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SMARTY EARS’ OPEN INNOVATION PROGRAM
    FOR THE DEVELOPMENT OF IPAD APPS

                         ProductCamp Austin 8
                                February 2012

                         Jose A. Briones, Ph.D.
                SpyroTek Performance Solutions
                             Twitter: @Brioneja
Agenda
 Background
 Definitions of Open Innovation
 Industry Successes
 Open Innovation Services and Software
 Case Study:
     Smarty Ears Use of Open Innovation for
     Development of iPad Apps




                         www.Brioneja.com
                         Twitter: @Brioneja
Legalese
•   “The fair use of a copyrighted work, including such use
    by reproduction in copies or phonorecords or by any
    other means specified by that section, for purposes
    such as criticism, comment, news reporting, teaching
    (including multiple copies for classroom use),
    scholarship, or research, is not an infringement of
    copyright” - Copyright Act of 1976, 17 U.S.C. 107




                          www.Brioneja.com
                          Twitter: @Brioneja
Background

   Open Innovation is now a very fashionable term
    and many companies are rushing to implement an
    open innovation process without fully
    understanding its value nor how it fits within their
    existing product development process.

   In this Chapter of the “Beyond Stage Gate” series
    we will discuss the different definitions of Open
    Innovation, where does it fit in the development
    cycle, software tools available and a case study.

                           www.Brioneja.com
                           Twitter: @Brioneja
Case Study
   We will show how Smarty Ears, a developer of iPad
    apps for Speech Therapy and Communication, has
    used open innovation to greatly increase the number
    of ideas to market, as well as accelerate the product
    development cycle




                         www.Brioneja.com
                         Twitter: @Brioneja
Clayton M. Christensen

• “There’s a better way for
  management teams to grow
  their companies. But they will
  need the courage to challenge
  some of the paradigms of
  financial analysis and the
  willingness to develop
  alternative methodologies”



                         www.Brioneja.com
                         Twitter: @Brioneja
Classical Innovation Process


              Idea                           Idea Generation
     Idea       2                            Idea Selection
       1
                                             Project Management
            Idea
              3




       Projects
                     www.Brioneja.com
                     Twitter: @Brioneja
www.Brioneja.com
Twitter: @Brioneja
Classical Stage-Gate
Process


                               Source: Product Development Institute, Inc.

Project is managed in a linear fashion

“The Stage-Gate system assumes that the proposed strategy is the right
strategy, the problem is that except in the case of incremental
innovations, the right strategy cannot be completely known in advance”
– Clayton M. Christensen
                              www.Brioneja.com
                              Twitter: @Brioneja
The Spiro-Level™ Approach to Innovation
                              Resources
                                                 Launch
Quadrant IV                                                           Quadrant I
                 Roadmap/Timeline
                                                        Level   Idea
                                                                Generation
        Risk Analysis                                   3

                                                    2                VOC
        Customer
        Testing                                 1

          Time                                                               Time

                                                                     Technology
        Supply Chain                                                 Assessment
        Analysis
                                                                       Business
                   Value in Use                                        Case
                   Analysis                           Regulatory
 Quadrant III               Prototype                 IP Strategy       Quadrant II
                            Development       Resources
                                    www.Brioneja.com
                                    Twitter: @Brioneja
Definition
                    s
   What is Open Innovation (OI)?

     It is a paradigm that assumes that firms can
     and should use both internal and external
     ideas to further their technology goals.
     Henry Chesbrough




                        www.Brioneja.com
                        Twitter: @Brioneja
The Open Innovation
Paradigm




           www.Brioneja.com
           Twitter: @Brioneja
P&G
   Connect and Develop – Launched in 2000

   Accelerating internal R&D by leveraging the
    ideas, knowledge, expertise, know-how of a
    network of individuals, businesses and
    institutions from around the world

   P&G needs are posted on website in classified
    categories, and then anyone who is interested
    or has the solution can propose their ideas
    and get assessed by a specialized team.

   Payments can range from US$10,000 to
    US$100,000 (Bessant and Tidd, 2008)
                        www.Brioneja.com
                        Twitter: @Brioneja
P&G Open Innovation
Results
   By 2006, 35% of all P&G products had
    an external component vs. 15% in 2000.
     Over 50% today.
 R&D productivity increased 60%
 Today P&G has more than 1000
  agreements with innovation partners


    Source: Veristlabs.com


                             www.Brioneja.com
                             Twitter: @Brioneja
Clorox
   Clorox wants to use open innovation to:
     Find ideas, technologies and products
     Outsource entire chunks of product development
     License / sell internal ideas and technologies to others

   Clorox says that for open innovation to work,
    need:
     Strong internal and external networks
     Clear choices in corporate strategy that direct the “find”
      activities
     Capabilities, teams and processes to find more ideas
     AND capabilities, teams and processes to enable what’s
      found to be used: combined with other inputs, quickly
      assessed and built into business opportunities


     Source: The Clorox Approach to Open Innovation.
      Stephan Lindegaard
                             www.Brioneja.com
                             Twitter: @Brioneja
Keys to Success
   OI is a way to speed up time to market and increase
    probability of success

   OI includes sourcing for products, technology, intellectual
    property and ideas.

   OI is NOT outsourcing. OI requires constant interactions
    between companies and inventors. It requires huge
    partnering capabilities on both sides.

   OI will not decrease a company’s costs – it will only move
    it among line items. R&D budget may be less over time,
    but Legal and Business Development budgets will
    increase immediately.


   Source: Open Innovation – Paradigm Shift or Program?
    September 21, 2009 by Suzanne Harrison
                               www.Brioneja.com
                               Twitter: @Brioneja
Open Innovation Services vs.
Software
   Open Innovation Services offer a
    communities of experts in a variety of
    fields.
     Problems are posted for a fee to get
     feedback from the community


   Open Innovation Software relies in the
    company’s customer base and a
    broader reach

                        www.Brioneja.com
                        Twitter: @Brioneja
Open Innovation Services




          www.Brioneja.com
                           
          Twitter: @Brioneja
                               Source: Frank T. Piller
Open Innovation Software
   Spigit
     SpigitEngage for Facebook,
      organizations can engage their
      customers in social co-creation by
      tapping customer insights through
      idea generation, free thought,
      campaigns, contests, and game
      dynamics.



   Ryma
     Ideascope integrates customer
      feedback with other systems like
      Help Desk, Customer Relationship
      Management (CRM), Demand
      Management

                              www.Brioneja.com
                              Twitter: @Brioneja
Open Innovation
         Software
   Imaginatik
     Innovation Central
      collaboration platform allows
      organizations to include or
      exclude whichever groups or
      individuals are most
      appropriate for the topic

   Nosco
     Idea management software
     Publish, rate and collaborate
      on ideas



                            www.Brioneja.com
                            Twitter: @Brioneja
Smarty Ears’ Open Innovation
Program
   Smarty Ears is the largest
    app publishing company in
    the segment of speech and
    language development.

     34 total Apps
     Most for iPhone and iPad but
      some for Android.


   Promotion is via Social
    Media and Website

                             www.Brioneja.com
                             Twitter: @Brioneja
How The Program Works
                      Just like in traditional publishing,
                       there are authors to
                       books/therapy materials and
                       there are publishers.

                        Smarty Ears is the App
                         publisher and the submitter is
                         the author
                        Submitters continue to own
                         the idea and materials they
                         provide, and therefore they get
                         paid royalties for it.
                        The final application, coding,
                         and any art work developed
                         belongs to Smarty Ears.

                      Typical contract is 5 to 10 years
        www.Brioneja.com
        Twitter: @Brioneja
Royalties
   Authors receive a
    royalty of 5% to 15%
    on all sales for their
    app.

   The amount of royalty
    is decided based on
     Level of expertise
     Amount of material
      provided by you to us on
      the creation of the app
     Complexity of the
      application.

   Apps have name, bio,
    photo of author              www.Brioneja.com
                                 Twitter: @Brioneja
Program
Growth
                In the past Smarty Ears’
                 open innovation program
                 was limited
                   Apps that Smarty Ears could
                         not do on its own because of
                         lack of expertise.

                Today the program has
                 expanded to include apps
                 that Smarty Ears could do
                   Looking for submitters that
                    can devote the time to Co-
                    development and not just
                    submit ideas.
                   Higher probability of success

    www.Brioneja.com
    Twitter: @Brioneja
Benefits of Co-Development
                                  Submitters are
                                   passionate
                                   about their
                                   idea
                                    They want it to
                                     be perfect
                                    Test with their
                                     heart
                                    Become the
                                     most effective
                                     salespersons

          www.Brioneja.com
          Twitter: @Brioneja
App Creation Flow
 Create mockup
 Create content
     Questions
 Select images
 Create flow of product
 Coding
 Bug testing
 iTunes description

                    www.Brioneja.com
                    Twitter: @Brioneja
Open Innovation Program
Results
                          ~10 ideas for new
                           apps/month

                          1 out of 10 becomes an
                           app.

                          7 new apps are a result of
                           this process
                            More apps to market - faster


                          Recent app release from
                           Open Innovation program
                           “Fun and Functional” is
                           currently on top 50
                           educational app list on
                           iTunes
            www.Brioneja.com
            Twitter: @Brioneja
Program Lessons
   Win-Win Scenario

     Not a one-time payment
     Both the company and the
      submitter benefit from the
      success of the product


   % Revenue sharing goes
    down if author does not
    participate in updates with
    content.

     Does not include bug fixing

                              www.Brioneja.com
                              Twitter: @Brioneja
Acknowledgements
 Thanks to Smarty Ears, LLC for allowing
  me to be part of this exciting new field of
  product development
 www.smartyearsapps.com




                     www.Brioneja.com
                     Twitter: @Brioneja
Contact Information

 Jose A. Briones, Ph.D.
 Brioneja@SpyroTek.com
 Twitter: @Brioneja




                  www.Brioneja.com
                  Twitter: @Brioneja
Resources
   Making Open Innovation Work. Author: Stefan Lindegaard
   Open Services Innovation. Henry Chesbrough
   A Guide to Open Innovation and Crowdsourcing. Paul Sloane
   The Open Innovation Marketplace. A. Bingham and D. Spradlin
   Open Innovation – Paradigm Shift or Program? September 21,
    2009 by Suzanne Harrison
   Innovation Killers, 2008 - HBR     http://hbr.org/product/innovation-killers-how-
    financial-tools-destroy-you/an/R0801F-PDF-ENG?Ntt=innoation%2520killers

   Stage-Gate® is a registered trademark from Stage-Gate
    International’s Product Development Institute Inc.




                                                   www.Brioneja.com
                                                   Twitter: @Brioneja

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What is the Benefit of an Open Innovation Process?

  • 1. SMARTY EARS’ OPEN INNOVATION PROGRAM FOR THE DEVELOPMENT OF IPAD APPS ProductCamp Austin 8 February 2012 Jose A. Briones, Ph.D. SpyroTek Performance Solutions Twitter: @Brioneja
  • 2. Agenda  Background  Definitions of Open Innovation  Industry Successes  Open Innovation Services and Software  Case Study:  Smarty Ears Use of Open Innovation for Development of iPad Apps www.Brioneja.com Twitter: @Brioneja
  • 3. Legalese • “The fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright” - Copyright Act of 1976, 17 U.S.C. 107 www.Brioneja.com Twitter: @Brioneja
  • 4. Background  Open Innovation is now a very fashionable term and many companies are rushing to implement an open innovation process without fully understanding its value nor how it fits within their existing product development process.  In this Chapter of the “Beyond Stage Gate” series we will discuss the different definitions of Open Innovation, where does it fit in the development cycle, software tools available and a case study. www.Brioneja.com Twitter: @Brioneja
  • 5. Case Study  We will show how Smarty Ears, a developer of iPad apps for Speech Therapy and Communication, has used open innovation to greatly increase the number of ideas to market, as well as accelerate the product development cycle www.Brioneja.com Twitter: @Brioneja
  • 6. Clayton M. Christensen • “There’s a better way for management teams to grow their companies. But they will need the courage to challenge some of the paradigms of financial analysis and the willingness to develop alternative methodologies” www.Brioneja.com Twitter: @Brioneja
  • 7. Classical Innovation Process Idea  Idea Generation Idea 2  Idea Selection 1  Project Management Idea 3 Projects www.Brioneja.com Twitter: @Brioneja
  • 9. Classical Stage-Gate Process Source: Product Development Institute, Inc. Project is managed in a linear fashion “The Stage-Gate system assumes that the proposed strategy is the right strategy, the problem is that except in the case of incremental innovations, the right strategy cannot be completely known in advance” – Clayton M. Christensen www.Brioneja.com Twitter: @Brioneja
  • 10. The Spiro-Level™ Approach to Innovation Resources Launch Quadrant IV Quadrant I Roadmap/Timeline Level Idea Generation Risk Analysis 3 2 VOC Customer Testing 1 Time Time Technology Supply Chain Assessment Analysis Business Value in Use Case Analysis Regulatory Quadrant III Prototype IP Strategy Quadrant II Development Resources www.Brioneja.com Twitter: @Brioneja
  • 11. Definition s  What is Open Innovation (OI)?  It is a paradigm that assumes that firms can and should use both internal and external ideas to further their technology goals. Henry Chesbrough www.Brioneja.com Twitter: @Brioneja
  • 12. The Open Innovation Paradigm www.Brioneja.com Twitter: @Brioneja
  • 13. P&G  Connect and Develop – Launched in 2000  Accelerating internal R&D by leveraging the ideas, knowledge, expertise, know-how of a network of individuals, businesses and institutions from around the world  P&G needs are posted on website in classified categories, and then anyone who is interested or has the solution can propose their ideas and get assessed by a specialized team.  Payments can range from US$10,000 to US$100,000 (Bessant and Tidd, 2008) www.Brioneja.com Twitter: @Brioneja
  • 14. P&G Open Innovation Results  By 2006, 35% of all P&G products had an external component vs. 15% in 2000.  Over 50% today.  R&D productivity increased 60%  Today P&G has more than 1000 agreements with innovation partners Source: Veristlabs.com www.Brioneja.com Twitter: @Brioneja
  • 15. Clorox  Clorox wants to use open innovation to:  Find ideas, technologies and products  Outsource entire chunks of product development  License / sell internal ideas and technologies to others  Clorox says that for open innovation to work, need:  Strong internal and external networks  Clear choices in corporate strategy that direct the “find” activities  Capabilities, teams and processes to find more ideas  AND capabilities, teams and processes to enable what’s found to be used: combined with other inputs, quickly assessed and built into business opportunities  Source: The Clorox Approach to Open Innovation. Stephan Lindegaard www.Brioneja.com Twitter: @Brioneja
  • 16. Keys to Success  OI is a way to speed up time to market and increase probability of success  OI includes sourcing for products, technology, intellectual property and ideas.  OI is NOT outsourcing. OI requires constant interactions between companies and inventors. It requires huge partnering capabilities on both sides.  OI will not decrease a company’s costs – it will only move it among line items. R&D budget may be less over time, but Legal and Business Development budgets will increase immediately.  Source: Open Innovation – Paradigm Shift or Program? September 21, 2009 by Suzanne Harrison www.Brioneja.com Twitter: @Brioneja
  • 17. Open Innovation Services vs. Software  Open Innovation Services offer a communities of experts in a variety of fields.  Problems are posted for a fee to get feedback from the community  Open Innovation Software relies in the company’s customer base and a broader reach www.Brioneja.com Twitter: @Brioneja
  • 18. Open Innovation Services www.Brioneja.com  Twitter: @Brioneja Source: Frank T. Piller
  • 19. Open Innovation Software  Spigit  SpigitEngage for Facebook, organizations can engage their customers in social co-creation by tapping customer insights through idea generation, free thought, campaigns, contests, and game dynamics.  Ryma  Ideascope integrates customer feedback with other systems like Help Desk, Customer Relationship Management (CRM), Demand Management www.Brioneja.com Twitter: @Brioneja
  • 20. Open Innovation Software  Imaginatik  Innovation Central collaboration platform allows organizations to include or exclude whichever groups or individuals are most appropriate for the topic  Nosco  Idea management software  Publish, rate and collaborate on ideas www.Brioneja.com Twitter: @Brioneja
  • 21. Smarty Ears’ Open Innovation Program  Smarty Ears is the largest app publishing company in the segment of speech and language development.  34 total Apps  Most for iPhone and iPad but some for Android.  Promotion is via Social Media and Website www.Brioneja.com Twitter: @Brioneja
  • 22. How The Program Works  Just like in traditional publishing, there are authors to books/therapy materials and there are publishers.  Smarty Ears is the App publisher and the submitter is the author  Submitters continue to own the idea and materials they provide, and therefore they get paid royalties for it.  The final application, coding, and any art work developed belongs to Smarty Ears.  Typical contract is 5 to 10 years www.Brioneja.com Twitter: @Brioneja
  • 23. Royalties  Authors receive a royalty of 5% to 15% on all sales for their app.  The amount of royalty is decided based on  Level of expertise  Amount of material provided by you to us on the creation of the app  Complexity of the application.  Apps have name, bio, photo of author www.Brioneja.com Twitter: @Brioneja
  • 24. Program Growth  In the past Smarty Ears’ open innovation program was limited  Apps that Smarty Ears could not do on its own because of lack of expertise.  Today the program has expanded to include apps that Smarty Ears could do  Looking for submitters that can devote the time to Co- development and not just submit ideas.  Higher probability of success www.Brioneja.com Twitter: @Brioneja
  • 25. Benefits of Co-Development  Submitters are passionate about their idea  They want it to be perfect  Test with their heart  Become the most effective salespersons www.Brioneja.com Twitter: @Brioneja
  • 26. App Creation Flow  Create mockup  Create content  Questions  Select images  Create flow of product  Coding  Bug testing  iTunes description www.Brioneja.com Twitter: @Brioneja
  • 27. Open Innovation Program Results  ~10 ideas for new apps/month  1 out of 10 becomes an app.  7 new apps are a result of this process  More apps to market - faster  Recent app release from Open Innovation program “Fun and Functional” is currently on top 50 educational app list on iTunes www.Brioneja.com Twitter: @Brioneja
  • 28. Program Lessons  Win-Win Scenario  Not a one-time payment  Both the company and the submitter benefit from the success of the product  % Revenue sharing goes down if author does not participate in updates with content.  Does not include bug fixing www.Brioneja.com Twitter: @Brioneja
  • 29. Acknowledgements  Thanks to Smarty Ears, LLC for allowing me to be part of this exciting new field of product development  www.smartyearsapps.com www.Brioneja.com Twitter: @Brioneja
  • 30. Contact Information  Jose A. Briones, Ph.D.  Brioneja@SpyroTek.com  Twitter: @Brioneja www.Brioneja.com Twitter: @Brioneja
  • 31. Resources  Making Open Innovation Work. Author: Stefan Lindegaard  Open Services Innovation. Henry Chesbrough  A Guide to Open Innovation and Crowdsourcing. Paul Sloane  The Open Innovation Marketplace. A. Bingham and D. Spradlin  Open Innovation – Paradigm Shift or Program? September 21, 2009 by Suzanne Harrison  Innovation Killers, 2008 - HBR http://hbr.org/product/innovation-killers-how- financial-tools-destroy-you/an/R0801F-PDF-ENG?Ntt=innoation%2520killers  Stage-Gate® is a registered trademark from Stage-Gate International’s Product Development Institute Inc. www.Brioneja.com Twitter: @Brioneja