Networkers 2008: Open innovation ups revenue

Internet replaces traditional “closed” approach to innovation with an open, collaborative model.

The idea of being more open with business and product innovation may be contrary to the traditional, laboratory-style closed innovation practiced by many organizations, but breaking down barriers has led to a dramatic rise in revenue for global companies like Proctor & Gamble.

In a keynote address on innovation at this year's Cisco Networkers event in Brisbane, Cisco distinguished system engineer Michael Boland said the rise of the Internet over the past decade has allowed traditionally closed organisations like Proctor & Gamble to reap more ideas from its customers.

Back in 1999, Proctor & Gamble’s CEO looked at what it needed to do for the multi-billion dollar organization to grow its net new revenue at four to five billion dollars per year.

"At that time the Internet occurred, P&G said that about 50 per cent of innovation will come from outside of the organization, which will be linked to its in-house scientists," Boland said.

The company's main Web site is now used to connect and develop ideas for products ranging from pharmaceuticals all the way through to automobile cleaning products. As a result P&G’s net capital has grown from $US35 billion to $70 billion.

Boland cited the invention of paper, the industrial revolution -- including the business application of science -- and Japan's automobile manufacturing success as key paradigm shifts in the way innovation occurs. However, Boland claimed the Internet paradigm facilitated open innovation, which runs counter to traditional “closed” innovation.

Internally, Boland said Cisco has embarked on its own open innovation model, called I-Prize, which sought outside ideas. So far, some 1100 have teams responded, he said.

"More than 20 per cent of the teams were multinational, and we've refined them down to 32. The winner will get US$250,000 and Cisco will fund US$10 million for three years to develop a product around it."

What's next for innovation? Boland sees innovation as a culture that will increasingly be fostered within complex ecosystems.

"Unlike others it is a form of innovation where we work across a multitude of variables [and] Apple and Google lead the way here," he said.

"It's the things you don't see where the innovation is happening. Lots of orchestrated innovation is happening behind the scenes."

Cisco's new CTO Padmasree Warrior coined the word "Brainform", which is derived from Brainstorm, to describe innovation in a collaborative environment.

Warrior publishes everything she does on Twitter and uses her network to gather ideas, with one example being how the modelling of data centres could be the next virtual world business idea.

"Brainform is a culture, not a one-time event and will be used for solving constraints like sustainability, people and financial."

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