Platt Perspective on Business and Technology

Innovators, innovation teams and the innovation process 14 – deciding where and how to source what types of innovations 2

Posted in HR and personnel, strategy and planning by Timothy Platt on July 17, 2013

This is my fourteenth installment in a series on innovators and the process of innovation (see HR and Personnel, postings 154 and following for Parts 1-13.)

I began a more detailed and open-ended discussion of where a business might source innovation and insight in Part 13 of this series, where I focused on addressing business needs that would best be met through in-house development, or as a combination of explicit in-house and outside contributions. And my goal here is to at least begin to more specifically explore a third approach available for sourcing innovation where:

• Innovations and insight might at times best come essentially entirely from the outside and from the marketplace.

One possible reason behind making that determination might be a strategic decision to acquire some proprietarily developed and owned third party invention or facilitating resource that would offer real strategic value to bring in, but that would not be cost-effective or even possible to develop in-house.

• I have in effect been discussing that path to outside acquisition through several postings already, and in that regard cite, by way of example, my series: Acquisitions and Divestitures (see Business Strategy and Operations – 2, postings 358 and loosely following for its Parts 1-9.)
• And I also cite at least four earlier installments to this series for this too, with its Part 7, Part 8, Part 9 and Part 10.
• And if you add in crowdsourcing as an outside source acquisition channel too, then this series’ Part 11 and Part 12 could be cited here too.

But at the end of Part 13 I suggested a basic reason that can arise for acquiring innovation and insight from the outside, that can be quite different from the reasoning that I covered when writing those postings and for making outside acquisition work for their specific example scenarios. More specifically, I raised the possibility in Part 13, but without elaboration there, that in-house innovation and insight development might create problems for the business and for its remaining competitive. And I add that this problem can arise even when the in-house innovative effort seems at first glance to be cost-effective. And in that regard, repeating a point from Part 13:

• There are circumstances where it is necessary to limit in-house bias and the limiting effect of in-house preconceptions in order to develop and capture real long-term value.

And I would cite two very different scenarios here, where this might arise and where outside sourcing and even third party advice on the acquisitions selection process might make the difference for a business if it is to grow or even if it is to just hold onto its market share.

The first example that I would cite here is a strictly business to consumer scenario in which a low per-unit cost, high volume business seeks to compete in a fad-driven market. Consumer preferences right now, this precise minute, determine what is purchased and what is selling at any given time changes as rapidly as a next New can be produced and marketed. The more fad-driven end of the garment and apparel market can at times fit this pattern and the same goes for low-end fashion accessories that might, for example come into vogue for teens seemingly over-night, and then become yesterday’s new and out of date just as quickly. Crowd sourcing, and more particularly sourcing insight from the right members of the crowd become essential here, and in that I cite my social networking taxonomy model and its approaches for finding crowd members who are connected and listened to.

• So as a business owner, you need to learn, and from the outside, the true demographics of your marketplace and who to more actively source insight from, and
• You have to learn how best to connect with them so they will share their fad-driving insights with you.
• And then you have to listen and know when to act on the specific feedback that they offer you, and monitor the results of this,
• So that feedback from past and current crowdsourced-driven product design and production can effectively inform your decisions process as to who to listen to for this in a next product development cycle.

The second example that I would cite is that of a business that is in distress, and that has lost touch with its markets and with its customer base. So they have found themselves successfully selling to a progressively smaller and smaller fraction of their potential market, and of their perhaps once-active former marketplace. And they have lost touch with the more active side to that larger marketplace community and its early and even its middle-adaptors. They mostly just hold onto late adaptors who are content, more or less, with older and “tried and true.” This, with time, is a sure road to oblivion. Outside help and outside insight from the marketplace, and quite probably from supply chain partners and potential supply chain partners will probably prove essential for turning this situation around, and both for knowing what this business’ real potential marketplace is and what it wants, and for being able to cost-effectively and competitively retool to offer that. And with that, I offer this second scenario as a likely change management challenge and with all of the need for identifying and challenging sources of inertia and resistance to change from inside the business that this can and does involve.

• Crowdsourcing and acknowledging the value and insight of the crowd can only offer value if this source of insight can be effectively connected into the business, and with all of the change necessary to make its insight work.

That point applies to both of these example scenarios, even if differently as a matter of implementation strategy and operations.

I am going to more specifically focus on the Human Resources and personnel issues that enter into innovation sourcing in my next series installment, where my goal will be to at least begin typing this overall discussion together. Meanwhile, you can find this and related postings at HR and Personnel and also at Business Strategy and Operations and at its continuation pages: Business Strategy and Operations – 2 and Business Strategy and Operations – 3.

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