Wikinomics: How Mass Collaboration Changes Everything
By Don Tapscott and Anthony D. Williams
Portfolio, 2006, $25.95
Companies can tap emerging global marketplaces to discover and develop new products and services faster and much more efficiently than they have in the past. We call these marketplaces Ideagoras, much like the bustling agoras that sprung up in the heart of ancient Athens. In those days, agoras were the center of politics and commerce for the burgeoning Athenian citizenry. Modern-day ideagoras make ideas, inventions, and scientific expertise around the planet accessible to innovation-hungry companies.
Science and technology now evolve at such a great speed that even the largest companies can no longer research all the disciplines that contribute to their products. Nor can they can control an end-to-end production process or seek to retain the most talented people inside their boundaries. Meanwhile, acquisitions, alliances, joint ventures, and selective outsourcing are simply too rigid, and not scalable enough, to drive growth and innovation at a level that will make companies truly competitive. Smart companies will treat the world as their R&D department and use ideagoras to seek out ideas, innovations, and uniquely qualified minds on a global basis.
Let Others Profit
The online technology transfer marketplace yet2.com was founded in 1999 as a place where companies could post underutilized assets they were seeking to license externally. For Procter & Gamble the prospect of listing underutilized assets with yet2.com presented a potential windfall. The consumer products giant owns more than 27,000 U.S. patents. In the late 1990s P&G discovered it was spending $1.5 billion on R&D, but using less than 10 percent of the resulting patents in its own products.
The problem for P&G (and other companies) was that finding applications and buyers for these innovative technologies could be highly inefficient. In most cases, firms seeking to buy or sell new inventions and technologies would call up close associates. While patent searches aided the process of identifying desirable technologies, they typically produced more dead ends than leads.
Online exchanges promise to improve liquidity by expanding the universe of opportunities. They could also reduce search costs by easing the process of matching buyers and sellers. By visiting yet2.com, companies can browse a list of available technologies worth $10 billion. Yet2.com’s network of 500 clients has access to roughly 40 percent of the world’s R&D capacity.
P&G recently used yet2.com to identify a buyer for a transdermal drug-delivery technology. The system transfers large drug molecules like insulin through the skin, so that a person with diabetes could wear a patch much like those used to help people quit smoking. P&G built a prototype. Now a small company, Corium, that specializes in drug delivery systems, is set to launch the product, and the two companies are exploring further collaboration.
Ask for Help
As companies climb the open innovation learning curve, they discover that the real value of an open market for innovation lies in getting access to ideas that can fill performance gaps or fuel their product pipelines.
With the pace of innovation in consumer products having doubled in five years, an army of researchers is no longer sufficient to keep P&G at the forefront. For every P&G researcher there are 200 scientists or engineers elsewhere in the world who are just as good.
When P&G launched its “connect and develop” initiative to help tap this vast reservoir of talent, the idea wasn’t to replace its researchers, but to better leverage them. “Most mature companies,” says Larry Huston, P&G’s vice president for innovation and knowledge, “have to create organic growth of 5 to 7 percent year in, year out.” Relying on internal capabilities may have worked when P&G was a $25 billion company, he argues. But today it’s worth $70 billion. Organic growth of 6 percent is the equivalent of building a $4 billion business every year!
Ideagoras can also enable companies like P&G to hone their value-adding capabilities and avoid reinventing the wheel. For example, when P&G set out to launch a new line of Pringles potato chips with trivia questions and animal pictures printed on each chip, it discovered that producing images on thousands of chips each minute was highly complex.
P&G formulated a paper describing the technology it needed and tapped its global network to see if someone could solve the problem. A solution popped up in a small bakery in Bologna, where a university professor was printing edible images on cakes and cookies. He’d cooked up an ink-jet method, and it looked like this would solve P&G’s problem. So P&G acquired the technology and adapted it. Huston says P&G was able to launch Pringles Prints in less than a year, and for much less than what it would have otherwise cost.
Stay Focused on Top Company Goals
Huston notes that no amount of idea hunting will pay off if, internally, the organization isn’t behind the program. “Once an external idea gets into the development pipeline it still needs R&D, manufacturing and other functions pulling for it,” he says. Moreover, there needs to be senior level support, ideally from the CEO.
Furthermore, all journeys to the technology hinterland should begin with some basic stock-taking. What will customers need in the future? What can we deliver internally? Where can we work closely with partners to create even more value?
To fine tune its searches for new ideas, P&G begins with a list of its top ten customer needs, which includes broadly defined goals that are subsequently boiled down to solvable scientific problems. Next it creates a list of new products or concepts that can help it take advantage of existing brand equity. Finally, it utilizes “technology game boards,” a tool that allows P&G planners to assess which technologies might be central to several overlapping product categories or brands, and thus make good candidates for strengthening.
Larry Huston compares the whole exercise to a “multilevel game of chess.” Yet, even with this highly refined approach to filtering opportunities, only one in one hundred external ideas identified by P&G ends up in the market.
Reprinted from WIKINOMICS: How Mass Collaboration Changes Everything, by Don Tapscott and Anthony D. Williams, by arrangement with Portfolio, a member of Penguin Group (USA) Inc. Copyright (c) Don Tapscott and Anthony D. Williams, 2006. Tapscott is chief executive and Williams is research director of New Paradigm, a think tank.