Goodyear and Open Innovation

Seems that Goodyear, the tire company, is embracing open innovation in the quest to find innovation in their product offerings. Goodyear sponsored “Innovation Events” where they laid out their plans for the future and brought members of their ecosystem “under their wing”. Goodyear innovators will continue to team with leading research and testing institutions like Sandia National Labs. However this new initiative allows Goodyear to also tap into their close working relationships with their suppliers to encourage joint technology development that will help the tire maker bring “game changing” products to market at an even faster pace.

Since the April meetings, these suppliers have proposed nearly 200 initiatives in the areas of acquisition cost, materials management, conversion cost and new product development that can have a direct, positive impact on Goodyear’s product innovations. These initiatives will serve to enhance Goodyear’s overall R&D expenditures, but more importantly, they will significantly enhance the company’s supply chain.

“When fully aligned with Goodyear’s new products engine, the combined effort should accelerate significantly the introduction of relevant new innovations,” Kihn said.

“Innovation in difficult times makes more of a difference than ever,” stated Bert De Graeve, Chief Executive Officer of Belgium-based Bekaert Corporation, a global leader in drawn steel wire products and applications. “We greatly appreciate Goodyear’s commitment to long term collaborative innovation with its suppliers. The definition of a good supplier goes well beyond a cheap supplier for the next quarter and Bekaert is ready to take on the innovation challenges outlined by Goodyear’s executive leadership,” he said.

Goodyear and the supplier companies will facilitate the application of new innovations into new tire products while protecting each other’s intellectual property through a series of new, or enhanced technical and commercial agreements. “We want to ensure that the commercialization of any innovation occurs at the appropriate stage of a product’s development,” Kihn said. “And we also want to make sure that there are sufficient incentives provided to our suppliers so that they concentrate on the most marketable innovations.”

Goodyear is one of the world’s largest tire companies. It employs nearly 70,000 people and manufactures its products in more than 60 facilities in 25 countries around the world. Its two Innovation Centers in Akron, Ohio and Colmar Berg, Luxembourg strive to develop state-of-the-art products that set the technology and performance standard for the industry.

Step-Change: Collaborating To Innovate

Open Innovation is all about breaking down the barriers internally within an organization, but most importantly between an organization and its partners. Most organizations do this very poorly – they talk about “partnering” and “ecosystems” and “win-win” but at the end of the day, they treat their partners with contempt, purely as a vehicle for revenue.

This must change. As globalization and selling into adjacent markets become more and more relevant, the establishment of truly meaningful partnerships becomes essential and not a desirable nicety.

A recent study confirms exactly this. It has been undertaken by Logica in conjunction with the London School of Economics. I quote the key findings here because I passionately believe they are absolutely valid, and that we must all take them to heart if we are to success in a globalized economy.

1. Innovation is even more important in economic recessions. Innovations can be changes in IT operations, business processes or in products and services offered or in the business model of how the firm competes. To survive and thrive through a recession requires sustainable change. A focus on cost-cutting alone, or even cost-efficiency solves short-term problems, at the expense of building the future business.

2. Innovation using the external services market is increasingly realistic as both clients and suppliers are maturing their ability to go beyond traditional
outsourcing relationships and build the collaborative arrangements necessary for innovating. This means clients can move from contract administration and
outsourcing management to a new phase of collaborative leadership. They can also develop a new performance agenda.

3. Innovation with large-scale, long term impact requires deep collaboration within clients, and with and across their external suppliers. Without this, innovation, and the consequent high performance, cannot be delivered.

4. Collaborating to innovate requires a step-change in objectives pursued, relationships with suppliers, and how work and innovation is conducted. Our
study of effective practitioners suggests distinctive practices for success. These can be classified into a fourfold framework – Leading, Contracting, Organizing and Behaving.

5. Leadership shapes the context for collaboration, innovation and high performance and is primary. Leadership deals with adaptive challenges, and must be at all levels in each of the collaborating parties. Leadership also changes the approach to risk in order to share and manage down risk and manage in opportunity.

6. New forms of contracting are required for collaborative innovation to succeed. Such contracts share risk and reward in ways that incent innovation, collaboration and high performance to achieve common goals.

7. Organizing for innovation requires more co-managed governance structures and greater multi-functional teaming across those organizations and people
responsible for delivering results. Teaming now requires the ability to collaborate within a client organisation, between client and supplier and between suppliers in multi-vendor environments.

8. Leading, contracting, and organising in these ways incents behaviour and enables collective delivery of superior business performance. Collaborative innovation is most effective when it generates high personal, competence-based and motivational trust amongst the parties. High trust is a key component and shaper of the collaborative, open, learning, adaptive, flexible and interdependent behaviours required.

3M and a Culture of Collaboration

I have talked for some time in this blog about how collaboration powers innovation, and how most of us do not truly collaborate.

One of the key issues in collaboration internally within an organisation is having a culture of collaboration. The challenge with establishing such a culture is to align incentives as part of that culture – more often than not, this does not happen, and while evryone runs around talking about colaboration and innovation, their KPIs and remuneration is securely centred on the “ME”.

BusinessWeek has run a story on how 3M successful harnessed their culture of collaboration to their benefit. While the example in this article is not very compelling (it is of a worker using a corporate skills” directory to find an expert) the lessons learned are reasonable, and I quote them in full here.

Support networks. Build Web-based social networks that help employees with a problem find those with an answer. Support grassroots networking initiatives such as 3M’s TechForum—an employee-run group that organizes speaker events to stimulate thinking and also serves as a kind of mixer, where scientists from different labs or divisions can connect in person.

Build collaboration into your employee evaluation system. Reward employees not just for developing an innovative technology, idea, or process, but for spreading it. No company reaps the benefits of collaboration if their employees or managers are hoarding innovation in order to look good at the next quarterly meeting.

Encourage curiosity. 3M allows employees to spend 15% of their time on projects of their choosing, giving them permission to develop ideas or technologies that may be outside of their regular work focus. Such policies increase the odds of collaboration, as the path of curiosity often leads employees beyond their knowledge base, to a place where they need the advice and insight of others.

Create innovation funds. Group or department managers focused on core-related projects often don’t want to spend money exploring or developing innovative ideas. To overcome this common roadblock, companies should create an alternative source—3M calls these Genesis Grants—that employees can go to for funding of innovation projects that don’t fit neatly into existing departments.

Don’t underestimate the value of physical proximity. When 3M’s Post-it Note team wanted to accelerate product development, it had the team’s marketing, financial, and other nonmembers move into the same building with the tech folks. If different functions have to be housed in different buildings, pay for a shuttle service that makes it easy for employees in different departments to visit each other.

Two articles on Innovation from McKinsey

Excellent articles worth reading. The first talks about how we measure innovation. Always a difficult topic. Can innovation be measured? “Yes, yes and Yes” sites the author. McKinsey argues that innovation impact can be measured, and even provides some metrics.

The second article talks about the potential need for a national strategy on Innovation. To quote:

With a national strategy, as well as efforts to seed creative chaos from the bottom up, the Obama administration could put America on the right path for the long term. Unleashing, channeling, and connecting millions of innovative minds across all regions, all disciplines, and all walks of life is the most important form of long-term stimulus the president can provide. It is the key to nurturing our national coral reef.