Frank PIller: Service Providers Supporting Open Innovation
The Market for Open Innovation
Frank T. Piller,
based on joint work with Kathleen Diener
RWTH Technology & Innovation Management Group, RWTH Aachen
MIT Smart Customization Group, MIT, Cambridge, MA, USA
RWTH-TIM Group: Facts and Figures
Established in 1990 as one of the first dedicated chairs in technology & innovation
management in Europe
Part of RWTH's School of Business & Economics, with strong links to the RWTH Engineering
Core student body of industrial engineering students ("Wirtschaftsingenieurwesen")
Ranked #1 in our school's faculty ranking w/r to research output (publications), and
#2 w/r to external funding. Awarded "RWTH Price for Teaching Excellence 2009/2010".
Interdisciplinary team of about 18 full time positions for researchers plus about 25 support
positions and student researchers (strong growth since 2007)
Successful acquisition of about 500,000 Euro research funding annually for the group out
of peer-reviewed funding schemes ("Drittmittel"); in addition industry-funded projects
Strong industry partnerships, yet focus on scholarly research, not consulting.
Dedicated to research, but excellent in participant-centered learning on graduate student
and executive education level.
Network of affiliated companies & consultancies for direct project cooperation.
November 2009: Moving to new building in RWTH Aachen Research Park next to Research
Centers of, e.g., Microsoft, Sony Ericson and Ford (part of "RWTH Campus Project")
RWTH-TIM Group: Selections of Recent Research Project Clusters
Open Innovation: Increasing the productivity of technical problem
solving by external search
Customer Co-Creation: Integration of customers and users in the
innovation process in form of a firm-initiated strategy. Focus on toolkits
for customer innovation, user innovation contests, and innovation
Technology transfer : Absorptive capacity, managing ambidexterity,
and preventing "NIH" (not invented here)
Customer Co-Design in Mass Customization Environments:
Strategies to profit from heterogeneities in the customer domain
Modeling the contingencies of the innovation process: Database of
300 methods for the innovation process and marching tool to corporate
challenges of managing innovation
Managing the ramp-up: Connecting the new product development
process with scaling up the manufacturing system
Two problems that
make new product
Every innovation process requires two kinds of information,
influencing the efficiency and effectiveness of the process.
I n fe
Doing things Doing the right
right Realization things
service / development
ct i n
Netflix is the world's largest online movie
More than eight million subscribers.
Members can choose from >100,000 titles
Total subscribers have grown at a
compound annual rate of 70 percent.
Total estimated rental revenue of over $1.5
billion at the end of 2007 -- DVD rental
totals approximately $8 billion annually --
still a lot of growth potential
At the same time, Blockbuster's revenues
continue to decrease at a rate of 5 to 9
percent / quarter.
Objective: get root mean
square error (RMSE)
<= 0.8563 (Netflix's own
algorithm Cinematch has
RMSE of 0.9525, this
equals to one point of
error of recommendation
on their 5-point scale of
Crowdsourcing (Interactive Value Creation)
"Crowdsourcing represents the act of a company or
institution taking a function once performed by
employees and outsourcing it to an undefined
(and generally large) network of people in the form
of an open call. This can take the form of peer-
production (when the job is performed
collaboratively), but is also often undertaken
by sole individuals.“ (Howe 2006)
Other terms, same idea: Commons-based Peer-Production of Innovation (Benkler 2002;
Lakhani 2006); Open Innovation (Chesbrough 2003, Piller 2002); Interactive Value Creation;
(Reichwald & Piller 2006; Piller 2004), Wikinomics (Tapscott 2007)
Broadcast Search at InnoCentive.com
Firm R&D Labs
Firm R&D Labs
Firm R&D Labs
Firm R&D Labs
R&D Labs of large firms
Knowledge Broker 160,000 independent scientists
1. R&D Labs inside of major multinationals are not able to solve certain
- Their own internal and external experts cannot obtain solutions
2. Hope to get solution by going to distributed scientists that they do not
know who may have an answer
Karim Lakhani (HBS) found that Innocentive has
a VERY efficient mechanism for technical problem solving
• Context for posting problems
– Firms spent 6 months to 2 years trying to solve problems
– Offer on average $30,000 for solution
– Solutions need to be submitted within ~6 months of initial posting
• How many problems that had not been solved internally were
– 49 problems (29.5%) were solved
– 75 solution awards given
• Participation Patterns:
– Average 240 individuals examine detailed problem statement
– Average 10 solution submissions per problem
– Average time spent ~74 hours by winning solvers
and ~36 hours by non-winning solvers
Would Innocentive work in your industry?
What is your Netflix Challenge?
What are the hurdles when you move from
chemistry or software to other domains?
Can you sketch the basic parameters for such
an approach in your industry? What information
would you have to open to the crowd?
Recent research project:* "Open Senior Innovation": A new
approach to reduce the NPD risk and increase NPD efficiency
Picture: Age Simulator by duke HealthCare Communication
Objective: To develop a method which enables senior citizens
to directly transfer their needs into an artifact that highly
corresponds with their needs. This means to shift some
specifications of the product into the domain of the user.
The idea is to isolate the source of uncertainty, i.e. sticky
information about user needs, and to place it entirely outside
the boundary of the manufacturer. This is a fundamental
break with the current understanding of the innovation
process (Piller & von Hippel, 2007).
The idea is not to try to understand what older consumers may
think and want, but to enable them to co-design exactly what
Open Senior Innovation Platform: Provide platform and
supporting infrastructure so that senior consumers can
participate in defining fitting products for their needs, but also
in solving technological problems along the innovation
* More info: senior.open-innovation.com 44
Objective of project is a feasibility study to build our
understanding of senior innovation platforms.
Main objectives of project:
(1) Create proof of feasibility for internet
platforms for open senior (service) innovation
(2) Understand technical and economic
(3) Build an exploratory prototype of platform
and pilot it.
(4) Generate business model how to operate
Stay tuned ... project has start in Jan 2010 ...
First idea contest online since March 10, 2010:
Design the best cell phone for senior citizens
Such a platform promises a broad set of benefits and
advantages – their realization however still has not been
Overcoming the sticky information problem of accessing need information.
Providing direct access of older users to manufacturers and service
providers (firm partners).
Initiation to innovation project can be user community, but also firm.
Ideas can be generated by individuals or groups of users
Utilizing resources of experienced contributors with heterogeneous
set of experiences
Transfer of idea to (offline) senior expert networks.
Utilization of large untapped labor source (matching requirements on
Special requirements of designing platform with regard to usability
and incentive structure
Special focus on service development
Case example BtoB idea contest: Fujitsu Siemens Computers
Web2.0 technology delivers the technological background
linking of ideas
working on ideas Technology evaluates and
motivation on the
Source: HYVE AG Net. www.hyve.de. Contact: email@example.com 50
Overview: Elements of an idea competition
Employees Customers Combined
Describe, categorize, evaluate and
submit the ideas
Measure and proof Canalize and
Idea objectives preselect ideas
realization of ideas
Idea portfolio Idea evaluation
Compare and sort Evaluators / experts
ideas and take evaluate and publish the
Search, print and comment ideas
Source: HYVE AG Net. www.hyve.de. Contact: firstname.lastname@example.org 51