Innovating the Process of Innovation
Airbnb is luring customers away from a slumbering lodging industry. Uber, Lyft, and other ride sharing services are competing successfully with taxi and rental car companies. Grocery chains are being threatened by home-delivered “meal kit” firms, not to mention Amazon and their experimental Amazon Go store without check-out lanes.
These innovative business models have flowered in a hot-house climate that has re-energized innovation itself. It may be too early to pick clear winners in new innovation methodologies, but smart firms will supplement their existing processes with new approaches to ensure long-term growth, new revenue streams, and the agility to out-innovate competitors.
This is not to suggest current methodologies are outmoded. On the contrary, the front-end of innovation has evolved in sophistication over the past 20 years, as seen most notably in the nearly universal embrace of user-centered research techniques, now the de rigueur starting point for most processes. The traditional moderated focus group has given way to on-site or in-context observational research, ethnography, participatory design, co-creation exercises, and other research methods. The underlying process remains the same, however: Researchers gather data from direct observation, then document the results as a set of “customer needs” which are translated by a team of company experts, which kicks off the familiar stage-gate development process.
This methodology is fine, but depends on traditional notions of projected or anticipated customer behavior. Other methods may reveal a broader spectrum of opportunities.
One alternative method, often called Open Innovation, is used to identify a wider range of unmet or even unperceived customer needs, create new business opportunities, and potentially identify disruptive business models.
The Open Innovation model relies on three things: 1) an engaged user community passionate about a broad topic, and willing to advance the ideas generated by fellow community members; 2) mechanisms to quickly prototype and evaluate these ideas; and 3) a way to validate a new product in the market through small sample lot sales. This is the “we built it, will you buy it?” validation model.
Today, there are a number of working business initiatives based on Open Innovation processes. The most comprehensive and best known is Local Motors, focused on transforming the design, development, manufacturing and distribution of transportation products and services. Its Rally Fighter off-road vehicle and Strati 3D-printed automobile are just two examples of what is possible when open, community-based product development combines with advanced manufacturing techniques and new distribution models. The result is not just new products but new business models.
In the consumer products arena, Local Motors collaborated with GE Appliances in 2013 to launch FirstBuild, a 33,000-sq.ft. rapid prototyping center, evaluation lab, and micro-factory dedicated to open innovation in the field of home appliances. FirstBuild is staffed by a team of engineers and designers from GE Appliances, but located on the University of Louisville campus. Team members are called community leaders, and connect to a global network of enthusiasts that propose and collaborate on ideas of interest to the community. The community leaders not only assist in the development of these ideas, they manage the fabrication process needed to quickly turn ideas into prototypes of various levels of readiness, as determined by the maturity of the idea. Successfully passing the prototype and evaluation phase, the micro-factory is engaged to manufacture products in small batches that are saleable to the public through any number of distribution methods, from direct sales to traditional brick and mortar stores, or through crowdfunding platforms like Indiegogo.
A good example of how the FirstBuild model works for GE Appliances is the Paragon sous vide cooking system. Paragon was designed and developed at FirstBuild based on community interest in the sous vide cooking method, in which food in a vacuum-sealed pouch is cooked in water at relatively low temperatures for an extended time. Consisting of a standalone induction burner, a wireless rechargeable Bluetooth temperature probe, and a smartphone app, the product launched on Indiegogo in February 2015 for $249. It met its funding goals in just a few hours and sold over 1,000 units on its first day—a huge success. Just as important is how the technology developed at FirstBuild transferred back to the core GE Appliances business. Based on Paragon’s consumer acceptance, the GE Appliances business quickly incorporated the same wireless temperature probe and smartphone app developed at FirstBuild into GE Monogram and GE Café branded cooktops, demonstrating the value of Open Innovation as means to drive new business opportunities and new revenue streams.