Managing Open Innovation Programs: Can Blockchain Be Of Help?

Under open innovation, the focal organization assumes the form of an orchestrator while working with various entities to solicit ideas, talent, and capital, rallying the outcome in a collaborative manner

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In the decades of 1960s, 70s and well up till 90s, a disproportionate wealth of talent, knowledge, ideas and capital were confined to a select few institutions. Organizations such as AT&T Bell Labs, Xerox PARC, IBM Research, CERN, DARPA, GE Research and the likes would attract the best and the brightest from academia, fund them on future gazing projects, absorb failure, generate and protect intellectual property, and occasionally channelize those to commercial ends, all by themselves. Such an insular approach to managing innovation has given way to a more open posture, where ideas, talent, capital, knowledge and information has gotten democratized, and the stalwarts of the bygone era are losing their clasp on innovation. This his chiefly happened because of proliferation of commerce, the pervasive Internet, rise of capitalism, affordable computation and communication, and growth of new business models.

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The alternate approach to innovation, often dubbed as open innovation, is where the focal organization assumes the form of an orchestrator while working with various entities to solicit ideas, talent, and capital, rallying the outcome in a collaborative manner. Firms such as Cisco, Procter & Gamble, NASA, Dell, PepsiCo, Tesla, Intel, Intuit, Royal Dutch Shell, Nike and Novartis, among others, have demonstrated the approach where a lower spending on internal R&D can be complemented with a networked approach towards innovation.

However, the adoption of an ecosystem driven, platform-based open model of innovation is plagued with serious difficulties. There are ongoing issues around privacy, value appropriation, intellectual property management, designing and safeguarding contracts, and such issues are sufficient for enterprises recoiling to their time-tested, insular approaches to innovation. As more talent breaks out into the open and yet new models of engagement evolve, there must be superior ways for managing contracts, data, privacy, ideas, rewards and emotions. Can an emerging technology be of assistance? Blockchain, with its distributed ledger technology, can lend credibility and support to the pursuit of open innovation.

There are three avenues where Blockchain can make innovation ecosystems more robust, dynamic and, resultingly, antifragile. The first aspect is of managing the seeker-solver relationship, where a seeker is typically a large corporate wanting to solve a complex problem and the solver could well be a chemical engineering wizard somewhere in Russia. The second application is of managing intellectual property, which is often evolving in nature, developed in a participatory approach, much like Wikipedia, or Linux, except that everyone wants to profit from it. Thirdly, blockchain can help close the innovation loop by enabling value appropriation, who gets what from the final outcome. Each of these aspects are discussed briefly.

Managing seeker-solver relationships: One of the emerging models of solving problems, especially of the scientific nature, is through contests or challenges. Crowdsourcing models such as InnoCentive, NineSigma, YourEncore, IdeaConnection, and Yet2.com, connect the seekers with solvers, involving transfer of intellectual property and payment of cash. However, there remains challenges around arriving at the prize money, ascertaining the source of an idea, tracing evolution of concepts, and appropriation of intellectual property, issues which the Blockchain technology addresses regularly. Blockchain has found vast applications in the areas of supply chain communication and proof-of-provenance applications.

Managing intellectual property: One of the most serious challenges with an attempt of innovation through network is to know who owns what. Since ideas are increasingly becoming democratized, and so is information, there are occasions where multiple people who come up with the same or similar idea, and others would build on those ideas. According to WIPO, recording of IP rights in a distributed ledger system instead of traditional database could usher an era of Smart IP Rights. The entire IP lifecycle, ranging from evidence of rights, record keeping, rights transfer and conflict resolution, can be managed adopting blockchain. 

Value appropriation to participants: Finally, and most importantly, the question of value appropriation: who should get what for their contribution. An idea has little value till is it commercialized, which involves a series of steps, such as invention, prototyping, testing, validation, manufacturing at scale, IP management et al., and then sales and marketing. One of the widely adopted applications of the Blockchain technology is Smart Contracts, as self-automated computer programs that carry out the terms of a contract. Together with traceability of origins and the various value add activities, it would be relatively easy to draft, update and honour contracts adopting a non-human system, such as Blockchain.

What does it mean for your business?

Blockchain has come a long way from being a tool for transaction to that of business enablement, and innovation being a business imperative more than ever can be the next use case for the adoption of the technology. Here are the ways in which you can usher the power of blockchain to radically lift your (open) innovation agenda.

Digitizing the innovation process: While the adoption of digital technologies has seen vast avenues, ranging from employee engagement to customer relationship management and process improvement, that in the innovation management process has been scant. Companies still resort to paper based idea submissions, sticky notes based ideation sessions, gut feel based idea validation and traditional means of implementation. With the boundaries of innovation spanning multiple organizations, there is an urgent need for adoption of digital tools for the innovation management process and its outcome. Blockchain, with its application in traceability, appropriation, and contract management, amongst others, can render an idea supply chain more robust.

Engaging with the long-tail of talent: Digital technology with its access and speed, also offers radical transparency, leading to an unprecedented discovery of talent, ideas and capital at the long tail. In the erstwhile system of innovation, there would be partnerships with known entities around formally drafted contracts, but with democratization of the factors of production, the marginal cost of reaching out an edge case customer or talent is not exorbitant. Amazon has already done this for the long tail of products, customers, and sellers, and it is a matter of time before the model finds its way into the realm of taking ideas to market. The economies of scale will give way to economies of scope, where we would witness ideas from a few for a few, customised, and monetised. Blockchain, can enable value appropriation in a validated manner, whereby a talent on the margin would not feel short-changed while participating in an innovation journey, knowing very well that her contribution would be duly rewarded.     

The emerging technology of Blockchain could have a widely felt impact across industries, but more importantly on the process that cuts across industries: innovation; and with the pendulum swinging from an insular approach to a more participative one the technology could enable a large scale involvement without the fear of anybody losing out.