Emerging Business Units As A Means to Develop Innovation with Customer Involvement

12 07 2007

Broad principles to guide the project defined by the Economist open innovation project team.

Open Innovation at the Economist

A six person team from the Economist magazine group were tasked to create an innovative web-based product, service or business model by July 2007. In addition to the research which the team is conducting in-house, they solicited ideas from the outside world in an effort to attract submissions from a diverse group of people.

Their approach appears similar to the principles of creating an “emerging business unit” model* (aka a new, independent group composed of people from various business units to develop not only the project but also the very organization and culture of the unit itself) for developing and managing the innovation process.

The London School of Business found that ambidextrous organization designs (like the creation of emerging business units to develop “discontinuous innovations”) are significantly more effective in executing transformative innovation than functional designs, cross functional teams, or unsupported autonomous designs.

Calling themselves “Project Red Stripe” they used a blog to conduct a rather open innovation approach to “project ideation” and the development of a business plan for their business idea. It is an interesting read covering the start of this effort about one year ago to the present day which began with three webcasts of around 120 Economist readers to help them define their business opportunity.

In June, they unveiled their idea:

We are developing a web service that harnesses the collective intelligence of The Economist Group’s community (of readers), enabling them to contribute their skills and knowledge to international and local development organisations. These business minds will help find solutions to the world’s most important development problems.

It will be a global platform that helps to offset the brain drain, by making expertise flow back into the developing world. We’ve codenamed the service “Lughenjo”, an Tuvetan word meaning “gift.”

Their initial business model for Lughenjo will be as a social business enterprise and generate revenue through ads.

Some of the more compelling posts during their journey from crude idea to business plan include:

  • We divided the task (to complete the goal of the project) into four basic items: setting up a framework for how we develop ideas; brainstorming and choosing the best idea(s); developing the idea(s); and then writing the business plan and presenting the finished product.
  • Today was a day of building blocks; attending to a number of key components which would underline the overall project moving forward; introductions from team members, scoping some broad principals to guide the project, examining the breakdown of the available time frame..
  • Trying to nail down the meaning of “innovative” is an intellectual challenge: it is one of those weasel words that keep slipping away. But we also have to cope with duller legal stuff: who owns those ideas that are submitted to Project Red Stripe? If we don’t deal with this issue from the start, it could come back to haunt us later – particularly if we dream up a money maker. The fine print on the idea-gathering sites mentioned earlier is clear, though hidden in lengthy legalese. In short: we can do whatever we want with your ideas.
  • (They examined different models for soliciting customer ideas) One of the most overused quotes about the future is that it is already here, just unevenly distributed. But, one might add, at some point the future tends to cluster. Last week, two noted firms launched idea-gathering sites: Yahoo! and Dell. These services, called Yahoo! Suggestion Board and Dell Ideastorm respectively, join a raft of others that went live in recent months. Salesforce.com has a site where customers can make suggestions. IdeaSplicing is an open-source effort to gather and discuss ideas. And then there are firms to provide “idea management” software or services such as Crispyideas, Brightidea and imaginatik.

Ideas from the Crowd
Here are two example of the ideas that came from their “open innovation” methods for contacting customers during their ideation phase that attracted over 200+ ideas.
1. Allow subscribers to participate and even create prediction markets.

The Economist has a perfect userbase for running policy analysis markets. Every article should have a sidebar with the relevant market(s) displayed, suggests Mike Linksvayer. And Scott Harper writes: “Implement online decision markets for Economist subscribers. Open at least one every month with a 12-24 month maturity. Each will relate to a featured article and let subscribers compete with peers in a running points total.”

Perhaps the most intriguing ideas are those suggesting The Economist should create its own private currency, which subscribers could use to make bets on prediction or other markets. Simon Stuart, for instance, suggests that every Economist subscriber receive one thousand Economist dollars per year to trade. This triggered another thought within the Red Stripe Team: Why not let subscribers earn some money (by contributing to a wiki, for instance) and spend it (by donating it to a charity of their choice)? Now there’s an idea: turning the Economist into a real economy.

2. Accessing and creating huge quantities of information is easy, but sorting the wheat from the chaff is the problem

In our idea collection, many contributors suggested expanding The Economist’s service of “trusted advisor and overseer” and applying it to information available online.There was strong support among idea contributors for The Economist to become the “gateway” or “sorter” of a wider body of information beyond that purely generated by itself. Colin Henderson wrote: “I trust the Economist, I trust the content, I trust their analysis and their predictions. But I get all the rest of the information from the internet sorted through Google…..I need a trusted source…that assimilates all the news and information, assesses it, within my personal context and presents it to me.”

Colin’s proposal suggests The Economist becomes the user’s primary respected source which also trawls the internet on the user’s behalf delivering content it feels is most appropriate based on The Economist’s assessment of value, reliability and news-worthiness.

This type of benefit can, to some extent, be achieved with community feedback, as suggested by Earl Killian. With the ability to rate articles and add comments before sharing one’s reading with one’s friends, you build a communal system of receiving information which is most likely to meet your fields of interest. Del.icio.us and Bluedot currently allow this type of interaction with their “tagging” and “posting to friends” functionality. In one of our brainstroming sessions we also came up with the thought of somehow collecting data of our subscribers’ surfing behaviour to compile lists, such as “The Economist’s reader’s favorite websites” and “what other readers of this article have read”. Sites like StumbleUpon and Last.fm – go some way to carrying out this type of action.

Dann Anthony Maurno suggested a point’n’click globe: Economist data and analysis overlaid on Google Earth allowing the reader to scan the globe and zero in on a location of interest to access the relevant country and regional data. Reuters have a Beta version of a map that does something similar (see below). Alternatively, one could move the mouse over a timeline which tells you about major events by time and a keyword.

Some Lessons

  1. To create truly innovative products or services that are discontinuous (ideas that are not simply incremental improvements of existing products and services) you need to get outside your world. New perspectives directly from customers and processing the ideas outside of stove-piped business units that tend to dampen creativity.
  2. Using new media and blogs or wikis to manage the process of cultivating customer participation promotes a more open means of customer engagement in defining product or service ideas.
  3. Forming new groups from different business units and possibly from outside your organization into a completely separate group can improve the chances of creative process and exploration.

In an upcoming post we will explore “emerging business units” as a strategy for fostering innovation.




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