emissions control products)
4. Life sciences (cell culture and bioprocess, assay and high-throughput
screening, genomics and proteomics, and general laboratory products)
5. Specialty materials (Corning Gorilla Glass, display optics and
components, optical materials, optics, aerospace and defense, and Corning
specialty glass)
6. Other products and services (emerging display technology, drug discovery
technology, new business development, and equity companies)
Within the six market segments Corning also makes keystone components (e.g.
honeycomb substrate in catalytic converters on automobiles) that enable high-
technology systems for consumer electronics, mobile emissions control,
telecommunications, and life sciences.
Corning credits much of its success to its sustained investment of approximately 8
percent to 10 percent of its sales into RD&E, its 160 years of materials science and
process engineering knowledge, and its distinctive collaborative culture. There is a
strong organizational belief that the interactions among researchers, developers, and
engineers lead to innovation. According to James Scott, director of knowledge
management, Corning is committed to innovation, which is ingrained in the
companys culture.
Description of Innovation and Open Innovation Program
Corning has a formal enterprise-wide innovation program embedded within R&D.
Innovation projects are funded by operating divisions. They fund extensions,

page 153
renewals, and earlier stage projects for development funding. Its science and
technology division has its own budget for new research and development projects.
Business development units at Corning constantly explore new business lines that
will provide both growth and stability to the company. The companys corporate
strategy is to expand through global innovation and to provide stability and balance
to its market segments. As business grows and matures, Corning prepares with new
innovations to feed its product pipeline. Next level innovations like those illustrated
in Cornings video, A Day Made of Glass, offer an idea of the scale of research it
hopes to do. Corning has $6 billion in cash on hand, which can carry it through
times when their products are not providing a quick return on investment.
A key change to how Corning does business came in the late 1980s with shifts into
new market areas, as well as the increased use of external partners that brought
diverse knowledge to the company. This diverse knowledge compliments Cornings
efforts and propels new products to market at a faster rate. Since technology
develops so quickly, said Bruce Kirk, director of corporate innovation effectiveness,
Corning knows it is unable to hire all of the smartest people in the world; so it
collaborates with other entities to distinguish the company from its competitors.
Corning has a formal innovation process that requires a core team to track
innovation through a five-stage stage-gate process. A corporate innovation process
group is its core team of innovation process owners and facilitators that train and
oversee a community of practice that has innovation experts that are internally
referred to as innovation Black Belts. Both its corporate technology council and the
growth and execution Council provide governance, which allows for bottom-up
innovation with top-down guidance from senior leadership.
Corning created the external technology collaborations group to progress open
innovation efforts by managing relationships between Corning and external entities.
This is a group within R&D that supports the open innovation function by going
after emerging and attractive markets. This group consists of senior long-term
employees who work on long-term projects that have a long time to market at scale.
According to Dan Vaughn, manager of the external collaborations group, Corning
does not have a formal open innovation program. However it does practice the
concepts and principles of open innovation. Vaughn states that one of Cornings
most successful open innovation projects was the creation of Corning Gorilla
Glass. Corning looks for partners to collaborate with in order to bring new products
to market. The collaborative nature of how Corning invents and innovates is deeply
embedded in the organizations culture. The companys first experience with open
innovation was when it worked with the Dow Chemical Co. to develop silicones in
1934.

page 154

STRATEGY
For Corning, market dynamics are changing such that collaboration is of increasing
importance. Collaboration with partners, customers, and universities throughout the
supply chain business can be a requirement for doing business. A company that
wants to keep up and even surpass competitors must have a strategy to support
collaborative efforts. Corning realized the need to focus on collaboration early in its
business history, and it has since been focused on establishing new relationships and
expanding global innovation.
Global Innovation
We have a strong belief that the way we grow is through global
innovation.
James Scott, director, knowledge management
Cornings central R&D facility in Corning, N.Y., was designed to integrate technical
capabilities and create keystone components. Corning uses a centralized R&D
facility because it allows researchers, developers, and engineers to have an increased
number of creative interactions that lead to innovation.
Corning maintains a network of research and technology centers around the world,
which provides them with a local presence that offers a much better understanding
of the local markets. Corning has centers in California, France, Russia, India, China,
South Korean, Japan, and Taiwan. In Europe, collaboration is managed by staff at
regional research centers. Technology and scientific centers in Asia are managed by
staff at the corporate office or sometimes at the regional research centers.
Corning established its West Technology Center in 2007 and staffed the Center with
technologists to engage with key universities, customers, and leading technology
companies on the West Coast that are leaders in technologies or markets of interest.
It has been a success from an idea generation standpoint, as well as in terms of
identifying opportunities to collaborate with others.


page 155

Collaboration with Universities and Government Entities
The biggest benefit of collaborating with universities is the
interaction with great people who will make great employees one
day.
Dan Vaughn, manager, external technology collaborations
group
Since January 2007, Corning has collaborated with different universities and
government entities on various research projects. About one-third of the universities
that Corning collaborates with are outside of the United States. With certain key
universities, Corning has negotiated long-term agreements which enable more rapid
interaction and which lower the barriers to starting new projects.
Corning collaborates in order to access expertise, equipment, and facilities that it
does not have. The benefits of university collaborations are new knowledge,
accomplishing objectives faster, reduced costs, avoided capital expenditures, and the
identification of prospective employees. The vast majority of such collaborations are
focused on early-stage research.
Third-Party Assistance
In the past, Corning has worked with third-party groups that address R&D
problems through open innovation. It is not currently working with any vendors.
Corning does intelligence gathering internally, but also uses external groups to
gather intelligence gathering and analyze best practices.

People
External Technology Collaborations Group
Project success depends on identifying competencies that Corning does not have.
Typically, technologists identify collaborators based on the needs of a particular
project. Occasionally, the external technology collaborations group assists
technologists in identifying potential collaborators.
The external technology collaborations group manages government and university
relations and collaborates within the R&D function of Corning. The group connects
Corning scientists with outside entities. This work initiates from requests from
scientists, project managers, and program managers. Based on the objectives, group


page 156
members select the best method of collaboration and assist in selecting
collaborators. Requests are also received from internal customers when scientists
know what entity they would like to collaborate with.
The group also manages contracts through the life cycle of collaboration and
conducts post collaboration interviews to measure and track the benefits of the
collaboration.
Emerging Market and Technology Group
The members of this group are long-term staff located in R&D, not within a
business unit. Using Corning's Magellan process to track emerging market trends,
they handle long-term and burgeoning projects that require the ability to function
with uncertainty and ambiguity. Their focus is more on learning rather than on
delivering financial results quickly. Projects handled by this group do not typically
provide immediate results and take about two to four years to understand the job.
Corporate Innovation Process Group
The corporate innovation process group owns the innovation process and facilitates
a community of practice that creates Innovation Black Belts. The facilitators try to
create innovation effectiveness by helping the entire organization to understand the
innovation process, and when to take certain steps.
Innovation Black Belts
Corning has created an innovation expert role similar to a Six Sigma Black Belt.
Business units select employees focused on innovation for additional training. The
corporate innovation process group provides a five-day course to certify innovation
expertise.
Research Fellows
Cornings research fellows are well-published senior scientists that encourage
organizational learning and sharing. They encourage the companys scientists to
continue to share and generate ideas. They also coach and mentor young scientists.
Recognition and Incentives for Innovation
Corning has formal and informal recognition and reward systems for its employees.
Corning recognizes its scientists for idea generation, the publication of papers,
presentations to the community, and the presentation of scientific posters. Display
details on patent holders are placed in common spaces. Quality is very important to
Corning, and they have a quality initiative that utilizes Six Sigma and Lean for
process improvements Individuals in the company are recognized for participation
in this initiative.
Engaging Employees in Innovation
Employee engagement is extremely important in an innovation ecosystem.
Organizations which engage with internal and external stakeholders are likely to be

page 157
more innovative than organizations who do not offer engagement opportunities.
Research reviews are conducted at the Corning, N.Y. research center annually. Team
members conduct a two- to three-hour presentation about their research. The
presentation is followed by a poster session, which provides rich dialogue. Corning
also has long-running communities of practice that allow scientists to share
problems with projects. These meetings also involve scientists presenting posters,
while other scientists walk around and contribute ideas and solutions. The
communities of practice have a long history of internal collaboration. Technology
poster sessions and peer reviews are widely attended activities for sharing ideas
and getting feedback from peers. Corning subscribes to outside publications so that
scientists have the latest literature, and the organization provides an internal
magazine for its scientists. The magazine allows the scientists to post questions and
problems for others to help with. Scientists are also able to provide thoughts on
previous issues in the magazine
Process
Innovation Effectiveness Oversight
Corning monitors its innovation effectiveness in order to convert opportunities into
dollars through commercialization, by applying a customer and market
understanding. Figure 1 provides a high-level overview of the innovation
effectiveness process. This process guides the innovation process and consists of
four process steps
Innovation Effectiveness

Figure 1


page 158
The first process is to create a roadmap to identify attractive markets and screen
opportunities, which Corning calls the Magellan process. The emerging market
and technology group identifies a particular area of opportunity and helps to bring
in academics, and business or industry specialists. They brainstorm, work in smaller
teams, and sometimes spur the investigation of the opportunity or creation of a
whitepaper. This process requires cross-functional participation from marketing,
commercial, manufacturing, and individuals from different business units within
R&D. Open innovation occurs during this step. Figure 1 provides a high-level
overview of the innovation effectiveness process.
The second process reduces the number of opportunities identified; this is a
preliminary portfolio selection. This step requires that project managers sort
through and select projects. They look at the resources available, and they start to
manage the idea.
The third process executes the selected projects through innovation project
management (Figure 2). Each opportunity is moved to the stages of innovation so it
can be commercialized or stopped
The final process is realizing the benefit of the opportunity. If the process is
followed correctly then the company makes money.
Innovation Process
Cornings innovation process was launched in 1987. Managed by the corporate
innovation and process group, the innovation process uses five stage-gates to
accelerate time-to-market and ensure project teams proceed efficiently. The process
keeps investments and risks in check by continuously prioritizing projects. By
funneling projects through the five stages, the group helps ensure that projects have
clear goals and guidance. Meetings are held at each gate to determine how the
company should proceed with the project.


page 159
Cornings Innovation Process

Figure 2

The innovation process is run by a cross-functional team from marketing,
technology, manufacturing, and R&D. A small number of individuals oversee the
health of the overall Innovation process (Corporate Innovation Process Group) The
five stages of the innovation process follow. Projects are evaluated at each gate.
1. Build knowledgeThis stage focuses on ideation and evaluating all
opportunities. To proceed through the first gate and receive funding, the
corporate innovation and process provides a series of questions to assess
the project readiness to proceed to the next stage.
2. Determine feasibilityThis stage focuses on establishing the solution's
feasibility, the concept, the value proposition, and customer pull. This stage
is driven by the level of investment.
3. Test practicalityThe focus of this stage is on optimizing the product
and process, as well as confirming its value proposition and customer
enthusiasm.
4. Prove profitabilityThis stage focuses on lowering manufacturing costs,
reconfirming the value proposition, gaining a longer-term commitment
from customers, and understanding capacity.

page 160
5. Manage the life cycleThis gate focuses on commercializing the
product. Corning launches the product and then proactively manages its life
cycle.
Research and Development Pipeline
The R&D pipeline is managed centrally, with the R&D research facility working
closely with the operating divisions. Figure 3 displays how ideas are screened and
filtered through the R&D pipeline (as part of process step 1) and also, visually, how
the investment commitment grows as projects move through the pipeline. Ideas are
gathered from external/internal sources (see reference to Magellan, in Figure 1
above). R&D then identifies the high-value ideas by researching the ideas and tries
to develop the ideas. The next step requires that the highest-value opportunities be
selected to engineer the value proposition. The idea then must be scaled up for
commercialization. The investment gets bigger as it moves through the development
phase.
Research and Development Pipeline Management

Figure 3

Tools
Corning uses the following tools to support its innovation efforts:
Microsoft SharePoint The company has forums where scientists can submit
ideas or post project issues needed input. It also uses Microsoft SharePoint to
distribute recorded After-Action interviews with principal investigators and to
document project failures.

page 161
Electronic Collaborative Lab Notebook Cornings scientist use electronic lab
notebooks that track R&D progress in the lab. This tool is used to help bridge
knowledge gaps and increase collaboration by providing a virtual notebook space.
iPlace Cornings iPlace is an online system that provides an innovation team
workspace, as well as a reference library with process tools.
Patent Mapping Tool - A patent mapping tool creates graphical models that
identify the patents in a technology space.
Cisco Tele-Presence Rooms - Corning utilizes Cisco Tele-Presence Rooms to
help maintain real-time. connectivity among its research centers and collaborates.
Technical Report Repository - This online tool allows access to internal technical
reports.
THE SUCCESS OF OPEN I NNOVATI ON

Measures for Evaluating Success
Corning has found that using metrics to evaluate the success of open innovation has
both an upside and a downside, because it may take a longer period of time to see
results. Evaluating open innovation success is handled by the operating divisions.
Some divisions within Corning track innovation funding and resource utilization
using a number of tools. Aside from evaluating the percentage of new products
introduced to the market in the last three years and the number of patents filed,
Corning mainly concentrates on improved efficiencies and product success in the
marketplace.
Lessons Learned
Although Corning does not have an aggressive or formal open innovation program,
it does have a history of identifying partners that can fill its talent gaps to meet a
window of opportunity in the marketplace. Corning sees an increased demand for
companies to aggressively approach open innovation. With innovation efforts
moving at a faster pace, Vaughn said it is important that Corning also move at a
faster pace in order to be the first to the market with technology solutions that have
outstanding value propositions. Corning is making every effort to leverage its
history, culture, and tenure while being adaptable and agile enough to keep pace and
sustain.

page 162
Case Study
General Mills Inc.
OVERVI EW
General Mills is one of the worlds largest food companies. It has about 39,000
employees and its products are marketed in more than 100 countries on six
continents. The organization had $17 billion in sales in 2012.
Although in the past the organization focused primarily on the U.S. market, since
2000 it has been aiming to have a more global presence. It now has about 30
percent of its annual sales outside of the United States due in part to acquisitions the
company has made to increase its global market.
Innovating in all aspects of the business is one of General Mills core values.
Innovation is also one of the organizations core strategies, along with building its
portfolio, leading customer growth, margin expansion, and international expansion.
Innovation at General Mills occurs throughout the company. Product development
takes place within the organizations Innovation, Technology, and Quality group.
This group is organized into global development platforms based on product type
(cereal, meals, snacks, dairy, and baked goods). General Mills Innovation,
Technology, and Quality organization had previously been organized based on lines
of business, such as food service or Pillsbury products.
The reorganization of the Innovation, Technology, and Quality group has the goal
of maximizing scale, eliminating redundancies, and repurposing insights and
technologies.
Description of Innovation/Open Innovation Program
The Innovation, Technology, and Quality group has centralized capabilities available
to all of the global platforms. These capabilities are:
Shared Services group (centralized support services such as sensory, pilot plants,
etc.),
General Mills Quality and Regulatory Organization,
Technology Creation,
The Bell Institute of Health and Nutrition, and
Strategy & Innovation (centralized innovation support team).


page 163
The innovation strategies of the Innovation, Technology, and Quality group are to
deliver high-impact innovation, create advantage technology, leverage connected
innovation (the term General Mills uses for open innovation), build global scale, and
maintain strong product quality and food safety. The centralized innovation support
group (Strategy & Innovation) consists of subteams with specific expertise:

iSquad (new product strategy development),
X-Squad (external innovation, which includes the General Mills Worldwide
Innovation NetworkG-WIN),
Sparks (conversion of insights into product opportunities), and
ICE (or In-Context Experimentation).

Development Process and Innovation Review
For product development, General Mills uses a standard stage-gate process that it
has adapted to meet the organizations needs. The process emphasizes the need to
ask the right questions at the right time, have the right individuals involved, and
maintain alignment within the organization. The process begins with strategy
development and ends when the product has been in the market for six months.
General Mills classifies its new products into three categories:
line extensions,
brand expansion, and
new platforms.

The Strategy & Innovation group is not usually involved in product line extensions,
but instead focuses on helping General Mills businesses create robust, differentiated
new products. The organizations ultimate goals for a new product are for it to have
incremental sales (or new sales) and to be sustainable and profitable in the
marketplace.
In 2005, General Mills began conducting Innovation Reviews twice per year. During
these reviews, executives from the organization meet with leaders from each
business to discuss their new product pipeline and evaluate performance via new
product metrics. These reviews give executives visibility into product development
projects, the ability to prioritize projects as needed, and the ability to disseminate
insights from product development projects across the business.
During the Innovation Reviews, executives are shown a new product dashboard for
each business, which includes metrics such as new product sustainability in the
marketplace, incremental sales, and key data on profit/margins.

page 164
During the Innovation Reviews, executives are shown a new product dashboard for
each business, which includes metrics such as new product sustainability in the
marketplace, incremental sales, and key data on profit/margins.
The new product dashboard provides General Mills with a sense of how quickly a
new product is developing a consumer base. Although most of the new products
currently developed at General Mills build quickly, the organization is also focusing
on product innovations that will build a consumer base over time. The company
refers to these types of projects as emerging scale innovation. So far, new brands
acquired by General Mills have made up the majority of the organizations emerging
scale innovations.
Business Drivers of Connected Innovation
One of the main drivers of General Mills Connected Innovation Program is to
become the partner of choice with external organizations looking to partner for
innovation. Even if a potential innovation project is not carried out, General Mills
still wants to have created value through its interactions with a potential partner so
that the partner will come back to General Mills with future innovation
opportunities.
For General Mills, becoming the partner of choice means that other organizations
are willing to trust General Mills to bring innovations to life. Being the partner of
choice can lead to three benefits for General Mills:
access to differential technology,
new connections that were not actively sought out by General Mills, and
being considered by potential partners that may not have previously considered
General Mills.

STRATEGY
General Mills attitude toward connected innovation has evolved within a relatively
short period of time. The organization shifted from a culture that primarily created
innovations internally to one that actively seeks innovation both within and outside
the organization.
General Mills had a successful year in 2004 in that it launched a record number of
new products. However, when those items were charted and the size of each
product launch was measured, the organization found that many of the products
launched that year were small, close-in line extensions. These products most likely
were not sustainable in the marketplace and reflected the organizations focus on
quantity of innovation rather than quality of innovation.

page 165
In addition, General Mills had a company policy not to review, accept, or fund any
submitted idea from outside the organization. The organization relied on
Innovation, Technology, and Quality group employees for the development of
innovation internally.
A team began benchmarking and conducting research on a variety of innovation
programs outside of General Mills and identified best practices that were eventually
adopted. The Strategy & Innovation group created its current organization of
smaller catalyst teams to support implementation of the best practices. These teams
were designed to be small groups of well-respected people within the organization
who would be change agents. The group set goals for the teams to have members
that were experts in their areas, with an ultimate goal for each team to be best in its
class. Once the catalyst teams were formed they took on pilot projects to gain
experience and to demonstrate value to the broader organization.
In 2005 members of the X-Squad worked to change the organization policy against
using outside innovation. Now innovation at General Mills has shifted from an
internal focus to an external one.

People
The catalyst teams within the Strategy & Innovation group have specific
requirements for their team members. For example, the X-Squad seeks team
members who are entrepreneurial, can scout for new sources of innovation for the
organization, determine the needs of their designated lines of business, articulate the
needs in writing or to others, and identify the talent needed to address the needs.
The iSquad looks for team members from a variety of backgrounds. Team members
take continuing training to enhance their ability to develop consumer empathy.
Some team members are trained in improvisational acting due to the amount of time
they spend in front of groups facilitating. Other iSquad team members take
sabbaticals to observe other organizations that are leaders in innovation.
Rewards for Idea Contributions
The rewards for external partners that provide solutions to General Mills vary
depending on the nature of the innovation. Rewards could be monetary or service
based (such as a package design for a contributing organization).
General Mills employees are also rewarded for innovations. Employees that obtain
patents are honored at an annual dinner with company executives and receive a
plaque and cash award. The organization is seeking to create a similar recognition
program for employees that leverage connected innovation.


page 166
Process

iSquad
When exploring an opportunity area, the iSquad uses what the organization has
named the I3 process (Figure 1). The first two stages in the process (immersion and
interaction) involve conducting research to both understand a problem from a
business point of view and to experience the problem from a consumers point of
view.
General Mills I3 Process

Figure 1

An example of how the iSquad follows the I3 process is a project focused on
creating products to help consumers lose and/or manage their weight. The team
began its research by immersing itself in reports on the subject and deliverables
from previous projects related to the topic. The team also talked to experts on
weight loss, read blogs, and spent about 75 hours talking to consumers who were
actively trying to lose weight. To build empathy for the consumers, the team went
on a diet. The team members experienced the limitations of grocery shopping while
on a diet to learn how buying habits have to change and the difference in grocery
spending for a consumer looking to lose weight. Being on a diet also helped the
team learn the emotional effects of dieting, especially when family members were
not dieting.
The third stage of the I3 process is idea creation, or developing solutions to the
problem. For its project on weight loss, the team identified 19 ways to facilitate

page 167
growth related to products directed at consumers looking to lose weight. The team
worked with the Betty Crocker Baking Division to develop a dessert product that
was lower in calories and maintained portion control but satisfied the desire for a
dessert. It also worked with Progresso to develop soups that contain very low or
zero Weight Watchers points, and to prominently display the number of calories in
the product as well as the number of Weight Watchers points, which is information
that is of interest to consumers watching their weight.
A completed iSquad project can be refreshed after a few years. For example, the
iSquad team revisited the weight loss project after six years to see if new solutions
could be found.
X-Squad
The X-Squad manages General Mills Connected Innovation Program along with
other collaborative initiatives. With the organizations movement away from an
internal invention focus to a connected focus, the X-Squad developed a three-part
model for partnering for connected innovation. The first part looks at internal
collaboration, the second looks at collaboration with trusted partners, and the third
part looks at collaboration with new partners. This team focuses on finding
solutions rather than ideas; a solution could be a technology that results in a new
benefit for General Mills or technical expertise that could bring a solution to
General Mills.
Internal Collaboration: The Innovation, Technology, and Quality group holds a
two-day technical conference annually. Representatives from across the Innovation,
Technology, and Quality organization present work from the product lines and
share best practices. The conference features keynote speakers and eight to 10 tracks
with 400 presentations or posters authored by 800 individuals. The conference is
open to anyone within General Mills, but the majority of its approximately 1,400
attendees come from the Innovation, Technology, and Quality organization.
The X-Squad facilitates virtual internal collaboration with its Tech Connect
platform, through which developers can submit questions or development
challenges. Other users can provide suggestions or potential solutions through the
platform, which helps facilitate the creation of relationships within the organization.
General Mills also has Connect, which is an internal social networking platform.
Employees can create profiles and become involved in online communities of
practice. Employees can also post in forums to further communicate and
collaborate.
Collaboration with Trusted Partners: For collaboration with trusted partners, the
X-Squad began by focusing on General Mills suppliers. In 2009 the team initiated
Supplier Summits, which are held every two years with the goal of deep sharing of
the technical or innovation needs of General Mills with strategic suppliers. At these
summits there is discussion of how these suppliers can collaborate with General

page 168
Mills to address those needs. Each summit also features an awards presentation. The
Supplier Summits have resulted in increased collaboration between General Mills
and its strategic suppliers.
The team also organized a Big Splash Event, which was an informal meeting with
key suppliers on the lawn of General Mills headquarters. The goal of the Big Splash
Event was not to focus on supplier capabilities, but to generate new product
innovations. For example, at one event, one supplier of frozen sauce chips for
Green Giant products indicated that it could also provide sweet chips. Collaboration
with this supplier led to the creation of smoothie kits for at home preparation. The
Big Splash Event has led to additional opportunities for collaboration between the
organization and its suppliers.
Some businesses are now bringing in key suppliers monthly to have discussions and
to generate new product opportunities. Other key suppliers now have research staff
at General Mills facilities, which helps facilitate collaborative relationships with
these organizations.
General Mills is piloting additional ways of enhancing its ability to form
collaborative relationships with suppliers and existing innovation partners. The
organization rates its suppliers not only on cost, performance, and other relevant
supply chain metrics, but also on potential for innovation. The goal is to identify
suppliers that have the most potential for innovation but also the most reliable
performance.
General Mills also plans on creating innovation communities with external partners,
which are focused on specific platforms. The goal is to allow individuals at a partner
organization to interact with key individuals at General Mills regarding innovation
projects. However, when General Mills initiates an innovation community with a
partner it will establish guidelines on the types of information that can be shared.
Collaboration with New Partners: The X-Squad has created the position of
Innovation Entrepreneur within General Mills. Innovation Entrepreneurs are
employees tasked with defining the needs of their business or function and then
identifying solutions to these needs. The Innovation Entrepreneurs not only look
for organizations across the world that can provide General Mills with new
technologies, but also look for new talent that can provide the organization with
new solutions.
General Mills also works with Innova Market Insights, a Netherlands-based
organization that maintains a database of potential sources of innovation. General
Mills uses this organization as a resource for introductions to new products and
technologies. It also works closely with China Materialia to help it scout for
innovation in China.

page 169
The X-Squad is looking at other ways of connecting with new partners for
collaboration. On occasion, it conducts indigenous innovation tours to identify
innovation that is unique to several regions across the globe, most recently focusing
on China and India. General Mills is also using software to map expertise across the
globe from universities and other organizations. The goal is to get a visual
representation of where talent is located across the globe.
G-WIN: The General Mills Worldwide Innovation Network (G-WIN) seeks to find
novel technologies to address the needs of General Mills. The G-WIN Innovation
Portal on the General Mills website provides a way for outside groups to submit
proposals in response to non-confidential needs that General Mills posts online.
Outside groups can also use the portal to submit ideas that do not specifically
address an identified need.
When creating summaries of the needs that it would like to address, General Mills
aims to ensure that the briefs are crafted in a way that will generate the best
submissions. Ideally, briefs are abstract enough to solicit a wide variety of potential
solutions from both inside and outside of the food industry. When a submission of
interest is identified, General Mills contacts the outside group and initiates a non-
confidential exchange of information to determine how the technology will work
before the organization begins collaboration with the outside group. General Mills
sometimes uses its relationship with the organization YourEncore for a third-party
evaluation of a submission.
General Mills conducted events across the globe to get exposure for the G-WIN
program. It had booths at trade shows and conferences that include visuals to help
explain General Mills innovation needs and the potential benefits of partnering with
the organization. General Mills also held town hall meetings to present its
innovation goals and the G-WIN portal. The organization used its relationship with
Innova Market Insights to generate a list of organizations to invite to the town hall
meetings.
X
3
Process
The X-Squad has developed a process called X3 that it uses to assess a particular
need and find a solution to that need (Figure 2). This process focuses on finding a
technology rather than developing new products.


page 170
General Mills X3 Process

Figure 2

In the first stage of the process, the problem is identified and refined so that the
solution will adequately address the need. Hypotheses are developed in the second
stage of the process, and in the third stage talent that can find a solution to the
problem is identified. The entire process can take about six months to complete, so
the full X3 process is not always pursued. However, individual projects that address
a specific phase of the X3 process (known as X3 a La Carte) can be completed.
These can take the form of internal alignment sessions, problem definition sessions,
the creation of a talent list to address a particular problem, or a direct on-site
connection to a potential solution to a problem.
Use of Connected Innovation in the Global Meals Group at General Mills
The Global Meals platform provides innovative solutions to General Mills meals
businesses around the world, which include Old El Paso, Wanchai Ferry, Progresso
Soup, and more. The meals line of business has a wide variety of products and thus
needs a variety of technologies to address various needs. Global Meals looks at new
ingredient technology as well as manufacturing technologies that can help bring
products to market quickly.
Global Meals has used various methods of connected innovation in an initiative to
reduce sodium in General Mills products. A five-step process was used for the
project.
During the initial phase, a staff member was sent on a sabbatical to obtain more
background on the science of sodium taste perception. This individual came back
from sabbatical with hypotheses for the project that were then prioritized. The
organization used a consultant to help General Mills find outside groups that could
aid in reducing sodium in products without compromising flavor. The organization
then developed relationships with the external groups identified by the consultant as
well as a university that had conducted research related to the problem. General


page 171
Mills identified two suppliers that could provide ingredients that would be an
alternative to sodium. So much data was generated during the project that an
outside software vendor was needed to assist with the project.
Although outside connections were used in developing a way to reduce sodium, the
Global Meals platform also used connections within the organization. General Mills
sensory division and toxicology group were involved to ensure that the resulting
solution provided safe but adequate flavor. The External Partner Development
group was also involved to discuss intellectual property issues and to facilitate the
commercial development of the technology.
Sparks
General Mills Sparks team is tasked with turning insights into business
opportunities. This is a relatively new group that often leverages the work of the
iSquad and the X-Squad to develop ideas into actionable product opportunities. The
Sparks team holds online and in-person idea generation sessions. The team seeks to
generate as many ideas as possible and then quickly weed out ideas that will not
work. It uses convergent and divergent thinking in its process for generating and
refining ideas (Figure 3).
General Mills Sparks Process

Figure 3

For some businesses, the Sparks team coordinates a global new product expo in
which 30 to 50 ideas are presented to business teams. The ideas are represented as
tangible new product items. The Sparks team often works with graphic designers
and product and packaging developers to provide business teams with a
representation of the potential product. These expos can enable the business teams
to take action on some of the presented ideas. Smaller expos are also held for
individual business teams.
The Sparks team also seeks consumer feedback on potential new products.

page 172
External Partner Development
The External Partner Development group within General Mills is located within the
organizations Sourcing Function but plays an important role in establishing
connected innovation partnerships. New partnership opportunities are first
identified by the Strategy & Innovation group. However, before an opportunity is
commercially developed, the External Partner Development group meets with the
external party to further develop the relationship and discuss intellectual property
issues. The mission of the group is to enable growth through strategic partnerships.
The External Partner Development group has four areas of focus:
brand licensing and partnerships,
innovation and technology,
marketing solutions (which supports General Mills marketing services group),
and
corporate sourcing solutions.

The group is organized into teams with diverse sets of skills. Each team is essentially
a community of practice and could include individuals with backgrounds in
procurement, finance, licensing, business development, law, or other relevant areas.
The group works to establish win-win relationships with external groups. It provides
the Strategy & Innovation group with commercial perspective in relation to external
partnerships, complex deal-making, risk management support, and training on
processes and tools related to partnership establishment. These services were
created to support General Mills goal of becoming the partner of choice for
innovators. The group feels responsible for ensuring that partners find value in
every interaction with the organization. Even if a particular project does not move
forward, the group wants to ensure that the partner will return to General Mills in
the future with additional innovations. To educate other groups on ways to support
the partner of choice initiative, the External Partner Development group also
conducts training on ways to interact with partners and potential partners and how
negotiations with these groups are conducted.
The External Partner Development group typically becomes involved with a
potential innovation project after an early-stage technology has been identified. The
group then structures a deal with the external group that includes precommercial
rights and development.
In-Context Experimentation
General Mills In-Context Experimentation (ICE) group facilitates fast development
of a potential product so that early consumer learning can be done. This method of
new product development provides early learning on hunch ideas for a potential


page 173
product. Innovation entrepreneurs and a support system lead the development, but
the ICE group finds both internal and external groups that can move the early
development along.
Traditionally, General Mills has operated under a written concept testing model for
new product development in which an idea was generated, a concept model was
developed, testing of the concept was conducted, further development of the
product was done, and then the product was launched (Figure 4). This method
could take years to go from idea generation through product launch. However, the
organization has adopted a new focus on creating a saleable product that meets legal
and safety regulations before testing the product with consumers. If the testing is
successful, the product development project is chartered and then proceeds to full
development. The goal for this new model is to move from idea to consumer in
about 100 days.
Concept Testing Model vs. Saleable Product as Concept Model

Figure 4

General Mills One Global Dairy group used ICE to develop and evaluate a Greek
yogurt product. The ICE team used a method called a lemonade stand to test the
new product with consumers in a retail setting. Members of the group brought the
product to various stores and set up sample stations where consumers could taste
the product before being offered a carton of the product to purchase. Members of
the group interacted directly with consumers.
General Mills has adopted the method of quickly creating saleable products as a
means of understanding new product concepts. About 20 lemonade stands have
been conducted by groups within General Mills over a two-year period.

page 174
Intellectual Property
General Mills focuses on the creation of relationships with potential innovation
partners before discussing intellectual property. For G-WIN portal submissions,
General Mills begins with a non-confidential exchange of information with the
submitter before any work begins. If a submitter asks for a confidential disclosure
agreement, General Mills asks for the basics of the concept or technology before
any work is agreed upon. Once the organization accepts the submitted idea, it can
negotiate the ownership of intellectual property with the submitter.
Negotiations of intellectual property are conducted by the External Partner
Development group. This group negotiates pre-commercial rights with potential
partners as well as the ownership of intellectual property and the ownership of the
output of the partnership.

Measures for Evaluating Success
General Mills uses a variety of measures to evaluate the success of its connected
innovation efforts. The organization monitors:
the percentage of launches enabled by external innovation,
the percentage of sales enabled by external innovation,
the percentage of cost savings enabled by external innovation,
sales per headcount (with the recognition that innovation is not the only factor
that can affect this measure), and
cost savings per headcount.

General Mills is also developing measures to assess its innovation partners. These
measures will evaluate the quality of a partners service and its innovation potential.
Lessons Learned
General Mills has had to make changes to its culture to gain acceptance for
connected innovation. The X-Squads initial projects focused on the pain points for
business units, which made the benefits of connected innovation tangible for the
organization. Connected innovation has support from senior management, which
has helped the teams within the Strategy & Innovation group to gain credibility for
innovation strategies that were not familiar to the business units. Although the
External Partner Development group aims to facilitate innovation partnerships with
outside groups, it does not aim to change the failure rate for innovation products.
The goal for this group is to enable General Mills to take the risks that the
organization should take to result in truly innovative developments without concern
for the number of failed projects.

page 175
The Strategy & Innovation group takes inspiration for its methods from the Senior
Vice President of Innovation, Technology, and Quality, who provided the following
advice about innovation: When in doubt, move too fast, share too much, move
into discomfort, and ask for forgiveness instead of permission. This statement is
indicative of General Mills approach to connected innovation.
CONCLUSI ON
The teams within General Mills Strategy & Innovation group use a variety of
methods to encourage collaboration both within the organization and with external
partners. The group is willing to test many different methods and tools for
connected innovation to find those that yield the best results. Team members also
go beyond traditional consumer research to determine the needs of consumers and
evaluate potential new products. The more global, wide-reaching focus of General
Mills connected innovation initiative mirrors the organizations greater goal of
building a more global presence for its brands.

Open Innovation Idea-Generation-Collaboration PDF

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Open Innovation Idea-Generation-Collaboration PDF

Hochgeladen von

Copyright:

Verfügbare Formate

Open Innovation: Enhancing Idea Generation

2013 APQC. ALL RIGHTS RESERVED.

Das könnte Ihnen auch gefallen