Where Does Innovation Come From?

“History should be our guide. The United States led the world’s economies in the 20th century because we led the world in innovation. Today, the competition is keener; the challenge is tougher; and that is why innovation is more important than ever. It is the key to good, new jobs for the 21st century. That’s how we will ensure a high quality of life for this generation and future generations. With these investments, we’re planting the seeds of progress for our country, and good-paying, private-sector jobs for the American people.” 

—President Barack Obama, August 2009 

President Obama has spoken to the American public on the importance and the promise of innovation to refuel the economy.  

He has promoted the concept of “open innovation”—a term first popularized in a 2003 book of the same title by University of California-Berkeley,professor Henry Chesbrough. By Chesbrough’s definition, the concept involves combining external as well as internal ideas—and internal and external strategies—in advancing competitively. This concept of opening the gates to new ideas is nothing new—especially in the open-source software community. The recent economic reality, however, along with the constricted American dollar, are drawing attention to low-cost pools of information and ideas.

Jeff Howe, author, Wired magazine writer, and father of the buzzword “crowdsourcing,” insists that this “crowd stuff”—using the intelligence of groups of people to harness new ideas—has been around forever. It’s just that today’s technology lets us see it clearly.

Crowdsourcing

“I don’t think crowdsourcing eradicates a business, it changes [the business],” Howe said at Mediabistro’s User-Generated Content Expo in October 2009. Part of the beauty around crowdsourcing, he said, is the premise that the person we think of as most qualified for the job isn’t the best to do it. 

Take Threadless, for example—a company that’s made its reputation based on the ideas of its customers. The online retailer not only lets its fans submit T-shirt designs, but even the decision to manufacture the shirts is based on the desire of the crowd. Threadless gets a ton of free advertising and brand evangelists. The T-shirt designer gets peer recognition. The customers get access to shirts they’ve already decided they want. It’s a model that may not transfer all that well to other verticals, but it says a lot about a consumer’s willingness to share ideas—sometimes for compensation as simple as just seeing that idea posted on the Web.

The idea of letting customers collaborate, communicate, and share ideas in forums is gaining steam with social software vendors, and the development of “ideation” communities and frameworks. It’s already worked for brands such as Dell, Starbucks, and Lego. (See “5 Great Customer-Driven Innovations" sidebar.)

However, some are still skeptical of what the crowd holds for the corporation. “The positive way to look at it [is that] people love to engage,” says Mark Roser, an innovation consultant and current director with Launch Institute, which specializes in helping companies achieve sustainable top-line growth. “If a company has something that people are passionate about, that approach works. If you aren’t in an industry that has that much product engagement, that doesn’t work for you.” 

Does that make leveraging the power of the crowd only possible for name-brand and retail companies? Perhaps not, but your company may need a major overhaul first. Spreading the job of innovation from the c-suite down to the front lines—and even the customers—isn’t an easy matter. “The biggest challenge [with innovation] is probably culture,” says Gartner analyst Kathy Harris. You need to have executive buy-in, she says, or grassroots innovation doesn’t work. And tossing around the term “crowdsourcing” might cause more confusion than cohesion. 

“‘Crowdsourcing’ sounds weird and tech-y,” Howe said, but at its core the word reflects a fairly simple idea: Often the less you know about a subject, the better chance you have of solving a problem involving it. Essentially, it’s a way to rethink problem solving. One example of this is the Web site InnoCentive, where the online community poses difficult engineering questions, and most cases reveal a positive correlation between successful solutions and distance: Those further removed from the problem held the best answers.

Despite this interesting model, innovation isn’t a chore many organizations are eager to part with. For some, innovating models for innovation is a big enough change—one that’s perhaps required to join crowdsourcing phenoms such as Threadless and Dell. In fact, Harris says that innovating business models and strategies can result in changes that far outstrip those produced by innovating product design. Those internal innovations, however, aren’t things customers touch—not yet at least.

Organizations, Harris says, have to recognize that when they’re undertaking an innovation initiative, they’re going to have to build business processes around how they reliably innovate—applying analysis to the methodology—and make that a business process. In other words, thinking outside the box still has boundaries. 

INSIDE INNOVATION

Advertising agencies set up beanbag chairs, remove cubicles, and encourage casual dress to get employees to think outside the box. Why don’t other corporations embrace creative structure? Well, perhaps it’s a matter of not embracing innovation. Innovation is baked in—not treated as a strategic department.

Harris advocates companies creating “catalyst groups” for innovation. Just be careful not to treat the group as some elite department, she warns. Instead, involve stakeholders from key departments and, most important, take down the barriers to communication. For instance, if customer service is hoping to achieve better customer intimacy, Harris suggests involving customer service agents with the highest satisfaction scores in the innovation think sessions. 

But beware: What might seem “just” a customer service or a marketing issue could really be a full-enterprise issue. Launch Institute’s Roser gets at that point: If it’s a customer issue, chances are it should involve the entire business. “If we have the interest of the customer in mind and want to develop the future products, we need to…let the development team have a closer relationship…with sales, marketing, and customer service,” he says.

THE LIGHTBULB MOMENT

“Some of the best ideas came from the [product] team…as power users,” says Tim Sheehan, cofounder and CEO of 7 Degrees, a provider of social-mapping and collaboration platform PeopleMaps. “They basically lived and breathed the product. They were their own best customers.” Next to the internal developers, Sheehan says the next most important idea generators are the supercustomers—those who are passionate about the company and align themselves closely with its culture.

Sheehan’s company has yet to involve customers in the ideation process along the lines of community forums; instead it involves them in discussions during routine support calls. “Often some of the best stuff would come out of…a sales call or on a customer interview,” Sheehan says. “They are invaluable. The conversation takes [on] a life of its own.” He says in developing PeopleMaps most of the macro-innovation was done internally, but the feature-level stuff is where customer input comes into play—and makes a huge difference.

Marchex, an online-reputation management vendor for small and midsize businesses (SMBs), had its lightbulb moment while developing plans for its initial product launch, originally geared toward consumers and listings such as Yelp.com reviews. Then Marchex executives began talking to small businesses struggling to correct online listings and manage online presence, and discovered they had an entirely different market opportunity. 

“We thought we were innovating to solve the consumer problem. We realized along the way [we weren’t] solving the right problem,” says Marchex Chief Operating Officer Pete Christothoulou. “That problem...is already solved for consumers; they go to search and get what they need. We were trying to innovate where there wasn’t a huge opportunity.” 

Marchex came to the conclusion that it was setting out on the wrong foot, Christothoulou recalls, but it didn’t take long to change the company’s positioning. For one thing, Marchex was sitting atop a huge mountain of information about customer sentiment toward businesses. And Marchex already knew what kind of service SMBs needed—brand monitoring, online-listing management, and listening for customer reviews. In Marchex’s case, a little rethinking took the business down a new avenue—one the company is thrilled to be on.