A look at three dynamics that determine the course and value of innovation efforts via communities. Describes areas including cognitive diversity, game mechanics and new bases for collaboration. Presented at the E2.0 Forum in Milan, Italy on 10 June 2010.

1. 3 Cs of Innovation 2.0 Crowdsourcing, Competition, Collaboration Hutch Carpenter VP of Product @bhc3

2. 2 What is this “innovation” you speak of? Innovation: A change in a product offering, service, business model or operations which meaningfully improves the experience of a large number of stakeholders

3. 3 Multiple Forms of Innovation create new market Low risk, many competitors High risk, high reward radical technology change minimal technology change Customer experience; cost savings High risk, defensive strategy manage existing market

4. 4 Innovation = ROI Leading innovators generate 430 basis points more in shareholder return than do average companies My entire year has been a quest to find quantifiable ROI… Finance agreed - it ain't easy. Where we did quickly find quantifiable business value was during an ideation proof of concept. Ideas that are discovered and turned into action have produced dollarized return of business value. Laurie Buczek Social Computing Program Manager at Intel All I Want For Christmas is my E2.0

5. 5 Innovation 1.0: Two Centers of Innovation

6. 6 Innovation 2.0: Employees Rule!

7. Crowdsourcing 7

8. 8 Crowdsourcing? What is that? Crowdsourcing: Soliciting the ideas, knowledge, experiences and judgment of a large, diverse group of people to solve a problem

9. 9 Diversity of Inputs Drives Idea Quality Diversity Means Quality Prof. Ron Burt, Structural Holes & Good Ideas Crowds of people, each calling on their own incomplete and private information, are able to arrive at optimal solutions as well as, or better than,a small group of smart people. Diversity in crowds expands a group’s set of possible solutions. Idea Assessment James Surowiecki, The Wisdom of Crowds high diversity of connections low diversity of connections

10. 10 Crowdsourcing Brings Edge Perspectives In customers customer service customers IT marketing R&D account mgt manufacturing sales product finance customers customers field operations

11. 11 Three Models of Crowdsourcing Crowdsourced Submissions Crowdsourced Feedback Selection by Experts Crowd Sentiment, Expert Decision Crowdsourced Submissions Crowdsourced Selection Crowd Decision Selection by Experts Crowdsourced Submissions Expert Decision

12. 12 Crowdsourcing Isn’t Immune from the 1:9:90 Participation Ratio Estimated distribution of employees’ propensity to share ideas Number of Employees typical idea suggestion curve Propensity to formulate & submit ideas low high

13. 13 Goal-Setting Changes the Participation Ratio Goals Stimulate Employee Idea Sharing Number of Employees goal-driven ideation curve ideas increase due to goal-setting typical idea suggestion curve Propensity to formulate & submit ideas low high

14. 14 Why Does Goal-Setting Work? 1. Signals increased management attention to ideas on a topic 2. Sets an expectation of participation 3. Establishes a target the community can rally around 4. It creates an event orientation

15. 15 Goals Must Relate to Tangible Outcomes Product Delivery Value Chain Product Design Procure-ment Manu-facturing Distribu-tion Marketing Customer Experience What are the top emerging use cases of our product? How do we increase throughput by 10%? How do we increase fleet fuel efficiency by 10%? How do we increase customer sat. scores 20%? “Used in development of green technology” “Reduce truck idling time during morning loading” “Pre-build components for later install” “Route service calls by component, not vertical”

16. Competition 16

17. 17 Two Senses of Competition System Competition Individual Competition Competition: Process of determining how a finite resource will be allocated among a set of alternatives Competition: Actions taken to advance in a given endeavor, satisfying one’s internal need to excel

18. 18 Innovation Thrives on Soft Competition

19. 19 Marketplace Competition for Best Ideas Competition reduces innovation friction

20. 20 Paragone Creates an Innovation Meritocracy During the Renaissance, paragone implied the placing of two artists’ individual works side by side in order to judge them, weigh them, distinguish them, and critique them. Sofia’s idea Using rivalry to spur innovation Bernard T. Ferrari and Jessica Goethals McKinsey Quarterly Wisdom of the crowd distinguishes among submitted ideas Maximo’s idea

21. 21 Paragone Creates Performance Curiosity Greater freedom to innovate and decide which ideas are best leads naturally to a desire to better understand one’s own performance. Feedback benchmarking recognition

22. 22 Game Mechanics Are Performance Metrics …Translates to Activity… Authoring activity currency Interacting collaborator badge Positive Feedback reputation score Professor Andrew McAfeeShould Knowledge Workers Have Enterprise 2.0 Ratings?

23. 23 Game Mechanics Are Reinforcement Behavior achieved is what you actually reward. Pavlovian but true. To achieve full value of 2.0 need tech + culture. I would suggest that @ replies in twitter trigger a dopamine response. And thus the addiction. Who's with me? /via @cammybean /// I am :) Laurie Buczek (tweet) Social Computing Program Manager Intel Claire Flanagan (tweet) Senior Manager, Enterprise Social Collaboration CSC Social incentives reward and reinforce the goals in innovation

24. Collaboration 24

25. 25 When I Say “Collaboration”, I Mean… Collaboration: Building toward a defined outcome through the interactions and input of multiple people

26. 26 Typical Collaboration Is Poorly Suited for Innovation Standard collaboration group formation is… …great for project execution… …but limiting for innovation. Group Composition and Decision Making: How Member Familiarity and Information Distribution Affect Process and Performance, 1996 (pdf)

27. 27 Collaboration Based on Emergence

28. 28 Innovation Requires Emergence and Structure Emergent Collaboration Structured Collaboration crowdsourcing competition

29. 29 Reward Innovation Collaboration as Much as Idea Origination What people focus on Need to make collaboration as important as origination The work that makes eureka possible The Work of Innovation Scott Berkun Author, The Myths of Innovation (pdf)

31. Part of project team

33. Milestone achievements