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Open Innovation Networks And Virtual Worlds Best Practices Research Study






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Open Innovation Networks And Virtual Worlds Best Practices Research Study Open Innovation Networks And Virtual Worlds Best Practices Research Study Presentation Transcript

  • Open Innovation Networks and Virtual Worlds
  • Contents Online Communities 3-27 Virtual Worlds 27-37 Contact 38
  • Online Communities
  • Project Scope Objective  Evaluate the best in class corporate Open Innovation Network (“OIN”) communities, specifically focusing on how companies are using these communities to “seed innovation”  Examine the latest technological advancements in OIN development Deliverables  Identify the best in class companies and approaches for seeding innovation through OIN communities  Provide recommendation from our interview and findings  Identify other issues which have arisen during our Key Innovation Leader interviews 4
  • Online Communities Best in class companies are using online communities for market research, seeding innovation, community building, and brand building. Companies using online communities include: J&J Toyota Google General Mills Apple Starbucks Sony Dell IBM McDonald’s Yahoo BMW Coca-Cola Chrysler eBay General Motors 5
  • Communities are being used to seed innovation Market research from communities has been helpful in developing, beta testing, and enhancing existing products. Internal communities help foster a culture of innovation as well as improve employee retention. Our research has shown that some companies are employing representatives to monitor non-affiliated company specific blogs. 6
  • Types of Online Communities: Internal vs. External Internal Communities External Communities Usually those communities are developed to facilitate the Any community developed for the purpose of bringing-in exchange of information between employees. members outside the company. Often, these communities are developed to host the company’s consumer products. 7
  • Types of External Online Communities: Open vs. Closed Open Closed These communities are open to anyone willing to Members are usually invited or recruited. participate. There are options for inviting members, but  Better relationships are built and members are able to usually, members join due to their own volition and connect with one another desire.  More intimate  Opportunity to develop relationships  Remuneration is not mandatory  Incentives offered are often minimal 8
  • Types of External Online Communities: Open vs. Closed (cont’d) Open community participants tend to be younger; closed community participants span a broader age demographic based on relevance and purpose of the community. Open communities are public domains; closed communities are private domains and offer a dedicated community. Small is “In” (300-500 member communities): Status and self-esteem; Affiliation; Sense of community; Assistance and opportunity to help others. 9
  • External Open Communities Benefits Drawbacks  Open to all users (potential higher participation)  Higher ratio of “white-noise” (likely more irrelevance  Likely more diversity among participants than closed)  “Shot-gun effect” – the more people involved, the  Much more unwieldy to manage more opportunity for a good idea to emerge  Potential to lose the sense of community, which may  Great opportunity to build brand loyalty, have attracted members in the first place; such as recognition, and public relations building relationships or being heard  Excellent opportunity for company and brand  Often less commonality than closed exposure  Compensation is less likely to be expected from participants 10
  • External Closed Communities Benefits Drawbacks  Great place to build true relationships between  Smaller population participants (“members”)  May find difficulty recruiting the right members  More control over demographics (since the members  If community is not selected carefully, there is are recruited) potential for a possibly less diverse population  More interaction and rapport among members  Members may expect some form of compensation for which build relationships their services (although still much cheaper than  Ideal for specific initiatives or areas of specific traditional market research) interest with the company  Great opportunity to build communities, brand loyalty, and public relations  Members have a better chance to feel a sense of commonality 11
  • Overcoming Barriers Communities allow for freer communication and better input than focus groups. Outside ideas can help foster internal discussions; e.g. – Improve design and functionality of next- generation products, critiques of early stage applications, product extensions. (i.e. Stents - Drug Coated Stents) Companies who provide compensation, often do so in response to an IP issue. Many participants feel rewarded just to be part of the system. Regarding legal hurdles and intellectual property, companies need to be specific about ownership of ideas submitted to communities. 12
  • Perceived Value & ROI In early stages, not enough quantifiable data is available to adequately assess ROI. Hard to gauge and quantify. One large consumer products company was required to justify return the first several years, but after consistent ROI’s of ~400%, management was satisfied with the investment. 13
  • Hallmark’s Online Community History & Participants Purpose Infrastructure  Originally, market research  Mostly used for market research  Constantly looking to improve participants (all members purposes (feedback on certain the technologies used recruited) ideas from within the company)  Initiatives can be as focused as  Currently, two close groups  Now there are innovative preferred gift wrap and broad (both consisting of women) who initiatives integrated into the as connecting and caring now share ideas among one research community  Most of the community work is another called Idea Exchange  There is a lot more trust among outsourced to Communispace  Participants are willing to sign members of the online off IP rights, just so they can community in comparison to have a voice in the company face to face focus groups  Compensated with a small  People feel free to share ideas package of goods and feedback as a result 14
  • Hallmark Insight Thomas Brailsford, Hallmark Manager of Advancing Capabilities  “There is a difference between a  “They all have visibility to each  “When you get into a community and a panel.” other and they set up their own community environment, 200 – surveys and their own bulletin 400 people is about all you can boards.” manage in a community. When you get bigger then that you really can’t wrap your brain around the connections and people start to break off into smaller groups.” 15
  • General Mill’s Online Community Participants Purpose Infrastructure  Strictly limited to individuals  Strictly created to provide a  Team is set up to perform with a patented technology portal for technology weekly analysis of submitted  Ranges from academics, submission ideas inventors, small research firms,  Since technologies are already  General Mills to give feedback large research firm patented, they are promoted to within 30 days the respective division of  All are members of an General Mills at a much higher innovation department within percentage than other sites General Mills, so there are other (about 40% promotion rate as responsibilities accompanying opposed to 5% or less in other their duties to the G-WIN companies) website  Produced Go-Gurt Fizzix technology from site submission 16
  • Kraft’s Online Community Participants Purpose Infrastructure  Open Community - submissions  Provide a new avenue for  Every idea submitted is filtered can come from anyone innovation within Kraft by a small group working in the  Kraft attempts to provided  One-way process (little “Innovate with Kraft” feedback within 6 weeks of interaction between department, and if the idea participants submitting ideas participants and Kraft) shows promise it is then  Looking to use a non- delegated to the respective confidential list of areas which department within Kraft specifically need to be addressed or improved 17
  • Intuit’s Online Community Participants Purpose Infrastructure  Employees within Intuit as well  Brand building, market  The site is run by employees of as users who have research, innovation, building Product Management and recommendations for and are communities Development proficient with Intuit’s software  Features have been added to  Participants may be rewarded TurboTax and QuickBooks as a with free products for their result involvement or even money if  Excellent subject pool for used in pilot studies specific research initiatives  Intuit takes it one step further (members are familiar with the and will utilize community process and software) members in research projects or pilot runs 18
  • Intuit Insight Intuit Executive responsible for Online User Feedback Program  “We feel that our program not  “There are a number of features,  “We make it easy for our only rewards our customers which have been added to customers to get involved with with product or gift certificates, TurboTax and QuickBooks, the creation of new ideas. One but we create an environment which were directly influenced of the things we will do is go out which allows our customers feel by our user feedback programs.” into the field and experience our that their ideas are of great client’s environment to see how value to us.” they interact with the product. It is an immersive experience, which lasts one hour or more.” 19
  • Clorox’s Online Community Participants Purpose Infrastructure  Open Community – but mostly  Brand building (wanted to put a  Established in 2005 women who have comments & face to the Clorox product  Promote Dr. Laundry via questions regarding laundry  Provided a platform for Clorox Clorox.com and through select to communicate and connect packaging with consumers  Two employees handle the blog  When people have questions site about products, the feedback is  Dr. Laundry (leader of R&D taken back to scientists team) runs the site, and through  Spread awareness of new participants submissions is able products to explore research & development  Currently very low-tech (just Q&A) but looking to expand 20
  • Apple’s Online Community Observations Purpose Infrastructure  Feedback options - Easy to use  Apple evaluates ideas from  Team of employees who peruse and broken down into numerous external resources and matches both the affiliated and non- categories – with the promise them up with internal teams affiliated Apple blog sites to look that “we read everything, but  Mostly centered around for ideas or feedback which are can’t always respond” features, bells and whistles; or in community property some cases service additions to  Great management support existing products.  Each Product Group is responsible for maintain ideas generate through OIN communities.  Apple’s policy is that it does not accept submissions unless the ideas are provided with no expectation for compensation 21
  • Apple Insight Apple Executive responsible for Internal Innovation Strategy  “We evaluate ideas from  “While most marketing and  “External innovation external resources innovative executives are quick communities are marketing and (communities) and match them to extol the benefits of external public relations devices … hyped up with our internal teams, open innovation networks, by academic types and authors which are segmented by product almost everyone agrees it’s a as the next coming … in reality, category.” me-too agenda. The practicality no one will be able to verify of using the information just is there is a return on investment not there.” in creating and monitoring them…it’s like other ‘next wave’ concepts whipped up by people who are the furthest removed from the reality of business and technology.” 22
  • Johnson & Johnson’s Online Community Participants Purpose Infrastructure  J&J representatives, customers,  Build relationships, share  Created a software program researchers, and academics information, prevent which is used in conjunction  Rewards are usually in the form contamination of IP, & ensure with IdeaPoint of research grants or medals submitters timely feedback  Each division has their own provided by J&J  Used for innovation purposes specific version of the software and a forum for researchers, and it is through this software academics, and J&J that ideas are exchanged representatives to share ideas  Drug coated stents and Splenda are examples of products created as a result of these communities 23
  • Dell’s Online Community Participants Purpose Infrastructure  Open Community including  Dell provides a number of  IdeaStorm, Blogs, Forums, internal support and mediation interactive ways for customers Videos, Web Feeds, Podcasts, from DELL to share and learn with others. Information Portal, Dell in They encourage open Second Life, Wiki, Customer conversations and believe Reviews, and Multinational everyone has something to Reach contribute  User generated ideas  Best ideas (most promoted) jump to top of list  Dell moderators address ideas  Actual production potential  Very user friendly 24
  • Academia’s View of Communities: Seeding Innovation Then Now  Initial ideas came from manufacturers  Companies are moving to open innovation – outside innovation for ideas  Companies were afraid to show early ideas or prototypes to early adopters or lead users because  Companies are recognizing best source for ideas & they were afraid it would set a bad expectation insights may be from their own customer base  Companies did not want to show users an imperfect  Companies should embrace customers who tinker design with technology themselves and there biggest pundits Stefan Thomke Harvard Business School William Barclay Harding Professor of Business Administration 25
  • Academia’s View of Communities: Open vs. Closed Open Closed  Pros – Once companies elect to really open up their  Pros – More closed networks (or "gated communities") innovation networks, they have to figure out what to do with overcome many problems communities have, such as IP issues. all the stuff that comes in over the transom. For example:  Pros – There are deeper ties, so it is easy to solicit and get  Pros – IBM celebrates its InnovationJam, involved ~ 60k relevant stuff, and less filtering is required as well. internal IBM participants in a 72 hour period. From that input, IBM distilled 10 new innovation themes for the  Cons – They are unlikely to range as widely as more open company. networks. So if a company is truly trying to develop a new business area that is not adjacent to the current business, a  Cons – What they DON'T say is how the 60k inputs turned gated community may not include enough diversity to attract into 10 themes. sufficiently different ideas for the business to consider. Henry Chesbrough Haas School of Business University of California Berkeley Adjunct Professor / Executive Director, Center for Open Innovation 26
  • Technology The general consensus of companies interviewed is that the one common thread among online community participants is their proficiency with technology; specifically the internet. Most companies believe that they are not taking full advantage of the technologies available, and do not seem to be bothered by this fact. Hallmark uses digital images of product ideas to receive critique from users before launching or even producing a finished good, saving the company time and money in the process. Each division of J&J has business unit software that is “division logo specific”, but uses the same software company wide. Some companies are using tracking software to determine which ideas are most popular via clicks, replies, etc. to expedite their efforts in recognizing the best ideas. “Companies today must create a coherent social strategy by focusing on relationships – not technologies...” Charlene Li (Forrester Research) 27
  • Virtual Worlds
  • Research being performed in Virtual Worlds Studies are being performed by accomplished research firms within Virtual Worlds (“VW’s”) such as Second Life and Active Worlds to assist residents and companies:  Build a strong presence  Gain insight about what they should offer in VW’s  How specific offerings will be received  Focus group studies are also being performed by companies to gain feedback about new offerings There have also been large scale studies performed by research firms soliciting responses to questions about real-world global shopping preferences. 29
  • Types of Virtual World Research  Primary & Secondary Market Research  Segmentation Analysis  Demographics & Psychographics  Behavioral Studies  Brand building Research  New Offering Testing 30
  • Research Benefits Companies can gain insight from early adopters and users. Specific market segments and audiences are key to research initiatives and lead to healthy brand building in VW’s. Research further expands the understanding of demographic and psychographic characteristics, including lifestyle behaviors and purchase preferences that drive buying decisions. 31
  • Opportunities Virtual Worlds are growing quickly. Venture capital, technology, and media firms have invested more than $1 billion dollars in 40+ virtual worlds companies from October 2006 to October 2007. Residents and users of VW’s are now able to buy goods and become exposed to over 100 existing and new brands. There are new opportunities emerging in VW’s for B2C and B2B businesses to work in a whole new arena. Companies can use online virtual worlds to network and develop projects, sell services between each other, and conduct commerce in an immersive 3D environment. 32
  • Second Life Second Life is a 3-D virtual world created by its Residents. Since 2003, it has grown explosively and today is inhabited by millions of Residents from around the globe.  “The World” - a vast digital continent, teeming with User Hours (in Millions) people, entertainment, experiences, and opportunity. Users are surrounded by the creations of your fellow residents.  Because Residents retain the rights to their digital creations, they can buy, sell, and trade with other residents.  “The Marketplace” currently supports millions of US dollars in monthly transactions and thrives with business opportunities and ideas. 33
  • Companies utilizing Second Life: Sun Microsystems American Apparel On Oct. 10, Sun Microsystems held a press conference American Apparel launched a virtual store in Second Life with John Gage, chief scientist at Sun. The company in July, 2006. The hip T-shirt maker is debuting styles created an area called Sun Pavilion, where a video blog of before they are launched in the physical world and is all of Sun's activities will be streamed. There were 60 offering cross-promotions. Visitors to the virtual store avatars at the press conference -- in Second Life terms, receive 15% off real-world purchases. that's a full house. 34
  • Companies utilizing Second Life: Toyota Reebok Toyota's marketing plan for its hip, boxy Scion includes Reebok is allowing avatars to customize the company's an art gallery in Los Angeles (Scion Space) and sponsored RBK range of shoes in Second Life, the same way they can screenings of indie films (the Scion Independent Film do in real life on the Reebok Web site. People will be able Series). Now the pop-culture-aware carmaker is also a to wear the same designs in RL and SL. presence in Second Life, where it offers a virtual version of the Scion xB. 35
  • Summary Some of the most innovative companies have created online communities, however there remains a question as to the usefulness of these communities. Internal community networks are a rich and powerful When beginning a community, we have found that resource of innovation and idea creation. The amount of companies that start small, then broaden their scope data generated from virtual worlds and external have had the most success. Establishing the social communities can be voluminous but, managing this data component, then introducing the innovation aspect once can be difficult. External communities may serve a better the community is in place has proven to be a successful function as public relations, marketing, and/or market model. Most users participate in external communities research forum for users who seek to be involved and regardless of tangible reward possibilities. They simply “heard”, while giving the perception that the enjoy the social interaction and intrinsic qualities these organization values feedback. communities are able to provide. 36
  • Final Thoughts Communities have a wealth of potential if used correctly. There are different community types for different company purposes and it will be the strategy involved with determining the correct community for the client’s purpose which creates the most differentiating benefit for creating these communities. Harrison Hayes works with clients to educate and determine which customized community approach works best for our clients. To learn more contact Harrison Hayes. 37
  • www.harrisonhayes.com Contact: Bill Smith, Managing Director Phone: 704.906.3402 Email: wsmith@harrisonhayes.com 38