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Editor’s note: The following Q&A is an extension of a webinar about external innovation hosted by Doug Williams, Director of Innovation Strategy at Spigit. The questions were provided by webinar attendees.

Q: When it comes to external innovation, can you provide some examples of incentives for participation? Also, can you give some examples of exchange of values?

DW: Incentives are every bit as important in an external challenge as they are in an internal challenge. Everyone invited to participate in a challenge of any kind will ask themselves this simple question: “What is in it for me?” The key difference between working with internal crowds and external crowds is that there are far fewer — if any — intrinsic rewards that you can offer to an external crowd. Internal crowds appreciate the visibility of participating in and perhaps submitting a winning idea in a crowdsourcing challenge. They appreciate the opportunity to be recognized as a top collaborator or top innovator in a public forum like a town hall meeting much more than a free sweatshirt or $50 gift card.

With external crowds, the incentive typically must come in the form of some “thing” — cash rewards or prizes are popular, but are not the only options. The opportunity to visit the sponsoring company’s headquarters and present their idea, or have the opportunity to work with a team to bring the idea to life, are two options that have a cost to the sponsor company but may have a perceived value to the recipient that is much greater. That’s where the “exchange of value” comes into play. The incentive you offer must be in line with the value of whatever it is you are asking the crowd to provide. Asking them to simply vote? Conduct a lottery to hand out SWAG to 10 random winners. Asking for a creative response to a brief, such as a video or design? Consider 10 monetary awards ranging from $5,000 for first down to $500 for 6th-10th. Asking for new product or service concepts, or technology to help solve a problem? Your reward had better include some form of licensing arrangement, or all you will hear are crickets.

Q: How do you innovate externally without exposing intellectual property?

DW: How to handle intellectual property (IP) is the most common question when it comes to external innovation. The dreaded answer is, “It depends.” We typically ask three key questions when it comes to IP:

    1. What kinds of ideas are we looking for? Ideas may be new to the world, a feature/product enhancement, a more straightforward process, or operational improvement. When you run down that kind of continuum, the importance of IP protection starts high and diminishes as you go.
    2. What is the source of these ideas? Who comprises the crowd, and what are their expectations? A partner in your supply chain may have no interest in IP retention if their idea helps make a process more efficient. On the other hand, sourcing opportunities from startups will require firm IP protection in order to engage in any meaningful interactions.
    3. How developed is the IP? If submitted ideas are along the lines of “It would be nice if you could…”, then IP restrictions should be low, or even nonexistent. Partially- or fully-developed ideas would require some agreement between the parties, with higher expectations for IP protection for those who are offering a tried-and-true solution.

Other factors can also come into play.

First, an external challenge doesn’t necessarily mean that it is a challenge conducted in an open, public forum. If you choose to work with a selected private external group, then you can require agreeing to terms and conditions that include non-disclosure agreements provided by your legal department.

Second, external challenges can incorporate “closed” submission, such that other external participants cannot see ideas that have been submitted. In that scenario, the crowd would not perform any vetting of ideas or collaborate to improve ideas, which are two key aspects of most open challenges (internal or external). However, this provides some comfort to the idea submitter that his or her IP will not be shared with others, although it would be subject to whatever IP transfer requirements you decide to put in place. Generally speaking, the more strict the IP requirements in the company’s favor, the less likely you will get any takers (see discussion of exchange of value earlier in this post).

Third, external challenges can place the burden on the external crowd to ensure that anyone submitting an idea has taken steps to protect their own IP. In its Frontier challenges, Siemens warns participants against submitting ideas or solutions that incorporate unprotected IP.

Q: What are the expectations of feedback on an external challenge?

DW: With external challenges, you are building a community. Effectively communicating with that community will make the individuals feel important and well-informed, which will encourage them to participate in future challenges. Just as with internal challenges, it is critical that you close the loop with external challenge participants by letting them know how the challenge ended. Even if your challenge process doesn’t allow you to share the winning ideas with all participants, a simple “thank you” will go a long way in showing the crowd that you valued its participation.

Q: How effective are external challenges in B2B environment?

DW: As I discussed in the webinar, there are many use cases for external challenges, including B2B scenarios, such as challenges with supply chain vendors, current partners, or start-ups/entrepreneurs. How effective they are depends on how closely you follow our best practices, of course! In all seriousness, the effectiveness of any challenge hinges (1) how well you have aligned the question with the target audience; (2) how well you communicate to/with that audience, and (3) whether the exchange of value you establish is considered fair to the audience.

Q: What experience did companies engaging in external challenges have with Spigit for internal innovation / ideation prior to launching external campaigns?

DW: It is very common for our enterprise customers to run several internal challenges before launching an external challenge. In most cases, the program sponsor simply wants to ensure that the team has a chance to get familiar with the software and the crowdsourcing process before engaging in a more public arena. However, some clients face business objectives that require use of an external challenge (such as Unilever and UNHCR), so they dive right in without any prior internal campaign experience. I would note that most customers engage Spigit’s Services team when they run their first external challenge. We guide the process, share best practices, and transfer knowledge that our customers can then leverage to run future external challenges.

Q: How do you address the barrier of an organization that states, “It’s not in our policy to gather ideas from our customers?”

DW: That’s a pretty substantial barrier! It takes a lot of work to change a policy like that. It reminds me of one of the Four Lenses of Innovation as defined by my friend Rowan Gibson in his book of the same name, namely “Challenge Orthodoxies.” A few questions come to mind: Why is this the policy? When was it put in place, and by whom? What are the downsides to gathering ideas from customers? What if we had an online tool we could use to solicit ideas from customers, allow them to work together to improve those ideas, and then let them help us identify the best ideas to take action on? Maybe there is a good reason for this policy. Then again, maybe there isn’t!