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Scottish Enterprise

A GUIDE TO DEVELOPING
NEW PRODUCTS AND SERVICES

New approaches to R&D

Supporting a globally competitive Scotland


INTRODUCTION A VISION OF THE FUTURE
R&D is essential for the long term growth of technology enterprises but it can be It’s difficult to say exactly how research and development will change over the next
expensive and is often associated with risk. This risk can be reduced by directing ten years however some predictions are outlined below based on trends that are
R&D spend towards the best opportunities and putting in place an R&D strategy.
strategy already emerging.

In recent years, there has been a lot of new thinking Enablers R&D departments will typically be smaller, yet more competition and this will stimulate faster but more
on how to get a better return on investment from R&D people will be working in R&D globally. This is because reliable development processes. Formal development
and some interesting approaches are currently being • Open innovation supporting IP exchange companies will only maintain core R&D staff in-house processes, such as the stage-gate approach, will be
pioneered which are likely to become mainstream • Online communities for funding, ideas and and supplement this through various open innovation adopted by a broader range of companies to enhance
within10 years. This report is intended to provide an skills approaches including licensing IP from external product integrity. However, other companies in fast-
overview of the most exciting global trends in the companies and universities, paying for particular moving industries will prefer to use more agile, lean
management and processes of R&D so that companies in • Better connected consumers, supply chain problems to be solved by independent experts through product development approaches. Online platforms will
Scotland can consider which may be appropriate to their partners, regulators etc. crowdsourcing platforms and outsourcing non-core tasks, channel customer feedback to enable continuous product
own R&D strategies. • More computing power enabling new such as coding or testing, to more cost-effective sub- improvement.
development methodologies contractors.
To set the scene, it is useful to consider some of the New levels of computing power will enable more
drivers, enablers and challenges that are shaping the Fewer products will fail in the market as customer intelligent design automation. For example, evolutionary
• Digital prototyping and 3D printing
future of R&D: needs will be better understood. This is because more and generative design techniques can deliver optimal
• Innovative business models methodical market research will be undertaken at the solutions to many tough problems. The time saved in the
start of the development process to determine user optimisation process will free designers and engineers to
Drivers • More agile product development processes needs, priorities and cost sensitivities. A much greater focus on the higher-end activities such as true systems-
• Open source movement breadth and depth of market research will be available thinking, requirements management and defining the
• Faster return on investment
through online platforms and data mining. The use of algorithms and boundary conditions for these automated
• Fewer market failures digital prototyping, immersive simulation environments approaches.
Challenges and 3D printing will allow end users to interact with
• Extracting more value from intellectual Globally, many customers are becoming more
product concepts at an early stage of development, testing
property • Increasing global competition sophisticated and demanding so some products will be
their usability and identifying issues early on. Product
designed to be customisable at the time of purchase.
• Differentiation that supports premium pricing • Faster pace of innovation developments that are struggling to deliver value for the
However, other products will be completely re-engineered
end user will be aborted early.
to provide low-cost alternatives for high-growth, low-
• Sustainability through the full product lifecycle • More litigious IP environment
Attitudes to intellectual property will become more income markets. In both cases, sustainability will be built
• Affordable customisation • Learning to collaborate effectively polarised and this will be reflected in the approach into the development process from the start, so that the
of leading organisations. Some will invest substantial lifetime carbon footprint of the product is minimised while
• Higher product integrity • Growing volume of inputs and ideas to digest amounts building strong patent portfolios and litigating its recycling potential is maximised. This, in turn, will lead
against competitors but few will have the finances to to innovation in business models, including leasing.
make this a realistic strategy. A growing number of
In short, by the 2020s, the likelihood is that R&D will
organisations, not just software companies, will become
become more challenging yet more exciting than ever.
enthusiastic participants in open source initiatives
which will encourage the pooling of IP in digital formats
including hardware designs as well as software code. The
majority will seek to protect their core IP while using open
source components for the less differentiated parts of
their solutions.
Pressure will increase on both time-to-market and
product integrity due to increasingly sophisticated global
Disclaimer

Throughout this guide, a number of companies, services and products are mentioned. It should be noted that these are not endorsements:
we have not tested the tools or services offered and provide these names merely as examples of what’s available.

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THE R&D PROCESS
Brand Values

Emotional Strategic
Engagement Context Define R&D project
Customer Before starting a new R&D project the project itself
Perceptions
Long Term must be defined. The diagram illustrates the activities
Needs
that should be considered before starting a new R&D
Market project. Part one of the report explores each element in
Research
more detail.

Key
Trends
Customer
Roadmapping
Business
Models
Funding R&D Tool Box
Needs
The second part of the diagram shows a range of
Background approaches that managers may wish to use once the
Technology project is defined. The list is not exhaustive, but focuses
Idea on more recent techniques, or those which have not
Management
yet been widely adopted that could benefit a company
Innovation developing an R&D strategy. Each is explored in more
Define R&D detail in part two.
Finance
Unstructured Project
R&D

Ideas

Crowdsourcing Please click on the boxes in the


R&D
Toolbox diagram opposite to visit the
relevant parts of the report.
Information about support offered to companies carrying out
R&D in Scotland is available on page 35 of this document.
R&D Innovative Open
Techniques Processes Innovation

Generative Joint Research


3D Printing Phase Gate Co-creation
Design Centres

Scalable Human Lean Product User


Innovation Open Source
Computing Modelling Development

Digital Value De-risking


Crowdsourcing Patent Markets
Prototyping Engineering Innovation

Evolutionary Recording
Intrapreneurship University IP Outsourcing
Design Usage

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PART 1 DEFINING AN R&D PROJECT

1. STRATEGIC CONTEXT Such companies will include the likes of


materials companies, engineering design Putting it into Practice – Mobile Phone Industry
R&D must be fully integrated into a company’s overall services companies and start-ups that develop
strategy and market approach otherwise resources may differentiated IP to attract acquisition. In the mobile phone industry, SonyEricsson used to develop all their
be wasted either developing technology the enterprise is An example would be ARM. phone platforms in-house for their exclusive use. However, as margins
unable to exploit or creating undifferentiated technology were squeezed and complexity rose, the cost of developing mobile
that could have been sourced elsewhere. From the start, phone platforms made this approach unsustainable. Therefore, they
the company’s senior management must consider how TECHNOLOGY MARKET split into a market-focused company (SonyEricsson) which develops
to drive and exploit its innovation1. mobile phone models for consumers and a technology-focused
company (ST-Ericsson) who market the mobile phone platform to
other phone manufacturers, to gain economies of scale.
Market Pull vs. Technology Push
INNOVATION
New technologies take a long time to develop but markets
are evolving at a quickening pace. This growing disconnect
means that vertically integrated companies will be rare 2. BUSINESS MODELS and, ultimately, decommissioning as part of the package.
by the 2020s. Instead, innovative companies will tend Such business models work in situations where
to position themselves as either market focused or A business model describes how a product or service operational expenditure (OpEx) is more acceptable to
technology focused. delivers value for its customers and profit for its owners. the customer than capital expenditure (CapEx), or where
Of course, there will be some blurring of the edges in Disruptive technologies often require new business equipment is seen as complex, high maintenance or high
• Market focused companies will seek these categories. For example: models to break through while innovative business risk. The decision to move to such a business model
competitive advantage in understanding their models often affect the direction of technology innovation. will affect R&D as it will adjust priorities: with a product
customers better and will rapidly source • Some market focused companies will still
Therefore, the business model should be considered early (CapEx) model, a company has to be very competitive on
innovative technology from a suitable partner retain a small R&D team at the technology
in the R&D planning process as it may influence not just initial selling price but can make more profit on servicing
once they have identified a clear opportunity. platform level in addition to their larger
the viability of the product but also the specification of later. With a service (OpEx) model, the initial price of the
They will be adept at finding technologies product development teams. This will focus
the technology. Developing the business model involves equipment is no longer the main driver, what matters
developed elsewhere and tailoring them to on a few “crown-jewel” technologies which
reviewing resources, cost structures, potential revenue is the lifetime cost, so any innovation which reduces
their particular application. Such companies provide genuine differentiation.
streams, channels to market, customer segments and and simplifies maintenance will increase long-term
may still expend a lot of money on R&D but • Some technology focused companies will relationships. It is often advisable to involve value-chain profitability.
their development work will always have a develop platform technologies which they will partners early in the process, as they may be a key
clear market application. The majority of In the software world, the move from selling shrink-
use in-house to address a few markets where element of the business model (this is explored further
successful companies will be market focused. wrapped software to offering software as a service
they have a strong focus. However, they will in the open innovation section).There are tools available
An example would be Apple. (pay per use) is another manifestation of this trend.
also promote and licence their technology to to help companies explore all aspects of their business
• Technology focused organisations will other companies who may even compete with model to ensure that their R&D is delivering the optimal
seek competitive advantage in developing them in end markets. W.L Gore and Associates value proposition to the target market2.
Consumables Focused
outstanding technological expertise within is an example of this type of company. The There are many business models in common use, and
their niche and will seek suitable market- challenge for such companies is to avoid This is also known as the “bait and hook” model.
more are being developed every year. A few are described
focused partners from diverse sectors to the temptation to keep the best technology The classic example is printers, which are generally
below.
licence and exploit their technologies. Their for themselves. Only by marketing their IP cheap to buy but expensive to refill with ink. Another
engineering teams will be adept at developing externally can they hope to maintain a large example is video games: the console is often sold at an
highly differentiated platform technologies and R&D base long-term. attractive price to build an installed base but the games
Product to Service
supporting technology transfer into partners. are expensive and often take just a few days to play.
Many technology companies have moved from a product- In both cases, the initial hardware price is effectively
centric to a service-centric business model. There are subsidized by later consumables sales. This model
several variants. may fit many industrial segments where low CapEx
is prioritized over OpEx.
For example, instead of selling a product, a company
could lease that product and provide servicing, support
1. Roussel, Saad, Erickson (1991) Third-Generation R&D Management 2. Osterwalder, Pigneur (2012) Business Model Generation website
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Putting it into Practice – Amazon Putting it into Practice – Philips
Sometimes, a new technology cannot be exploited until new business Philips has always been an innovative company with a huge R&D
models are developed. For example, the development of “e-ink” spend. However, its connection with end users was weakening. Many
displays did not make a strong impact on the market until a new products bristled with features but were complex to use. There was
business model for downloading from a huge library of e-books onto a no consistent approach to the way products were designed that an
dedicated e-reader was pioneered by companies like Amazon. end user could recognise. In response, Philips adopted a new brand
philosophy called “Sense and Simplicity”6. The goal was not to simplify
the technology itself but rather to hide all the complexity from the end
user, so that the product would be intuitive to use. This required not just
a marketing relaunch but a re-education of all the R&D departments
to adopt the same philosophy in designing their products, underpinned
by a common approach to market research and product concept
Licencing 3. EMOTIONAL ENGAGEMENT development. Crucially, this applied not just to consumer products, but
also to industrial products as there was clear evidence of spill-over in
For some companies, it is best to focus on developing WITH THE CUSTOMER the minds of purchasers (“I’m not buying your CAT scanner because my
excellent technology and licencing it to others for
video broke!”).
exploitation, yielding an ongoing royalty stream. This is In consumer products and services, emotional appeal is
what ARM has successfully done3. They make no silicon very important, enabling brands such as Apple or BMW
chips themselves but they design processor cores and to charge a high premium in the market. However, in Emotional engagement with industrial clients can be built on a wide variety of approaches which will influence
licence the designs to companies who have made billions commercial and industrial markets, R&D staff rarely R&D approach:
of devices using them. consider the potential emotional appeal of the products
that they are developing, believing that more features and Development Priority Emotional Impact
higher performance will be sufficient. This is a mistake
Reliability or durability Sleep easy, our products won’t let you down
Freemium as a brand with strong appeal can add huge value to a
Ease of use A pleasure to use, avoiding confusion or frustration
company. The prime example is IBM who sell innovative
In the software world, it can be economical to offer a
technology into the B2B space and whose brand is Quality and attention to detail Satisfaction of knowing you’ve bought the best
basic version of a product or service for free. The hope is
estimated to be worth over $100 billion4. Innovation You feel ahead of the pack using our product
that, once the users become convinced of the value of the
product or service, a proportion of them will be willing To achieve this emotive appeal, the products and services Serviceability No headaches if something needs fixed
to upgrade to a paid product or service with additional a company develops must reflect its brand ethos in a Sustainability You can feel virtuous in selecting our product
features. In some cases, after a certain period, the free positive and consistent way. This philosophy has to be
option is discontinued, forcing users to start paying or designed-in at every stage of the product development
look for an alternative – not easy if you have embedded to be credible. For this to happen, the company has to Of course, whichever approach a company decides to an impartial third party survey) before adopting a
the software into your business processes. have a clear brand ethos which everyone involved in take has to be grounded in reality, so it’s necessary branding approach which will influence your R&D
product development and marketing must understand to check how your customers actually feel about decisions.
and practise. Cisco sell its products predominately to your products and services (preferably through
B2B customers but they have invested in developing a
brand ethos that starts with their hardware and software
designers and finishes with a consistent image of
innovation, inspiration and thought leadership at all their
customer touch points5.

3. ARM Holdings plc (2012) Company Overview


4. Marketing Week (2011) B2B brands build extra marketing muscle
5. Rebrand (2012 ) 2012 Rebrand 100 -Cisco 6. The Times (2005) Philips: Brand repositioning and communications
8 9
4. MARKET RESEARCH This approach is widely adopted and successful but care Key Customer Driven The market research phase should deliver strong
must be taken in its application. Where questions focus on customer insights against which a clear value proposition
In industrial markets, key customers may provide
A number of research studies have estimated that customer experience with current products and solutions, can be developed and verified. In some cases, it may even
suppliers with roadmaps of features, performance and
approximately half of new products fail7. This is often it is likely to lead to incremental improvements. Where be possible to produce a detailed product specification at
price targets they require in future while the supplier will
because of an insufficient understanding of market needs. more radical innovation is sought, the questions have to this stage if the customer is precise in their requirements.
have to figure out how to meet these. The key customer
Therefore, it is wise to invest in detailed market research probe the customer’s whole operational environment and These outputs will guide the R&D work, though it is
will evaluate prototypes and provide guidance. Where
before committing substantial resources to an R&D deeper aspirations, which is a more challenging task to wise to check regularly with the customer during the
the risk and the potential benefit are high, customers
project. In fact, EU empirical research suggests that the structure and interpret. development phase that the proposed product is meeting
may even be willing to part-fund this development
level of marketing expenditure in a company may be more their needs as expected.
through non-refundable engineering payments or
important to the success of innovative products than the
through guaranteed orders if the specs are met: however,
level of R&D expenditure8. Outcome Driven Innovation10
sometimes exclusivity is demanded in return. This
It is essential to have effective processes for undertaking This approach pioneered by Strategyn focuses on approach will only work if the customer has a high degree
market research. The digital age has made market understanding the ‘jobs to be done’ through an exhaustive of confidence in the supplier’s ability to deliver as a strong 5. ROADMAPPING
research far more sophisticated through techniques from interview process with end users. This approach avoids mutual dependence develops so they will succeed or fail Technology roadmapping is a strategic process to define
the mining of big data sets to the use of social media for talking about potential solutions and focuses on identifying together. the development of technology platforms over an extended
feedback. Some current methodologies are described the most important under-served needs where there is
time horizon to meet a set of evolving industry needs. In
below. an opportunity for innovation which will be valued by the
high-capital industries with lengthy investment cycles,
customer. This is more likely to lead to a unique insight Online Crowdsourcing
such as aerospace and semiconductors, technology
but it is a difficult technique to master, and may be less
Where the customer base is broad, crowdsourcing roadmapping is a well established process12. However,
Voice of the Customer9 appropriate in cases where product evolution rather than
could make sense. Well deployed digital techniques many other industries could benefit from using the
revolution is desired.
This collates a comprehensive list of customer allow greater quantitative and qualitative input than methodology, particularly where cross-industry
requirements and desires, structured hierarchically and traditional focus groups, customer visits or surveys collaboration is envisaged. It begins by identifying the key
then rates them by importance and current satisfaction can achieve. There are a number of large international drivers for the technology and forecasts requirements
level. Both qualitative research (e.g. interviews, focus companies offering specialised digital platforms while at various points in the future. It then identifies which
groups, online forums) and quantitative research (e.g. many smaller local agencies are skilled in using open technologies need to be developed to meet those
larger surveys, text analysis of social media) are used. social media platforms like LinkedIn in tandem with more requirements. Often, there will be a point where further
traditional techniques. Alternatively, if the company has evolution of established technologies will no longer
market research expertise in-house, judicious use of meet the anticipated requirements and there is a need
LinkedIn communities, Knowledge Transfer Networks to jump to a new technology with more potential, which
etc, combined with online survey tools can achieve useful is expensive and risky. However, the technology roadmap
Putting it into Practice – Intel results for minimum expenditure. will help identify the best point to make the transition.
Intel worked with Advanced Marketing Science Inc. to adopt the Similarly, product roadmapping is now routinely applied by
Voice of the Customer methodology in 2004. Using a combination of many market-focused companies though the time horizon
interviews, focus groups and large scale surveys with IT Directors, they is typically shorter and the focus is on feature-sets and
identified a particular need for corporate desktops with security from performance requirements at various points in the future.
external corruption and tampering. This led to the development of the In both cases, roadmapping informs resource planning
v-Pro™ which became the fastest product in Intel’s history to exceed and prioritisation and is a useful tool for discussions with
$1 billion in revenue.11 key customers.

7. Edget (2011) Latest Research: New Product Success, Failure and Kill Rates
8. Garcia (2011) The relevance of marketing in the success of innovations
9. Cooper and Dreher (2010) Voice-Of-Customer Methods: What Is The Best Source Of New-Product Ideas?
10. Ulwick (2005) What Customers Want
11. Applied Marketing Science Inc (2012) Sample Cases (Voice of the Customer) 12. Sandia Labs (1997) Fundamentals of Technology Roadmapping

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Intellectual Property 6. KEY TRENDS The drive to sustainable products and services is likely to An alternative approach is to automatically propose a
shake up business models as much as technology. For unique product or service based on “customer experience
In recent years, the proportion of a company’s market
example, many organisations are already outsourcing intelligence” (which might include personal details,
valuation attributed to “intangible assets” has grown to an
Sustainability much of their IT infrastructure to third-party data centres. purchasing history, usage pattern, internet favourites,
average of 80%. For technology businesses, most of that
This not only lowers the company’s own carbon footprint Facebook etc)17. Gaps in information can be addressed by
80% is their intellectual property (IP)13. There is strong pressure, both from a cost saving and but lowers the total societal carbon footprint as large interpolating the preferences of customers with similar
In certain markets, where innovation is fast-paced regulatory angle, to reduce the carbon footprint and data centres are optimised for low-energy usage whereas profiles. If this approach is well calibrated, the end user
and costly, including consumer products and mobile general resource usage through a product’s lifetime. office servers may not be. could be offered the ideal product with a minimum of
communications, IP has become a battleground and Initially, this can be achieved by designing with materials direct input.
which have a low carbon footprint, low water usage in Leasing models are expected to become popular again for
this trend is set to continue. IP is expensive to protect,
production and minimal chemical pollution. The product other equipment such as domestic washing machines15.
especially internationally, and it can be very costly
should also be designed to consume as little energy as This clearly changes the design priorities as total lifetime
and time consuming to defend patents and prosecute
possible through its lifetime (for software, this equates cost becomes more important: washing machines that
offenders, especially if they are large companies with
to requiring minimal processing resources). Finally, the are built to last and can be easily serviced are likely to be
strong legal teams and extensive patent portfolios which
product should be easily serviced and maintained and, more profitable to lease.
may allow them to countersue. As such, large corporations
are putting more resources into strengthening their own when it reaches end of life, be simple to dismantle and
IP portfolios and litigation is more common to cover these recycle. These design objectives are not always compatible
with each other, so an exercise has to be undertaken to Mass Customisation
costs and protect market positions.
understand which facets should be prioritised for minimal There is a trend towards increasing sub-segmentation of
In this environment, it is increasingly difficult for small overall impact. For example, for a light bulb, the key factor markets and customisation of products and services that
companies to secure a defensible IP position allowing is likely to be energy consumption during use, but it may is ultimately leading to the ‘market of one’. For example,
them to compete directly in high-value markets which be the choice of refrigerant gases used for a domestic new cars can now be finished at the factory to meet the
are dominated by powerful companies. Instead, they fridge, or ease of maintenance for an offshore wind exact preferences of the buyer, with even unique paint
increasingly choose to either licence their IP to larger turbine. colours available at a premium.
players, or to be acquired by them14.
The challenge is to provide the capability for the end user
Companies do not always choose to exploit the IP they
to customise the product without significantly affecting
have developed, due to changes in strategic direction etc.
the economies of scale in producing the product or
Other companies may need to acquire IP to enable them
service. In some industries, this challenge has been met.
to quickly enter a market of strategic importance to them.
For example, some semiconductor companies provide
This increasing separation of IP developers from IP users
Field Programmable Gate Arrays with development kits
has led to a growing secondary market in patents as
that allow each industrial customer to program their
companies seek to sell or acquire IP.
devices to implement the precise function required.
Of course, there are many other attractive markets where The Glasgow School of Art have done work on mass
IP is more dispersed and it is much easier for SMEs to customisable homes where the components of housing
establish a defensible IP position. There is also a growing are standardised and integrated into an overall system
market for IP insurance which could help SMEs with approach which may have the potential to reform the
limited resources to defend their IP. current house building methodology to offer homes
that are both affordable and customisable16. In both
Finally, the open source movement, which aims to make
of these cases, the key is to provide the user or retailer
certain IP freely available, is developing a broader base
with intuitive tools to customise the product themselves.
which is challenging traditional IP strategies (this is
Developments in 3D printing are likely to make
discussed below).
customisation more accessible in many markets as the
price of equipment drops.


13. McKee, Voorhees & Sease, PLC (2011) 15. Ellen McArthur Foundation (2012) In depth - Washing Machines
Intellectual Property and Company Valuations 16. Macintosh School of Architecture (2012) Zero Energy Mass 17. Piller (2010) Mass Customisation: A Strategy for
14. Merges (2012) Secondary Patent Markets: A Possible Role for Startups Customised Housing Graduate Course Customer-centric Enterprises

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Frugal Innovation Ubiquitous Intelligence Globalisation 7. IDEA MANAGEMENT
In developing economies like India, innovation is driven There is now a range of wireless network technologies, In order to build a sustainable position, companies
by the need to minimise costs and reduce the use of raw from low-cost ZigBee to high-performance 4G, which increasingly have to market their products globally. This AT Kearney’s research shows that leading companies tend
materials and energy in development, production and means it is feasible to connect almost any device to allows the economies of scale to be developed which are to consider more ideas at an early stage but select fewer
use. This often leads to dramatic breakthroughs in another device or to the internet. Meanwhile, the relative necessary to stay competitive in the face of aggressive of them to go forward. This requires careful management.
price/performance ratios18. Given ongoing financial and cost of computing power continues to drop exponentially, global competition. This means:
environmental pressures in the developed world, there so that even a low cost microcontroller can manage Limited
is increasing interest in frugal innovation. In particular, relatively sophisticated algorithms. As a result, many • Maintaining good intelligence on international Ideas More Ideas
sectors like health and care, where demand is set to environments including clothing, cars, buildings and even competition.
outstrip supply, could benefit from the philosophy of frugal whole cities are becoming ‘smart’. • Understanding the potentially diverse needs of
innovation. multiple markets early in the product design
Ubiquitous Intelligence presents both opportunities and
Creativity and an open-mind are essential for frugal challenges to R&D departments in industries which do process. This could encompass cultural,
innovation. Simplifying existing products or services will not traditionally include information technology in their regulatory and economic factors as well as
not achieve major cost reductions. A whole new approach products or services. For example, some sports shoes differences in applications. The product can
to analysing the real market need and proposing radical already contain wireless sensors which enable the user to either be specified to meet all these needs
in a single package or, where that is not Many Fewer
solutions is required. Value engineering techniques monitor their athletic performance, when combined with Projects Projects
(see below) can be useful. Frugal innovation is an area a wireless hub and a PC application. Such an approach economical, have a modular approach so that
where collaboration with professionals with different promotes customer loyalty as they will wish to maintain regional variants can be painlessly spun-off An effective ideation process stimulates more
skill sets and experience is likely to be helpful in finding the performance data when they change shoes. Again, this the original product. raw ideas but soon funnels them down to a few,
breakthrough solutions, perhaps through crowdsourcing highlights the need to consider business model innovation high-impact projects.
approaches. Companies could also benefit directly at the same time as R&D.
from Indian expertise in frugal innovation by working A process is employed to collect and cluster the ideas,
Wireless sensors could be used for a myriad of
collaboratively to develop low cost products for European select the best ones and introduce them into the R&D
applications, such as supply chain tracking, guarantee
markets19. pipeline20. A good suite of online tools (sometimes called
validation, maintenance recording, gathering usage
an ideation platform) enables the community to review,
statistics and adapting to the local environment (context
comment on and strengthen each others’ ideas before the
awareness). In the next decade, imaginative engineers will
selection stage. This is key as, while a spark of inspiration
add many more applications in areas not yet considered.
may produce a good idea, it will take a collaborative effort
with diverse experience to turn it into a great idea, or to
point out the issues that may mean it’s not such a good
idea after all. The use of such a tool will also mean that
management time need only be devoted to ideas that have
already been subject to critical peer review.
Ideation platforms have been implemented by a number
of leading companies into their innovation processes.
Examples include IBM’s ThinkPlace, Accenture’s
Innovation Grapevine and Whirlpool’s Innovation E-space.
There are also a number of 3rd party IT tools available,
such as Brightidea and Ideacomb, which companies
can use as a platform for such a process but, in small
companies, it may also be practical to conduct such a
process face-to-face.

18. Prahalad (2011) Bottom of the Pyramind as a Source of


Breakthrough Innovations
19. NESTA (2012) Our Frugal Future: Lessons from India’s 20. Karlsson (2010) Collaborative Idea Management -
Innovation System Using the creativity of crowds to drive innovation

14 15
One interesting way of assessing the relative merit of 9. CROWDSOURCING IDEAS 10. FUNDING Small Business Research Initiative (SBRI)
ideas is through an “ideas market” where members
Apart from grants and tax rebates, the public sector
of the community can use a virtual currency to invest The R&D and marketing departments need not be the R&D projects can be associated with risk and often invests a huge amount directly in R&D to address its own
in ideas they believe will be successful. The best ideas only sources of new ideas. Other valuable sources could have a long delay before any return on investment can challenges. Historically, this public sector procurement of
and most successful “investors” can be rewarded with include customer-facing employees, manufacturing be realised, so funding is a challenge. However, it is R&D has tended to benefit large companies, particularly
more tangible returns at the conclusion of the idea engineers, external business partners and end important that R&D is adequately funded, as delays in the defence sector. This is one of the reasons why SMEs
selection process21. Such an approach is best suited to customers. Crowdsourced ideas may be responses to in getting a new idea to market leave a gap for the only account for 3.5% of total UK business R&D spend23.
large, multisite organisations where it has the benefit of specific challenges set by the company or they could be competition to exploit. Unfortunately, there are many However, there is a trend to channel more public money
encouraging diverse departments to participate. spontaneous and freeform. good ideas which struggle to find adequate funding towards SMEs who often have more innovative and cost
from traditional sources. To bridge this gap, a number effective approaches to problems. A key mechanism to
The first step is to decide how wide to cast your net for
of new sources of R&D funding are steadily growing in achieve this is the Small Business Research Initiative24.
ideas. A larger community will generate more ideas,
8. UNSTRUCTURED R&D but it will take more effort to manage. There can be
importance, including SBRI and crowdfunding. SBRI enables governments to act as an intelligent lead
spin-off benefits in generating more engagement with customer and drive innovation, leading to new product
A growing number of companies like Google, Facebook, the company and its brand. Once the crowdsourcing and service solutions to specific public sector challenges.
eBay, Twitter, LinkedIn and Yahoo allow their employees community has been set up (usually an online forum) they This approach is well established in the USA: for example,
to spend a certain percentage of their work time on can be stimulated to provide innovation ideas and then Qualcomm, now a communications industry giant, traces
their own projects: creative ideas they believe can make encouraged to review each other’s ideas and vote for their its early success back to the US Government’s equivalent
money for the enterprise22. The benefit is that people work favourites. Dell’s Ideastorm is such a platform, used to of SBRI grants which gave it the time and space to develop
hard and think smart when they are passionate about gather ideas for new or updated products. While some game-changing technologies.
an idea. Developers are generally asked to produce an small incentives and personal recognition can be offered, In the UK, the Ministry of Defence has been the largest
early prototype of their idea which they can pitch to their such ideas platforms are generally run on goodwill user of SBRI but more government departments and
colleagues, seek feedback and, if there is enthusiasm, towards the brand. agencies are now starting to use this approach, including
refine the idea further. Sometimes this is manifested as
the NHS and environmental agencies. Unlike R&D grants,
“Friday afternoon” work, while other companies undertake
SBRI is fully funded and exempt from state-aid legislation,
regular 24 hour “hackathons” where the whole staff (not
as it is seen as pre-commercial research procured from
just R&D) form into multidisciplinary teams to work on
the market. Often, the SBRI begins with a feasibility study
their ideas. Some notable success stories to emerge from
and, if promising, it may proceed to developing prototypes
such unstructured R&D include Flickr, Twitter and Gmail.
and demonstrators. It is expected that more SMEs will
It is likely that this approach will become more common
actively search for funding through this mechanism in
in sectors which are fast moving and highly innovative,
coming years, as it not only connects the SME to real
where traditional bureaucratic approaches to setting up
market needs but it also has the advantage that the
new research projects may be too slow. With 3D printing
company keeps all the IP generated, so it can exploit it in
and virtual prototyping making it easier to bring ideas to
markets beyond the original government requirement.
life, it is also expected that this approach will gain ground
beyond the IT industry.

21. Soukhoroukova, Spann, Skiera (2011) Sourcing, Filtering, and


Evaluating New Product Ideas: An Empirical Exploration of the
Performance of Idea Markets 23. Hughes and Mina for CIHE (2012) The UK R&D Landscape
22. Tate (2012) The 20% Doctrine 24. Technology Strategy Board (2012) Small Business research Initiative

16 17
There are also crowdfunding platforms where profit Prospective entrepreneurs should not expect to sit stage to a large pool of committed people who can
is the primary motive, but because the stake is low back and watch the funding mount up. They must help with future market research, product testing
and the payback is usually months rather than years, be proactive and promote their idea on a number and promotion as the business progresses, as
psychologically it can feel more like online gambling of relevant online communities and networks with well as buying the next products. However, it has
than sober investment. Indeed, crowdfunding very rarely links back to the crowdfunding platform. taken Pebble longer than anticipated to develop
addresses larger or more complex projects which require the product which has disappointed some of its
significant investment and lengthy development periods. The most notable crowdfunding success to date is investors. The lesson is that expectations need to
the Pebble smart watch which raised over $10m be managed and timescales realistic.
Typically, the process works as follows: on Kickstarter in 2012 from about 69,000 backers26.
The inventor was unable to raise capital from The platforms typically take a 10% cut if the
• The enterprise submits its proposal, including
traditional sources but it took only a day to raise project is successful. This seems a reasonable
the minimum funding required, to an online
the first $1M on Kickstarter. Such a response was charge when the time, costs and equity loss of
crowdfunding platform, such as Kickstarter.
a clear signal that the market wanted the product, seeking investment through traditional channels
This will include details of what investors will
which provides added value over other sources are compared. Some companies have undertaken
get for their stake, which is often simply the
of capital. If the idea had no market traction, crowdfunding directly, such as BrewDog27 in
proposed product.
insufficient funds would have been pledged and a Scotland: this cuts out the middleman, but there
• If sufficient people invest before the cut-off costly mistake would have been avoided without are legal and promotional costs involved and you
date to meet the minimum funding target, the anyone losing money. This benefit has ongoing need to have very good PR to reach your target
Crowdfunding enterprise gets the money and goes ahead value as the enterprise gets connected at an early shareholders.
with the project. Otherwise, the money is
Crowdfunding represents a radical new way for inventors
returned to the investors.
and young companies to raise finance to take their
products to market. In 2011, $1.5B was raised globally • The development and production cycles
through crowdfunding – a figure that is expected to grow for these products are typically fairly short Putting it into Practice – Appbackr
steadily over coming years25. Crowdfunding effectively (months not years) so the investor should get a
de-risks a new venture by spreading the investment very product within a reasonable timeframe. Appbackr28 have an alternative approach to Kickstarter: they are
thinly over many individuals: no one is investing money focused purely on mobile apps, so the backers typically have a
they couldn’t afford to lose. good understanding of the technology, the business model and the
marketplace can recognize good proposals. Another difference is
The motivations for funders to participate in crowdfunding that backers effectively advance-purchase wholesale licences of the
are very different from traditional investors. Often, they proposed app. They get their payback when the licences are sold to
wish to enable the development of a new product or end users at a mark-up through their own channels, including social
service of personal interest as they typically get the networks and their own client bases. This promotional activity also
finished product in return for their small investment. generates a lot of PR for the new app, allowing it to gain momentum in
Others are attracted by a perceived social benefit, such as the marketplace.
a device which helps disabled people, or by a particularly
creative proposition.

26. Kickstarter (2012) Pebble: e-paper watch for iPhone and Android
27. growthbusiness.co.uk (2011) Raising Equity its Own Way
25. NESTA (2012) The Venture Crowd 28. www.appbackr.com

18 19
PART 2 THE R&D TOOL BOX
R&D TECHNIQUES Digital Prototyping
Digital or virtual prototyping reduces the time and cost to Putting it into Practice – NASA
3D Printing and Additive Manufacturing
get products to market by testing a concept thoroughly NASA’s Space Technology 5 (ST5) mission required a higher-performing candidates were identified
Three dimensional shapes can be produced, layer by layer, on the computer before committing the design to communications antenna with an exacting specification and a new generation of antenna designs were
by 3D printers. These technologies have been available for physical prototyping. Generally this is achieved by using in terms of performance and physical dimensions. bred from them using random recombination and
years but it is now becoming affordable for a wider range mechanical system plug-ins with CAD packages which The antenna design evolved by starting with an initial mutation operators. After hundreds of generations
of applications. enable the virtual prototype to be tested under all kinds of feedwire and then creating variants with wires specified of evolution, the optimal solution was fabricated.
challenging conditions which can be difficult to undertake by running a special program NASA had written. This Compared to traditional design techniques, the
3D printing and additive manufacturing can be used
in the lab. There are also benefits in product visualisation evolutionary algorithm started with a population of evolved antenna is superior in power consumption,
to accelerate the product development process and to
which can assist communication across the product team randomly generated antenna-constructions. Initial fabrication time and performance30.
manufacture end products, especially for small production
and with potential customers. Digital prototyping is now designs all performed well below specification but the
runs or mass customisation. It enables greater design
becoming more affordable for SMEs.
freedom leading to higher functionality, lower part counts
and reduced weight in products29. Radical new business
models are likely to be developed on the back of 3D
Evolutionary Design
printing.
In evolutionary design, computer software makes small, Generative Design Human Modelling in Product Design
random modifications to existing designs and then Generative design is the use of sophisticated computer The modelling and simulation of humans in product
Scalable Computing models the new design against various performance algorithms to create complex designs with minimal design was originally driven by defence and safety critical
criteria to determine if the evolution is useful or not. Of human input. It differs from evolutionary design in being applications where it is not desirable to test prototype
Today, computing resources can be hired by the hour
course, the vast majority of changes will not be useful open-ended, so it is much more likely to discover truly designs with real people. Now, it is starting to become a
and scaled up or down as required. This varies from
but, by following many parallel paths through successive innovative solutions. cost-effective way to test a wider range of products for
generic resources such as Amazon’s Elastic Compute
iterations, a near-optimal solution can be found. The usability early in the design cycle. Recent advances in
Cloud to more specialised supercomputers like HeCTOR. The process involves generating a wide variety of
concept of evolutionary design has existed for many years 3D gaming engines have influenced the development of
As a consequence, small companies can access huge designs automatically by computer algorithms within a
but the exponential growth in computing power is making this technology but the key difference is that the humans
computing resources for R&D as and when required. certain set of constraints, set by the engineer. The large
it feasible for more and more complex problems. must be realistic in terms of strength and vulnerability.
And, if they develop a new online product or service, they range of designs generated can then be modelled and
can scale it according to demand, dramatically reducing Evolutionary design is not restricted to mechanical Advances in informatics, where computer science meets
simulated to evaluate their performance against various
capital investment and risk. or structural components – a variant is also used in physics, biology and social science, will support such
structural, thermal and mechanical criteria. As with
informatics, called evolutionary computation. This uses developments. Current applications range from vehicle
Supercomputing can take modelling, simulation, analysis evolutionary design, the results are used to select the
an iterative process where the original code is subject ergonomics through production line design to end-of-
and 3D immersive visualisation to new levels able to better candidates and guide an iterative design generation
to mutation and cross-over (swapping branches of code) life disassembly of engineering structures. Companies
support R&D in highly complex systems. Application process until a near-optimal design is achieved.
to create a diversity of novel candidate solutions, which such as Siemens, Dassault and SantosHuman provide
examples include diesel engines, airplane wings, battery Generative design is already popular in architectural
are submitted to a selection process which uses various digital humans who can be used in product simulation
chemistries and flow analysis. Supercomputers are rarely design where a visual programming language called
quality criteria to choose the better candidates for the environments. They can measure such things as the
used by the majority of industry due to the perception Grasshopper is widely used31. Unfortunately, CAD systems
next iteration. Typical applications include quantum stress, strain and fatigue on human bodies and the range
of high cost and a lack of understanding on how to do not yet have a fully automated suite of programs to
computing, game playing, sorting and searching. Genetic of movement of human limbs. Benefits can include
harness their power. However, it can be economical to achieve this without heavy manual intervention, so it is
programming is a branch of evolutionary computing reduction of repetitive strain injuries or operator fatigue.
rent time and expert help at one of the growing number not yet widely used in engineering applications. However,
targeted at the automatic discovery of programs to solve a In future, models of disabled humans could improve
of supercomputing facilities, including Edinburgh and with ever-more powerful computing resources available,
given problem. products for a wider range of people32.
Strathclyde in Scotland. it must only be a matter of time before more sophisticated
tools are brought to market.

30. Hornby (2007) Generative Representations for Computer-Automated Evolutionary Design


29. Additive Manufacturing KTN (2012) Shaping our National 31. www.grasshopper3d.com
Competency in Additive Manufacturing 32. Kenneth Wong “In Harms Ways” in Computer Graphics World Aug/Sep 2012

20 21
Value Engineering INNOVATION PROCESSES Lean Product Development • Standardisation of work processes and
interfaces to increase efficiency and reduce
Value can be defined as the ratio of function to cost. There are many approaches designed to improve the Development Team information incompatibility, software
Value Engineering (VE) seeks to optimise the value of a process of innovation, aiming to find better solutions and incompatibility and communications failure.
product or service by first systematically analysing its get them to market faster. Many of these are centred To avoid delays and confusion, changes to
desired functionality. By understanding exactly what around collaboration where companies and individuals, Kick-off Alpha Beta Full
standard procedures are only tolerated where
job it is required to do, and avoiding jumping to any with diverse knowledge and experience across the
Release
there is a clear benefit.
conclusions about how the product or service should supply chain, can work together to produce marketable End User Continuous
be structured or delivered, it is possible to remove any innovation. Product Vision Proof of Vision
Validation Improvement • Early validation of designs through frequent
non-core functionality and find the optimal trade-off touch-points with customers throughout the
between quality, performance and price. VE began in the development cycle. This includes internal
defence industry but is now used in many industries, all Phase Gate Model customers such as manufacturing and
using the same structured methodology33. The use of marketing as well as selected end users.
value engineering is mandated by the US government for The Phase Gate or Stage Gate® model of innovation
Customer The goal is to get a minimum viable product
its contracts, and return on investment of greater than management is well established in a number of
into the hands of early adopters as early as
10X is often reported34. It is clear that value engineering industries, such as defence, semiconductors and energy,
possible and develop it further based on their
can also be a valuable tool in pursuing the agenda of where R&D investments tend to be very high. This
feedback. This will reduce time to market
frugal innovation discussed previously. approach places a number of decision points, called These philosophies are being formalised and adopted by avoiding the development of rarely used
gates, into the project flow where the progress of the by a broader range of technology industries under the features and by identifying problems early.
programme is formally evaluated against a number of banner of Lean Product Development36. The benefits It also means a failing project can be killed
Recording Usage of Real Products predetermined criteria. Funding will not be released for are significant for companies who adopt the philosophy early. Digital prototyping or 3D printing can be
the next phase of development unless the project passes wholeheartedly: increases in productivity in excess of 50%
The fact that many products and services today are helpful in achieving early validation of physical
this review, which may require some remedial action. are reported with products brought to market typically
connected to the internet gives companies an opportunity products.
This approach can introduce delays into the project but 25% faster 37.
to upload real usage information from their customers. the disciplined and robust approach it encourages helps • The ‘lean culture’ is embraced across the
This allows them to determine which features are used There are several key elements in a lean product
to avoid flawed development projects getting to market35. organisation, including ancillary functions
most often and how they are used. Companies like Apple, development programme:
such as finance, marketing, procurement,
Microsoft and Google collate this information and use it to • Streamlining of processes to remove waiting operations and manufacturing as well as core
improve their next product updates. However, even devices Lean Product Development time by coordinating resources across all R&D.
which are not internet connected, but have electronic departments and ensuring that everyone
control systems, such as car engines, can record such There is a trend towards applying lean manufacturing The principles of lean product development are already
principles (simplifying, streamlining and standardisation has easy access to the information they need embedded in many larger companies, but smaller
data and upload it when serviced. Of course, there is no when they need it, while avoiding supplying
point in doing this unless an effective means can be found of processes) to the product development process in companies are currently less likely to use it. As
manufacturing industries. In parallel, in the software superfluous information which will waste time companies grow, it is important that they recognise the
to interpret all this information. Off-the-shelf tools are or dilute the pertinent facts.
available from a range of companies including Software industry, there has been a similar shift from the need to bring in more formalised development processes
Statistics Service and PreEmptive Solutions. Such vendors established phase-gate model of development, which • Removal of any wasted effort: activities which but without stifling productivity through bureaucracy.
typically provide modules for integration into product code features a series of formal project reviews, to a faster do not provide direct value to the customer Lean product development may offer the best balance
to gather the statistics and tools to enable the data to be moving, more flexible and iterative “probe and learn” are stopped. Processes are automated but it must be recognised that in safety critical or high
analysed. Alternatively, free open source solutions are style, called Agile. where possible using the latest IT; a product integrity applications, the more established phase-gate
available from Warefeed, for example. portfolio management system is implemented approach is likely to be more appropriate, albeit with
to ensure that less profitable product frequent customer engagement and testing in carefully
programmes are stopped early, freeing up controlled environments.
resources for the higher priority programmes.

33. SAVE International (2007) VALUE METHDOLOGY STANDARD and BODY OF KNOWLEDGE
34. Institute for Defence Analyses (2012) DOD Value Engineering Program 36. Jaruzelski, Holman, Daud (2011) Next-Generation Product Development
35. Industrial Technologies Program (2007) Stage-Gate Innovation Management Guidelines 37. Aberdeen Group (2007) The Lean Product Development Benchmark Report

22 23
De-Risking Innovation OPEN INNOVATION Implementation
Increased global competition increases the pressure to In the past, all R&D was undertaken in-house and Organisations interested in adopting open innovation
get to market fast but this can mean higher risk as the firewalls were established to prevent leakage of ideas. The first need to evaluate if their culture, organisation and
market research, R&D and product launch phases are all pace and cost of innovation today is making such practices processes are amenable to the approach43. A prerequisite
compressed. There are a number of approaches which unsustainable, so smart companies are learning to share to open innovation is to develop a good network of
seek to address this challenge38: ideas and intellectual property (IP) with carefully selected contacts, through participation in industry events, online
partners40. The scope of this open innovation section forums etc. This can represent a significant investment
• 24-hour development teams can be set-up by in time, but is far more effective than cold-calling
companies with global operations to ensure includes collaboratively generating new product ideas,
solving technical problems beyond the competence of the potential partners. Also, it is best to network with people
the fastest product development timescales. beyond the usual group of your suppliers, competitors
Of course, excellent collaboration tools will be host organisation and the co-development of particularly
challenging technologies. Open innovation encompasses and customers. Big breakthroughs often come when
required. established ideas and technologies cross into new
a range of business models that combine internal and
• The use of lean product development external R&D resources through partnering, licensing domains, which require conversations between people
methodologies with frequent customer and joint ventures. As such, open innovation requires a with diverse backgrounds and knowledge.
feedback means that poorly scoped products complete redrafting of the innovation process to embrace Open Innovation can be very useful for SMEs who have
are less likely. co-operation with other companies and organisations. limited internal R&D resources. However, it is more
Trends
Potential benefits include faster time to market, lower likely to work for SMEs when they are partnering with
• Softer product launches: more beta trials with
R&D costs and access to complementary ideas and At present, only around 8% of R&D organisations regard organisations of similar size and ambition, capable of
early adopters or limited-geography launches
expertise. open innovation as critical to their success and these moving at the same speed and with similar expectations.
mean that any defects in the product can be
are likely to be larger companies in industries with a It can be challenging for an SME to work with a large
detected and rectified before there is too much
high R&D intensity41. However, the clear trend is for corporation where decision mechanisms move slowly
product in the field. Open innovation can take many forms open innovation to become mainstream, reaching SMEs and are hard to influence44. However, where SMEs have
and sectors with lower R&D intensities. It will often be developed technology but lack the resources to exploit
Joint delivered through lean product development techniques it in the global market, they should consider either
Intrapreneurship Co-creation Research
Centres (discussed above) which suit open innovation better licensing the technology to a multinational or coming
Organisations with stiff hierarchies and centralised than traditional phase-gate methodologies. The need to an agreement to market the technology through a
control will struggle to compete in the dynamic markets to leverage R&D spending will lead to more vertical strong international partner. Innoget45 is an example of an
User IP from
of the 21st century. Instead, they need to give sufficient Innovation Universities alliances, horizontal alliances and cross-industry online platform where organisations who have developed
autonomy and resources to staff with the creativity and partnerships. Universities, facing reduced public funding, technology can market it to find potential licensees or
leadership skills to address new opportunities by moving Open will seek to work more closely with industry. The open
Innovation partners.
rapidly and this is particularly true in R&D. Such people Crowd Secondary
innovation process will be professionalised and the focus
with an entrepreneurial skill set operating in a corporate Sourcing Patent Market will broaden from products to services while strategies for It is important that R&D output is modular, well
environment are often known as “intrapreneurs”. intellectual property will shift from protection to producing documented and conforms to widely accepted standards.
They tend to be outward focused, energetic individuals tradable goods42. This will minimise the effort required to port it from one
with a long-term perspective, who are able to deal Micro Open
organisation to another.
Tasking Source
with uncertainty and take risks. Key to the success of
intrapreneurs is the development of an open and informal Outsourcing
management culture in the company which will not
conflict head-on with the intrapreneurial style and this
requires the buy-in of all the management team to the
concept39.

38. Arthur D. Little (2011) The Future of Innovation Management: The Next 10 Years 43. Wagner, Piller (2012) Increasing innovative capacity: is your
39. Menzel, Krauss, Ulijn, Weggeman (2006) Developing characteristics of an 41. Grueber (2011) Global R&D Funding Forecast: Engaging the Global company ready to benefit from open innovation processes?
intrapreneurship-supportive culture Researcher 44. Lindegaard (2011) Making Open Innovation Work
40. University of Cambridge IfM (2009) Briefing: Creating an environment for open innovation 42. Gassmann, Enkel, Chesbrough (2010) The future of open innovation 45. www.innoget.com

24 25
IP issues should be considered at an early stage, as this is Co-Creation NESTA has pioneered an approach to open innovation User innovation can often manifest itself in using
the most common impediment to success. This is why 3M, called ‘jam’ and piloted it with a number of blue chip technology for applications which were not envisaged
for example, will only accept patented ideas in their open Working with partners across the supply chain at an early companies47. This is a cooperative process involving when the technology was brought to market. Users with
innovation / crowdsourcing programme as this leads to a stage of the innovation process offers the best chance selected customers and suppliers across the value chain. advanced technical skills may even create new products
straightforward licensing model with clear IP ownership. to develop products or services which will not only offer The process is managed by an independent facilitator using catalogue parts, off-the-shelf materials and some
In addition, it filters out ideas with a poor IP foundation, innovative solutions but also a ready market. Firstly, called a “Catalyst”. It begins with an open brief with initial semi-skilled machining or assembly work. A NESTA
as all the due diligence has effectively been done in the it means understanding your customer’s, supplier’s or ideas being brainstormed in workshops. The best ideas survey suggests that up to 8% of consumers do this.
patenting process. 3M’s approach saves a lot of time but partner’s business inside out so you can appreciate how are developed further with online tools. The process ends
it can mean many good ideas never reach them. Other you could help them to reduce costs or add value. It then with solid business plans being pitched by collaborative
companies, such as Procter & Gamble, have used an requires close team working so that all the parties have a teams (across the value chain) and these might be taken
innovation challenge approach to encourage a flow of stake in the solution developed. forward as joint ventures or other partnerships. This
proposals from potential partners. This generates a lot Co-creation is becoming common practice among large approach works best in areas like service innovation
of responses of variable quality so P&G use a mediation corporations but is rarer among SMEs. IP ownership can where IP ownership is less critical.
organisation to filter the responses, deal with IP issues be an issue so it is essential to develop an agreement Collaborative approaches will be facilitated by better
and coach the respondents to fine-tune their proposals. at the beginning of the process. Suppliers will generally online tools for knowledge activation and applied
The key is to have a clearly written, focused challenge to want to market products resulting from co-creation to creativity48. These will include web-based chat and
minimise irrelevant responses. other customers, while their co-creation customer may conferencing tools, collaborative writing tools, workflow
Trust is essential in open innovation but it must be backed wish exclusivity in some cases. In other cases, co-creation automation systems, document management and
by clear contracts to avoid costly legal wrangling down the customers will be happy to see the product marketed group decision support systems to enable the team
line46. It is also important to consider what would happen more widely if this will lead to economies of scale and to select the optimal solutions at each stage of the
if your partner were to go out of business, be acquired by lower prices. development. Next generation systems will employ The trend in user innovation is expected to increase in
another company or simply lose interest in the project. informatics to automatically document work without coming years for the following reasons:
Legal contracts should cover these potential pitfalls. teams having to explicitly record their actions, whether
they are collaborating physically or virtually. For example, • The growth in online forums and social
technology will be developed which can record and minute networks is making it easier for user-
discussions in a meeting, understand context to a basic innovators to exchange ideas and collaborate
Putting it into Practice – Design LED and Enterprise Enterprise Europe Network Scotland and has since
with each other51. Research suggests most
level and index key words for cross-referencing. This suite
Europe Network seen its overseas profile rise with 80 expressions of
are enthusiastic about sharing ideas except
of services will be packaged into a unified platform.
interest from potential partners over the past three
Design LED develops and manufactures incredibly when they fear they could lose a significant
years. The company has also embarked on a number
thin light emitting diodes (LEDs). This technology can competitive advantage.
of technical and commercial collaborations with
be used in a very wide range of applications but the User Innovation
partner organisations introduced by EEN. • The advent of 3D printing at reasonable costs
challenge was to find the right international partners
A small but significant percentage of end users have is likely to encourage user innovation in
to exploit its potential. So, Design LED engaged with
always taken a hands-on approach to innovation to meet hardware due to the ease of prototyping.
their own specific needs49. For example, in industrial
instrumentation, control and process equipment, users • In software, the growing library of open source
frequently modify or enhance off-the-shelf products, code and free or low-cost development tools
generally without the involvement of the companies makes it practical for hobbyist coders to craft
providing the original equipment. NESTA estimates that sophisticated applications.
approximately 15% of companies do this50. Similarly, User innovation can be profitably adopted by companies
in certain consumer markets, such as automotive, but this will require a systematic way of observing and
computing and sports equipment, sophisticated users understanding user innovation, and then feeding this
adapt standard products to meet their particular needs. knowledge back into the product development cycle.

47. NESTA (2010) Open Innovation from Marginal to Mainstream


48. Sorli and Stokic (2011) Future Trends In Product/Process Innovation
49. MIT Sloan Management Review (2011) The User Innovation
46. Glassman, Walton (2010) Open Innovation’s Common Issues Revolution: Interview with Eric von Hippel 51. Jespersen (2011) Online Channels And Innovation:
and Potential Roadblocks 50. NESTA (2010) Measuring user innovation in the UK Are Users Being Empowered And Involved?
26 27
This may be as simple as observing how people are Using a Crowdsourcing Platform Crowdsourcing offers some unique benefits:
actually modifying and using the product and then
adapting the product to better support the observed • More cost-effective than conventional
Company seeking solution outsourcing – you only pay for what you like.
applications. Some companies will be more proactive in
identifying and engaging in relevant online communities, • Access to creative minds beyond the resources
1. Formulate 2. Propose selected 2. Choose
though they must be careful to manage expectations. problem solutions best of a single company. This is particularly
In some cases, it may be possible to supply development useful if looking for breakthrough solutions
tools to lead users to help them experiment and to Crowdsourcing Platform or innovation outside a company’s normal
organise events where makers can show their innovations capabilities. Nokia, for example, recently
with other user innovators and the host company. Then, solicited ideas on mobile power using both
the company could offer to take the most interesting internal and external crowdsourcing. The
prototypes into production so that the wider community Continuous
Improvement external ideas were perceived as higher quality
can access the benefits. This is likely to be welcomed Large, diverse talent pool despite the number of in-house experts, due to
in hardware, where only economies of scale can yield their ability to think outside the box53.
Scientists Engineers Inventors Academics
reliable products at a reasonable price. Provided the
innovators are recognised, consulted and provided with There are several difficulties associated with So far, crowdsourcing has been discussed as a way of
some rewards (e.g. free production models) they are crowdsourcing innovation: solving specific problems but it can also be used in an
likely to be cooperative52. Sometimes, a complex problem will need a team of people • Unless the platform is specialised, there is alternative business model to source all of a company’s
with complementary expertise to solve. There are now a tendency for crowdsourcing platforms to innovation. For example, Quirky are a new consumer
platforms, such as Idea Connection, which can facilitate attract enthusiastic amateurs rather than products company who source their innovation from
Crowdsourcing the creation of a number of teams of diversified experts to skilled professionals due to the long odds freelance inventors54. They solicit ideas from the
work in competition with each other to create solutions. of submitting an idea that wins the prize. innovation community and select the best ones for
In the R&D context, crowdsourcing is the outsourcing
Other platform providers, such as Presans, proactively However, if the solution might be more about evaluation. They then use their innovation community to
of innovation tasks to a large external talent pool. This
engage individuals who may have alternative approaches inspiration than perspiration, it could be a good provide input including market research and fine tuning
concept is well developed in software (e.g. Linux) but can
to solving the problem. Both approaches lead to fewer, method for both parties. of the product features. 3D printing is then used to make
be applied to all kinds of innovation. The external input
higher quality proposals but are more expensive to run prototypes. Ideas that are selected for production will
comes from individuals rather than companies and some
due to the hands-on approach. • The challenge needs to carefully worded return the inventor a royalty and even provides a small
form of online platform is generally used to reach them,
and presented, as there is no opportunity to cut to those members of the community who contributed
capture their inputs and manage the process. All IPR
discuss the challenge as with conventional ideas to the product development. The costs of taking the
generated must belong to the crowdsourcing company
outsourcing. It also has to be written to product to market are borne by Quirky, so the inventor
rather than the crowd, so care must be taken in setting
generate enthusiasm among the target group. needs no capital except a $10 fee to submit an idea. Of
up the process.
course, the challenge for Quirky is to find the real gems
• If the challenge leads to a large number of
Crowdsourcing can work in a number of different ways. among the thousands of ideas submitted to them.
responses, it will require a lot of time to filter
Selective crowdsourcing centres on a competition seeking
and judge the best entries, so it may not be Crowdsourcing is still at an immature stage of
expert responses with substantial prizes for the best
cost effective. Again, careful writing of the development, yet it has shown great potential. Ten
ideas. One example would be the Saltire Prize offering
challenge can reduce this risk. years from now, it is likely to be a key element of many
£10M for outstanding innovation in marine energy. There
companies’ R&D processes, providing a source of ideas
are a number of third party crowdsourcing platforms • It can be difficult to transfer crowdsourced
and linked to more conventional processes for turning the
including Spigit, Innocentive, Brightidea, Napkins Lab, innovation into the company’s R&D processes
ideas into products. Over this time period, a few third-
Hype.de, IdeaBounty, Lithium and Salesforce. They unless careful consideration has been given at
party crowd-sourcing platforms will become predominant
generally have a large pool of well-qualified potential the start, with buy-in from all stakeholders.
due to the large number of quality problem-solvers they
problem solvers and act as a middleman to post the
attract and the maturity of their systems for rewarding
challenge and pay out the reward if the company decides
them. These third-party platforms will enable relatively
to adopt a proposal. Alternatively, companies could adopt
small companies to access high-quality blue-sky thinking.
a more basic approach and simply post their challenge on
LinkedIn communities, Knowledge Transfer Networks etc.
52. Leadbeater (2006) The User Innovation Revolution 53. Erkinheimo, Harjanne (2011) Idea Crowdsourcing at
Nokia - 12 months wiser 54. www.quirky.com
28 29
University IP Joint Research Centres Open Source In general, however, open source hardware is lagging
far behind software and it will be years before it has
Under financial pressure, universities and other public- In many cases it is not easy to directly connect university Open source is a cooperative venture: many developers
a significant impact on industry. This may be because
funded research labs are becoming more proactive research with industrial exploitation. Further technology can contribute to and access a shared IP pool. There is no
suitable business models for hardware open source
in marketing their IP to industry and the processes development is often required to bridge the gap before the charge to access this IP but users have to sign some form
have not been found. There are also certain challenges
for licensing their technology are becoming more technology is ready for industrialisation. Pre-commercial of “copyleft” licence which obliges licensees to provide any
which need to be taken into account when applying open
streamlined. However, there is considerable scope for research is an area where companies with complementary improvements or modifications they make to the rest of
source to physical design59. First, the design should be
misunderstanding between private and public sector capabilities as well as potential competitors can the community under the same free licensing terms. This
modular and the modules should correspond to certain
bodies with diverse objectives, so achieving an effective collaborate to develop platform technologies, sharing ensures continuous growth in the quality and quantity of
skill sets. This will facilitate easier allocation of work
working partnership requires investing time to achieve a the costs between them. Later, they can take these IP in the shared pool.
to suitably qualified providers. Second, tools should be
good mutual understanding55. Whilst most IP is offered platform technologies in-house to develop commercial
Open source is primarily associated with software selected which are either open source or widely used.
on a royalty basis, some universities now offer some of applications. The UK-wide Catapult Centres and the
where it is now a mature mechanism but there are also The IP situation is likely to be more complex than for
their IP for free. This has been pioneered by the University Scottish Funding Council’s Innovation Centres are recent
open cores available for integrated circuits and some software, and some patented IP may have to be used,
of Glasgow’s Easy Access IP programme56. Although the examples where a number of companies can work
electronics. The concept could be applied to many more which is acceptable as long as such IP can be licensed
licence is free, usually the university will often benefit alongside academics on core research programmes, with
branches of engineering, especially in this era of digital with minimal fuss at reasonable rates. Finally, the means
from consultancy work associated with the IP transfer and clear agreements on IP ownership and exploitation in place.
prototyping, and there are early signs of an emerging open of physical production needs to be considered at an early
will gain recognition from funding bodies for supporting
source market in mechanical engineering. For example, point, as access needs to be open and costs reasonable.
industrial innovation.
the RepRap 3D printer58 has attracted a lot of attention.
There are also a number of sites aimed at hobbyists
or lab technicians, such as Thingiverse, while Open
Source Technology offers some robust designs including
bulldozers and wind-turbines, which could be very useful
in developing economies.

Putting it into Practice – Weir and University of Strathclyde

Weir identified collaboration with the University of The Weir Group is funding the WARC with an
Strathclyde as a critical opportunity to develop ‘blue sky’ initial investment of £1.9 million over three years
technologies for all its markets and add value to the and continuing investment thereafter. The WARC
existing innovation efforts taking place across the Group. broadens and extends the University’s relationship
This led to the establishment of the Weir Advanced with the Weir Group by developing parallel
Research Centre (WARC), where senior Weir engineers knowledge exchange activities that are beyond the
work side-by-side with leading engineering academics scope of their initial research agreements, further
to develop product solutions and core technology enhancing this company relationship57.
propositions which can be leveraged across the Group.

55. EIRMA, EUA, EARTO, ProTon (2009) Responsible Partnering: Joining 58. www.reprap.org
forces in a world of open innovation 59. Raasch (2011) Product Development In Open Design Communities:
56. University of Glasgow (2012) Easy Access IP 57. University of Strathclyde (2012) Weir Advanced Research Centre A Process Perspective
30 31
Patent Markets Outsourcing It is no surprise then, that EU research indicates that Microtasking
most companies prefer to outsource R&D in their
Until recently, patents rarely changed hands but there There are a number of reasons why it may make sense to This involves breaking a project down into thousands
own country. For those companies looking globally for
is now a fast growing market for patents aided by an outsource R&D: of short tasks that can each be completed quickly by
outsourcing suppliers, the USA is by far the favoured
infrastructure of auctioneers and aggregators60 and this is someone with the relevant expertise. Some microtasks
1. Short term need for additional R&D resources. location, despite high labour rates, with India second and
facilitating a more open approach to R&D. require no specific expertise, just generic human
China a distant third63. Nonetheless, this suggests that a
2. Specialist skill is required that is outside the company’s capabilities that are hard to automate effectively such as
One reason is that many large corporations have small but significant number of companies are putting in
core competence. reading handwriting. The challenges are to break down
developed and patented good technology which they then the time and effort to developing a strong relationship with
any job into the microtasks and to ensure the quality of
choose not to exploit, usually because it does not fit their 3. A product has to be reengineered, or a new product a selected R&D partner in Asia. This will typically take
each microtask. Quality can be controlled automatically by
current strategic focus. For example, Procter and Gamble developed, for a foreign market where familiarity with longer than a US or EU partner, and the first projects may
assigning the same task to two independent contributors
used fewer than 10% of its patents in its own products. local regulations and cultural preferences is important. not be great successes, but in time a good understanding
and checking they produce consistent results.
Increasingly, corporations like P&G seek to get some can develop.
4. To take advantage of lower costs in emerging
return from this research investment by licensing it, and So far, little use has been made of microtasking for
economies, usually in Asia.
SMEs should consider the possibilities61. For example, R&D itself. However, it can be useful for certain product
Pyreos is a successful Scottish start-up based on IP While the first three in the list will always be good reasons Online Outsourcing development tasks such as adding metadata to content.
originally developed by Siemens. to outsource, the fourth has not become as common This has been called content crowdsourcing or integrative
There are now online platforms like Zombal or
as originally predicted. In principal, there is a strong crowdsourcing as it draws snippets of information from a
programmingbids.com which act as market places where
pool of low-cost R&D resource in China and India which very large pool to essentially populate a database.
companies can post small R&D projects they wish to
companies in high-wage economies could exploit. For
sub-contract. A growing number of freelance scientists, Microtasking can sometimes be useful for scientific
example, companies such as Innominds in India provide
engineers and software developers can bid for the work if research including pattern recognition and creative
a range of software-related outsourcing services. In
interested. Payments are often held by the platform until problem solving where machines are not always
addition, many multinationals have opened R&D centres
the work is completed, providing security for both parties. effective. The best way to engage people in this kind of
in these regions, but results have been mixed and there
microtasking may be through gamification rather than
is no strong trend for European companies to increase
payment. Gartner have forecast that gamification will be
R&D outsourcing to Asia. While Asian R&D centres often
employed by 50% of companies that manage research and
excel in creating products for their own markets, there
innovation by 201564.
is less evidence that they are cost-effective in producing
solutions for European or American clients due to cultural
differences and communication issues. Also, while the
On the other hand, large corporations often seek to cost of the R&D staff may be lower, there is a higher
strengthen their position in certain markets by acquiring overhead and risk in managing this work remotely.
IP, either because they wish to use it directly, or simply
for defensive purposes i.e. to create a ‘patent thicket’ to
prevent others from operating in that area. One route to
acquire IP is to acquire small companies with relevant
patents. This is increasingly becoming an exit model
for innovative start-ups and venture capitalists often
encourage (and fund) companies to patent their IP early.
This secondary market is facilitated by the internet which
allows patents to be identified quickly. For example,
espacenet provides a free worldwide patent search
engine62.

60. Chesbrough (2006) Emerging Secondary Markets for Intellectual


Property: US and Japan Comparisons
61. Vanhaverbeke (2012) OPEN INNOVATION IN SMEs: How can small 64. Gartner (2012) Gartner Says By 2015, More Than 50 Percent of
companies and start-ups benefit from open innovation strategies? 63.European Commission (2012) EU Survey on R&D Investment Organizations That Manage Innovation Processes Will Gamify Those
62. www.epo.org/searching/free/espacenet.html Business Trends Processes
32 33
HOW CAN WE HELP? Grants and funding are available to those organisations
Putting it into Practice – Fold It which are committed to pioneering new technologies but
need additional resources in order to make progress.
Medical research requires the 3D shapes of millions of and www.fold.it is a website set up to facilitate this. Scotland is a country that is proud to have a broad-based Many businesses not only need funding, but require the
potentially useful proteins to be evaluated, a task which The site appeals to people who like to solve puzzles R&D structure which – with enthusiastic support from a input or expertise of like-minded companies to bring their
is beyond current computing technology. Humans, and aid medical research at the same time – no forward-looking Scottish Government and its agencies ideas to life. While Scotland has a thriving and diverse
however, are good at this, even with no medical payment is made. such as Scottish Enterprise – promises to flourish in the business base, it may be the right collaborator for your
knowledge. As such, it is well suited to microtasking years to come. company lies overseas.
This commitment to encouraging innovation with We can help match you with your business partner
practical, financial and political assistance is a key factor and network with companies all over Europe which
Crowdsourced Software Testing a number of crowdsourced software testing companies in realising Scotland’s R&D potential. are interested in creating partnerships with innovative
offer platforms which can provide test professionals Support to develop Scotland’s position as a global centre Scottish outfits at every stage of the R&D process.
There is a growing expectation for software to be reliable
matching a certain profile, using various devices and of excellence in research and development is available to We can also offer support to help you ensure your
yet at the same time the diversity of environments
test scenarios, backed up by forums where bugs can businesses and organisations of all sizes and across every intellectual property is protected and help you develop
(hardware, operating systems, browsers, languages)
be discussed. Outsourcing software testing can have sector. a strategy to make the most of these assets.
in which the software must operate is expanding.
additional benefits: the testers are truly independent
This makes it challenging to test pre-release software Any ambitious company or entrepreneurial individual who Scotland has talent, ingenuity and ambition to spare.
and hold none of the inherent assumptions or biases
effectively at a reasonable cost. To address this need, needs support and advice on how to bring their bright ideas Your ideas and innovations demonstrate that we remain
that make rigorous testing more difficult in-house65.
to market can speak to us for free R&D and innovation one of the most intellectually vibrant countries in the
advice. We can help firm up your business case, signpost world.
how your proposals can graduate from the drawing board
into reality, or even how adopting a low carbon approach
can enhance your product’s chances of success.

If you are about to undertake any R&D activities and would like to
find out more about how Scottish Enterprise can help you please
get in touch to talk to one of our advisors on 0845 607 8787
Alternatively visit www.scottish-enterprise.com for further
information about our innovation services.

65. Sridharan (2012) Community Innovation:


Crowdsourcing in software testing

34 35
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Additive Manufacturing KTN 2012 Shaping our National Competency in Additive Manufacturing Jaruzelsji, Dehoff 2007 The Global Innovation 1000

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Applied Marketing Science Inc 2012 Sample Cases (Voice of the Customer) Jespersen 2011 Online Channels And Innovation: Are Users Being Empowered And Involved?

ARM Holdings plc 2012 Company Overview Johnson, Christensen, Kagermann 2008 Reinventing your Business Model in Harvard Business review

Arthur D. Little 2011 The Future of Innovation Management: The Next 10 Years Karlsson 2010 COLLABORATIVE IDEA MANAGEMENT - Using the creativity of crowds to drive innovation

Chesbrough 2006 Emerging Secondary Markets for Intellectual Property: US and Japan Comparisons Kenneth Wong 2012 “In Harms Ways” in Computer Graphics World Aug/Sep 2012

Cooper, Dreher 2010 VOICE-OF-CUSTOMER METHODS: WHAT IS THE BEST SOURCE OF NEW-PRODUCT IDEAS? Kickstarter 2012 Pebble: e-paper watch for iPhone and Android

Edget 2011 Latest Research: New Product Success, Failure and Kill Rates Leadbeater 2006 The User Innovation Revolution

EIRMA, EUA, EARTO, ProTon 2009 Responsible Partnering: Joining forces in a world of open innovation Lindegaard 2011 Making Open Innovation Work

Ellen McArthur Foundation 2012 In depth – Washing Machines Macintosh School of Architecture 2012 Zero Energy Mass Customised Housing Graduate Course

Erkinheimo, Harjanne 2011 Idea Crowdsourcing at Nokia – 12 months wiser Marketing Week 2011 B2B brands build extra marketing muscle

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Garcia 2011 The relevance of marketing in the success of innovations Merges 2012 Secondary Patent Markets: A Possible Role for Startups

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36 37
Author Year Title

Rebrand 2012 2012 Rebrand 100 - Cisco

RepRap.Org 2012 Wiki

Roussel, Saad, Erickson 1991 Third-Generation R&D Management (Arthur D. Little)

Sandia Labs 1997 Fundamentals of Technology Roadmapping

SAVE International 2007 VALUE METHDOLOGY STANDARD


and BODY OF KNOWLEDGE

Schenk, Guittard 2011 TOWARDS A CHARACTERIZATION OF CROWDSOURCING PRACTICES

Sorli, Stokic 2010 FUTURE TRENDS IN PRODUCT/PROCESS INNOVATION

Soukhoroukova, Spann, Skiera 2011 Sourcing, Filtering, and Evaluating New Product Ideas: An Empirical Exploration of the
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Sridharan 2012 Community Innovation: Crowdsourcing in software testing

Sydney Morning Herald 2012 Craig from Coogee rivals Angry Birds: a victory for the ‘common man’

Tate 2012 The 20% Doctrine

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von Hippel 2011 The User Innovation Revolution: Interview with Eric von Hippel

Wagner, Piller 2012 Increasing innovative capacity: is your company ready to benefit from open innovation
processes?

38 39
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and/or language please contact the Scottish Enterprise
Helpline on 0845 607 8787 to discuss your needs.
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