McKinsey: The Next Step of Open Innovation

McKinsey & Company released a great article as part of their McKinsey Quarterly that drives home a point I made just a few days ago.

While too long to go into detail here, the article, which cites SugarCRM, says that innovation and product development/feedback has been a predominately proprietary-based activity and that some businesses are starting to buck the trend. Executives at many companies are now realizing the value of open innovation. In particular, the article says:

“This is the model of innovation as a convergence of like-minded parties. Increasing numbers of organizations are now taking that approach: distributed cocreation, to use its technical name. LEGO, for instance, famously invited customers to suggest new models interactively and then financially rewarded the people whose ideas proved marketable. The shirt retailer Threadless sells merchandise online—and now in a physical store, in Chicago—that is designed interactively with the company’s customer base. In the software sector, open-source platforms developed through distributed cocreation, such as the “LAMP” stack (for Linux, Apache, MySQL, and PHP/Perl/Python), have become standard components of the IT infrastructure at many corporations. What facilitates this new approach to innovation is the rise of the Web as a participatory platform. What will drive its adoption by an increasing number of companies is the growing competitive need to uncover many more good ideas for products and to make better and faster use of those ideas.

The article goes on and cites a number of great examples, such as LEGO and Firefox. In addition, I’d also add the video game industry, which as I stated the other day, is another great example of community-driven product development and feedback, and which represents what the next generation of CRM solutions and open source are bringing to the market place. But regardless of the industry, there’s titanic shift taking place in the way in which consumers consume…and provide feedback on…products and services, whether it’s your average Joe looking to buy an off-the-shelf product, or a CTO looking for a superior application development model when shopping for a CRM solution.