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Internally Crowdfunding Innovation – 12 Steps to Create Your Internal ‘Innovation-Starter’ Marketplace

December 3, 2014

Is your innovation initiative challenge driven or challenged?

Steve Jobs said innovating was not about spending big, it was about leading people to think big. Much like the Good Judgment Project on world politics and events, the best answers and insights are often crowdsourced. Why do we typically have only a select few employees or locations contributing to new ideas? It wasn’t Henry Ford who invented the automotive assembly line – it was a mechanic, extrapolating what he saw at a slaughterhouse.

How do we democratize innovation in our organizations? Crowdsourcing and crowdfunding are fueling the fast growing Maker Movement, creating new products by empowering people atypical to the ‘usual’ new product development process. Why are we not embracing and leveraging this broadly accepted cultural trend inside our walls?

A few leading-edge companies are harnessing the Maker Movement via a concept we’ve seen work well, the internal ideas marketplace.  Modeled conceptually on Kickstarter and TopCoder,  group wisdom dictates winners and losers through gaming theory based ‘investments’. Why is this different from Open Innovation? For one thing, you own the ideas, without issues relating to Arrow’s paradox and previous art. This isn’t theoretical – Xerox became a major Apple shareholder as a result of a well-meaning graphical user interface demo to Steve Jobs.

Based on our observations and experience, here is a list of steps for implementing and running what we call the ‘Innovation-Starter’ market. While we deal with some degree of mechanics in this list, the real underlying principal is creating excitement around blue-sky thinking:

Setup

  1. Every employee has access to the ‘Innovation-Starter’ site on your intranet or SharePoint. Invite a select number of external SME’s and big thinkers. New DNA is always good for an organization.
  2. Annually, every employee gets 10,000 ‘Innovation Bucks’ to invest in the Innovation-Starter marketplace, funding ideas other than their submissions. Since the desired output is delivered innovation, and not merely participation, we use three classes:
    1. Inventors
    2. Active Investors who have made suggestions and concept refinements
    3. Passive Investors who have allocated their capital to an idea without refining the concept
  3. Two classes of innovation are requested – those answering specific customer needs or market dynamics, and pure brainstorming ‘what’ if we could’ ideas. Create innovation momentum, passion and engagement among employees by communicating challenges and the ‘leader-board’. Encourage them to visit the site and see the energy happen.

Adding Ideas looking for Investments

  1. Issue a specific challenge – is it best new idea or solving for a specific vertical market/Use Case/Domain Model?
  2. An idea must include a description, an understanding of who would be a customer, fit/purpose, and why it is a real innovation and not a logical refinement of an existing product or service.
  3. Ideas are posted anonymously to prevent politics driving a poor outcome, and are listed as ‘Pre-Investment’, i.e., not open to Innovation Bucks allocations.
  4. The full-time Innovation Team Leader reviews all recent idea postings, filtering for the clearly articulated and germane to business goals and strategy. Try to avoid the infamous Kickstarter Potato Salad campaign unless that is your business. Once approved, similar to being listed on Kickstarter (or the NYSE), the idea is ‘Open for Investment’.
    1. A word of caution – don’t over filter or be too linear. Innovation is a process and, like a sales funnel, the top of the innovation funnel has to be constantly fed to produce the best results at the bottom.

Allocating ‘Innovation Bucks’ to an idea

  1. Like any other source of investing, well articulated, and promising ideas attract more capital than the fuzzy. Investors endorse concepts by allocating Innovation Bucks, and ff they decide to become an Active Investor in an idea, they have to improve the concept with written refinements.
  2. To ensure continuous feedback, previous investors can reduce or claw-back their previous investment if an idea seems headed in a direction they do not like. Thus, like an actual  market, feedback is dynamic and continuous.
  3. Investment ready ideas have a shelf life of 30 days, after which the Innovation Team Leader ranks them by size of investment and the number of comments/refinements, indicating community buy-in and enthusiasm. Said ideas go before a bi-monthly  Innovation Review Committee  for a go-ahead on further exploration, and from this point on, stage-gates are appropriate.

Payback

  1. Inventor’s earn ‘dividends’ as their idea passes through the  evaluation and implementation gates:
    1. 10% for submitting an idea accepted for listing on Innovation-Starter for potential investment by the employee community
    2. 15% when selected for review by the Innovation Review Committee
    3. 25% when it goes to business case development
    4. 50% when it goes to Development for realization
  2. Active Investors receive 50% of this schedule, and Passive Investors earn 30%
  3. At the end of every year, Inventors and Investors who have achieved a minimum 50% overall ROI on their portfolio are invited to a by-invitation dinner with Senior Leadership. Originators of ideas which truly moved the needle should have a cash/options reward as well.

Don’t sweat the tech; sweat the nuances

Innovation platform vendors are numerous these days, often very similar,  so don’t sweat the platform, either SaaS or behind your firewall.  The key success criteria, in our experience, are using the largest population possible, anonymity so it doesn’t become a friends/like me fest, moderated ideas open to investment so it does not become the Dept of Trivial Thoughts, and swing for the fences, go large or go home, right from the start. Few things are sadder than an innovation initiative nursing really small ideas, none of which will move the revenue needle.

What if I don’t get sufficient standout ideas?

OK, sometimes we set up great processes only to have too few worthwhile ideas brought forward.  Why? There’s no clear answer but a few introspective questions need be asked:

  1. When should we use an open outside community such as gathered by TopCoder (and others) vs. focusing on internal idea sourcing? Should we use both?
  2. Is our culture rewarding or penalizing of ideas which seem great but do not materialize per expectations?
  3. Have we created a reward system for innovations which ‘ring the revenue bell’?  People act in their own best interest, and often that means taking a great idea (especially in the low cost cloud/app age) and doing it on their own.

Innovation is not a process requiring control and pacing to fit your organizational cadence and governance culture. A flexible thought harvesting process upfront will ensure the subsequent stage-gates are fed the very best raw materials. How do you turn ideas into an innovative reality? Here is our viewpoint: https://growroe.wordpress.com/2013/02/25/the-smell-of-the-skunk-is-a-good-thing-when-you-need-a-disruptive-product-to-power-growth-part-2/

Richard Eichen is the Founder and Managing Principal of Return on Efficiency, LLC,  http://www.growroe.com , focusing on transformation, innovation, and realization where technology is the primary means of delivery and revenue. He is one of their senior Turnaround, Transformation, Program Rescue, and New Product Development leaders. As a Change Agent, Trusted Advisor, Program Leader and Interim Executive, Rich has over 25 years hands-on experience reshaping companies, Operations, IT/Systems Integration, and strategic initiatives.  He can be reached at richard.eichen@growroe.com, and followed on Twitter, @RDEgrowroe

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