Open Innovation Wins through Evolution not Revolution
Interview with Kurt Schneider, VP, Product & Process Innovation Center at Quality Ingredients Corporation (QIC) By Paul Arnold
Kurt Schneider is an open innovation thought leader who advises companies of all sizes on how to best engage with external sources of knowledge to find creative solutions. Currently, he’s the VP, Product & Process Innovation Center at Quality Ingredients Corporation (QIC), a provider of ingredients to the food industry. In this interview he talks about his own open innovation journey of discovery and how he puts what he has learned into practice.
When did you first come across open innovation?
I ran across Dr. Chesbrough’s book on open innovation back in 2003 when it had just come out, and I sat down one day at Starbucks and started reading it. I couldn’t put it down until I had it all digested in about five hours and that started me down a path to try and figure out and learn as much about it as I could. I actually got in touch with Dr. Chesbrough a couple of times and we chatted a little so I could try and understand where his head was. So you read the book, digested it and spoke with Dr. Chesbrough, what was next for you?
At that point in time I was doing consulting work with some well-funded start-ups that had technology that was unique in their industry. What they were struggling with was what to do with it.
From the learning I had gleaned from the books and by talking to Dr. Chesbrough and a couple of other people, I figured that the application of a technology might not be in an area you think.
When we started working on those things I applied some very simple logic to it, to kind of flip their thinking and to get them out of their own brains in terms of what they were trying to solve.
And what we came up with was a very simple model of taking their product and turning it into a service or taking their service, if that was what they were selling, and turning it into a product. And in doing so we got those companies to start thinking the other way and we had some good successes with that.
We had a company that was selling equipment that would increase the shelf life of fresh fish from a couple of days on store shelves to 7-10 days on store shelves without any compromise on flavour. Having those extra 5-6 days meant so much in the supply chain that it was worth a lot of money.
They were having problems getting traction with the industry because they were trying to sell million dollar pieces of equipment to fish producers on the other side of the globe. What we did is that we came in and worked with them to figure out exactly what their technology was and how it could be applied to other industries.
We went into wastewater treatment, we went into silicon chips, and a number of different industries, and the company is doing pretty well now.
Do you meet with any kind of resistance or do you find that companies have made the intellectual shift to embrace open innovation?
It depends on the size of the organisation. If you start with a start-up and work all the way up to a multibillion dollar multinational – the start-ups are very willing to try new things, the multibillion multinationals are sceptical so you have to start in small pockets and try and get small wins for those organisations.
The smaller companies are nimble, and the larger companies have their well-established corporate cultures and are like slow moving dinosaurs?
The interesting part is that in all of those businesses there are always pockets of people who feel that this is the best way do it and they just need the opportunity. And that’s where my service and product model comes in. There’s actually a company out there called Weyerhaeuser and they’ve taken that model and have started it and I’m tracking it closely.
They sell paper products and have pretty much tapped the market; they are number one or number two in every one of their sectors. So they thought instead of selling products to these people let’s try and sell a service. Let’s sell a Weyerhaeuser service to provide solutions for smaller businesses that allow us to use our product or part of our product.
And the interesting thing there is not that someone came up with that service model, but they created an offshoot company as a result of it. They got to a point where – if you’ll pardon the phrase – they blew up open innovation.
You know, open innovation has got to a certain point and where in early 2000s Dr. Chesbrough was saying where do we need to go? Now it’s 2012 and those people who were at the forefront of open innovation are looking at it and saying now where do we need to go? In 2015, open innovation might be old hat and what’s next?
Should open be the default for companies?
I have yet to see a company that has made a wholesale cultural change into OI. What I have seen are major divisions making that leap. I don’t think it would a smart idea for an entire organisation to make that mind-set change. I think certain pieces of it that have the ability to make quick decisions and have that support for being a little out of the box makes sense.
I think if you take a large company doing all open innovation you might have so many rogue pieces that you will be out of business faster than you can see a return.
Some companies try open innovation and give up because they don’t see the return they expected, do you have to convince companies to stay the course if they don’t see immediate results?
It’s an interesting question because probably the bellwether for OI, the company that funded it well and believed in it, Procter and Gamble is now going the opposite way. They lost their visible leader of OI Chris Thoen and I think they put a lot of money into it and didn’t see a return on it. I think that’s the fallacy of OI, you have to see it through.
A cheerleader is a good thing but there has to be a pocket in a company that has to see it through, because there is a real value in it and I think if you talk to any OI expert small wins are the way to do this.
The nice thing is you can do small wins in a big and small company and you can do stealth small wins. For companies that don’t believe in open innovation you can actually go in and do some things that are below the radar, get a couple of wins and go from there. I think the fallacy is going in and trying to change the culture right away.
Some companies expect too much too soon?
If you look at what you’re trying to get out of OI, the end result is that you want to sell more products, but it’s really the speed of the answer that this program is all about. In a classical solutions provider company it takes a while to get to the answer, and sometimes they don’t even get to the answer.
But if I can speed up that time to the answer by enlisting the entire world, maybe I can get the answer to it a week faster, a month faster, two months faster, and the extra month or year etc., allows me to get my product to the market faster – that’s where you get the extra dollars.
So you don’t necessarily build a brand new product that is universally innovative in the industry, you just get a little bit faster to the marketplace with what you have. Open innovation is not a revolution, and I think that’s where some of the larger companies got caught up in it. They went all in with their websites their social media and all of a sudden they had millions of millions of dollars invested in this and the return was small. They probably could’ve got that small return without that huge investment and that would’ve kept the momentum going.
Is your work with QIC along these lines?
I am working with the R&D team right now and the reason I’m working with them is that the company was at a kind of crossroads; it is a smaller company trying to get bigger faster and in trying to get bigger faster they realised that the stopping point right now is the R&D team. And the reason that it’s a stopping point is that the team has got really good at saying ‘no’ and that’s a cancer in a lot of smaller companies that have had some success by doing specific projects for specific customers.
So what we’re trying to do here is asking ourselves how to get to the next level. How do we use internal resources that are outside of R&D to help us start looking at problems differently? And once we get that culture going then we can start looking at the suppliers and academia to help us out.
And once we get that going then we can start looking outside our industry, and once we get that going we can start looking globally. It’s the evolution revolution scale. Most companies come in and some outside consultants too, and with all due respect to some of them who have great ideas and great processes they’re trying to create a revolution where a company needs to go through an evolution.
There is a lot of talk and not a little hype about the intersection of social media and open innovation. What do you make of it?
It’s being able to figure it out and tap into it. I have talked to a few companies and they are just starting out with social media and open innovation. Their fear, and it’s a real fear, is that if I put more and more out there for people to understand about my organization there’s a fear that some of it goes to a competitor or a fear that I could get some bad press as a result.
Now I know that a company is going in the right direction when it says, you know what, that’s OK because I’m getting the conversation going - good, bad or otherwise I need that conversation going.
So I see it as playing a bigger and bigger role, just like open innovation played a bigger role back in the early 2000s. And need to have those early adopters out there.
And be prepared to make mistakes?
Isn’t that part of every new human imitative? You have to have people, the owners of the idea go to the stakeholder of the idea, and say ‘are you willing to let me mess this up a couple of times before we get it right?’ – open innovation really comes into its own if the stakeholders are willing to take that risk.
Reader Comments
Great point Michael,
Whether P&G backed away, are reassessing or some other tactic it is fair to say the results they have garnered since program inception have not been aligned with what they were hoping to achieve. I see that as a trap in large OI programs. Yes, you need early wins, but you also need to foster a culture of OI to get the results you desire. Those results might not be 100% tangible right away, so the early wins may be intangible but are still critical to a successful program launch.
Cheers
Posted by Kurt Schneider on November 20, 2012
Thank you Kurt for sharing your insights... you've given some great inspirational and practical advise for innovating both the culture and innovative processes within a company.
Posted by Sue Adams on November 14, 2012
Kurt makes some great points. I don't know that P&G would agree that they are backing away from OI. If I had to guess, I would imagine that they are more likely reassessing the public facing side of OI and are distorting effort against more qualified suppliers and partners (as are others).
Best regards,
Posted by Michael Fruhling on November 7, 2012