Management

Karim R. Lakhani, Wesley M. Cohen, Kynon Ingram, Tushar Kothalkar, Maxim Kuzemchenko, Santosh Malik, Cynthia Meyn, Greta Friar, and Stephanie Healy Pokrywa. 2014. Netflix: Designing the Netflix Prize (A). Harvard Business School Case. Harvard Business School. Publisher's VersionAbstract
In 2006, Reed Hastings, CEO of Netflix, was looking for a way to solve Netflix's customer churn problem. Netflix used Cinematch, its proprietary movie recommendation software, to promote individually determined best-fit movies to customers. Hastings determined that a 10% improvement to the Cinematch algorithm would decrease customer churn and increase annual revenue by up to $89 million. However, traditional options for improving the algorithm, such as hiring and training new employees, were time intensive and costly. Hastings decided to improve Netflix's software by crowdsourcing, and began planning the Netflix Prize, an open contest searching for a 10% improvement on Cinematch. The case examines the dilemmas Hastings faced as he planned the contest, such as whether to use an existing crowdsourcing platform or create his own, what company information to expose, how to protect customer privacy while making internal datasets public, how to allocate IP, and how to manage the crowd.
Kevin J. Boudreau, Eva C. Guinan, Karim R. Lakhani, and Christoph Riedl. 2016. “Looking Across and Looking Beyond the Knowledge Frontier: Intellectual Distance, Novelty, and Resource Allocation in Science.” Management Science, 62, 10, Pp. 2765-2783. Publisher's VersionAbstract

Selecting among alternative projects is a core management task in all innovating organizations. In this paper, we focus on the evaluation of frontier scientific research projects. We argue that the “intellectual distance” between the knowledge embodied in research proposals and an evaluator’s own expertise systematically relates to the evaluations given. To estimate relationships, we designed and executed a grant proposal process at a leading research university in which we randomized the assignment of evaluators and proposals to generate 2,130 evaluator–proposal pairs. We find that evaluators systematically give lower scores to research proposals that are closer to their own areas of expertise and to those that are highly novel. The patterns are consistent with biases associated with boundedly rational evaluation of new ideas. The patterns are inconsistent with intellectual distance simply contributing “noise” or being associated with private interests of evaluators. We discuss implications for policy, managerial intervention, and allocation of resources in the ongoing accumulation of scientific knowledge.

Kevin J. Boudreau and Karim R. Lakhani. 2013. “Using the Crowd as an Innovation Partner.” Harvard Business Review 91 (4), Pp. 61-69. Publisher's VersionAbstract

From Apple to Merck to Wikipedia, more and more organizations are turning to crowds for help in solving their most vexing innovation and research questions, but managers remain understandably cautious. It seems risky and even unnatural to push problems out to vast groups of strangers distributed around the world, particularly for companies built on a history of internal innovation. How can intellectual property be protected? How can a crowdsourced solution be integrated into corporate operations? What about the costs? These concerns are all reasonable, the authors write, but excluding crowdsourcing from the corporate innovation tool kit means losing an opportunity. After a decade of study, they have identified when crowds tend to outperform internal organizations (or not). They outline four ways to tap into crowd-powered problem solving — contests, collaborative communities, complementors, and labor markets — and offer a system for picking the best one in a given situation. Contests, for example, are suited to highly challenging technical, analytical, and scientific problems; design problems; and creative or aesthetic projects. They are akin to running a series of independent experiments that generate multiple solutions—and if those solutions cluster at some extreme, a company can gain insight into where a problem’s “technical frontier” lies. (Internal R&D may generate far less information.)

Karim Lakhani and Greta Friar. 2014. Victors & Spoils: 'Born Open'. Harvard Business School Teaching Plan. Harvard Business School. Publisher's VersionAbstract

This teaching plan provides an 80 minute class plan for the case Victors & Spoils: "Born Open".

Victors & Spoils (V&S), located in Boulder, Colorado, was the first advertising agency built on open innovation and crowdsourcing principles from the ground-up. V&S was co-founded in 2009 by John Winsor, Claudia Batten and Evan Fry, all former members of the advertising agency Crispin Porter + Bogusky (CP+B). V&S crowdsourced creative ideas for its ad campaigns through Agency Machine, its proprietary online platform. CEO John Winsor wanted to change the way that advertising was done, a difficult task in an industry entrenched in traditional models. The case follows Winsor as he prepares to scale his business and must determine the best way to do so. He has an offer from Havas, a leading global advertising company interested in acquiring V&S, which would give V&S access to unprecedented resources. However, Winsor and the V&S team have concerns about how their innovative processes may be affected by partnering with a large, traditional company.

Karim R. Lakhani. 2015. Innovating with the Crowd. Harvard Business School Case. Harvard Business School. Publisher's VersionAbstract

This note outlines the structure and content of a seven-session module that is designed to introduce students to the fundamentals of innovating with the "crowd." The module has been taught in a second year elective course at the Harvard Business School on "Digital Innovation and Transformation" and is aimed at students that already have an understanding of how to structure an innovation process inside of a company. The module expands the students' innovation toolkit by exposing them to the theory and practice of extending the innovation process to external participants.

Michael L. Tushman, Hila Lifshitz-Assaf, and Kerry Herman. 2014. Houston, We Have a Problem: NASA and Open Innovation (A). Harvard Business School Case. Harvard Business School. Publisher's VersionAbstract
Jeff Davis, director of Space Life Sciences Directorate at NASA, has been working for several years to raise awareness amongst scientists and researchers in his organizations of the benefits of open innovation as a successful and efficient way to collaborate on difficult research problems regarding health and space travel. Despite a number of initiatives, SLSD members have been skeptical about incorporating the approach into their day-to-day research and work, and have resisted Davis's and his strategy team's efforts. The (A) case outlines these efforts and the organization members' reactions. The (B) case details what Davis and the SLSD strategy team learned, and how they adapted their efforts to successfully incorporate open innovation as one of many tools used in collaborative research at NASA.
Karim R. Lakhani, Marco Iansiti, and Kerry Herman. 2014. Samsung Electronics: TV in an Era of Convergence. Harvard Business School Case. Harvard Business School. Publisher's VersionAbstract

From the late 1990s to 2006/2007, Samsung Electronics moved from one of 170 TV manufacturers to gain dominant TV market share year over year from 2007-2013. As digital technologies increasingly converged in 2013-2014, the industry faced new questions: What was the future of TV? The case considers Samsung Electronics TV Group's product development processes, as the company's mobile and TV offerings increasingly converged and consumer demands and behavior pushed the historically clear boundaries of product, content, engagement and interaction.

Dietmar Harhoff and Karim R. Lakhani. 2016. Revolutionizing Innovation: Users, Communities, and Open Innovation. Cambridge, MA: MIT Press. Publisher's VersionAbstract

The last two decades have witnessed an extraordinary growth of new models of managing and organizing the innovation process, which emphasize users over producers. Large parts of the knowledge economy now routinely rely on users, communities, and open innovation approaches to solve important technological and organizational problems. This view of innovation, pioneered by the economist Eric von Hippel, counters the dominant paradigm, which casts the profit-seeking incentives of firms as the main driver of technical change. In a series of influential writings, von Hippel and colleagues found empirical evidence that flatly contradicted the producer-centered model of innovation. Since then, the study of user-driven innovation has continued and expanded, with further empirical exploration of a distributed model of innovation that includes communities and platforms in a variety of contexts and with the development of theory to explain the economic underpinnings of this still emerging paradigm. This volume provides a comprehensive and multidisciplinary view of the field of user and open innovation, reflecting advances in the field over the last several decades.

The contributors—including many colleagues of Eric von Hippel—offer both theoretical and empirical perspectives from such diverse fields as economics, the history of science and technology, law, management, and policy. The empirical contexts for their studies range from household goods to financial services. After discussing the fundamentals of user innovation, the contributors cover communities and innovation; legal aspects of user and community innovation; new roles for user innovators; user interactions with firms; and user innovation in practice, describing experiments, toolkits, and crowdsourcing and crowdfunding.

Karim R. Lakhani, Hila Lifshitz-Assaf, and Michael L. Tushman. 2013. “Open Innovation and Organizational Boundaries: Task Decomposition, Knowledge Distribution and the Locus of Innovation.” In Handbook of Economic Organization: Integrating Economic and Organizational Theory, edited by Anna Grandori, Pp. 355-382. Edward Elgar Publishing, Inc. Publisher's VersionAbstract

This chapter contrasts traditional, organization- centered models of innovation with more recent work on open innovation. These fundamentally different and inconsistent innovation logics are associated with contrasting organizational boundaries and organizational designs. We suggest that when critical tasks can be modularized and when problem- solving knowledge is widely distributed and available, open innovation complements traditional innovation logics. We induce these ideas from the literature and with extended examples from Apple, the National Aeronautics and Astronomical Agency (NASA) and LEGO. We suggest that task decomposition and problem- solving knowledge distribution are not deterministic but are strategic choices. If dynamic capabilities are associated with innovation streams, and if different innovation types are rooted in contrasting innovation logics, there are important implications for firm boundaries, design and identity.

Karim R. Lakhani and Michael L. Tushman. 2014. Victors & Spoils: 'Born Open'. Harvard Business School Multimedia/Video Case. Harvard Business School. Publisher's VersionAbstract

Victors & Spoils (V&S), located in Boulder, Colorado, was the first advertising agency built on open innovation and crowdsourcing principles from the ground-up. V&S was co-founded in 2009 by John Winsor, Claudia Batten and Evan Fry, all former members of the advertising agency Crispin Porter + Bogusky (CP+B). V&S crowdsourced creative ideas for its ad campaigns through Agency Machine, its proprietary online platform. CEO John Winsor wanted to change the way that advertising was done, a difficult task in an industry entrenched in traditional models. The case follows Winsor as he prepares to scale his business and must determine the best way to do so. He has an offer from Havas, a leading global advertising company interested in acquiring V&S, which would give V&S access to unprecedented resources. However, Winsor and the V&S team have concerns about how their innovative processes may be affected by partnering with a large, traditional company.

Karim R. Lakhani, Wesley M. Cohen, Kynon Ingram, and Tushar Kothalkar. 2014. Netflix: Designing the Netflix Prize (B). Harvard Business School Case Supplement. Harvard Business School. Publisher's VersionAbstract

This supplemental case follows up on the Netflix Prize Contest described in Netflix: Designing the Netflix Prize (A). In the A case, Netflix CEO Reed Hastings must decide how to organize a crowdsourcing contest to improve the algorithms for Netflix's movie recommendation software. The B case follows the contest from the building of the platform in 2006 to the awarding of the highest prize in 2009. The B cause also considers the aftermath of the contest, and the issues of successfully implementing a winning idea from a contest.

Andrew King and Karim R. Lakhani. 2013. “Using Open Innovation to Identify the Best Ideas.” MIT Sloan Management Review 55 (1). Publisher's VersionAbstract

As innovation becomes more democratic, many of the best ideas for new products and services no longer originate in well-financed corporate and government laboratories. Instead, they come from almost anywhere and anyone.1 How can companies tap into this distributed knowledge and these diverse skills? Increasingly, organizations are considering using an open-innovation process, but many are finding that making open innovation work can be more complicated than it looks. PepsiCo, the food and beverage giant, for example, created controversy in 2011 when an open-sourced entry into its Super Bowl ad contest that was posted online featured Doritos tortilla chips being used in place of sacramental wafers during Holy Communion. Similarly, Kraft Foods Australia ran into challenges when it launched a new Vegemite-based cheese snack in conjunction with a public naming contest. The name Kraft initially chose from the submissions, iSnack 2.0, encountered widespread ridicule, and Kraft abandoned it. (The company instead asked consumers to choose among six other names. The company ultimately picked the most popular choice among those six, Vegemite Cheesybite.) Reports of such problems have fed uncertainty among managers about how and when to open their innovation processes. Managers tell us that they need a means of categorizing different types of open innovation and a list of key success factors and common problems for each type. Over the last decade, we have worked to create such a guide by studying and researching the emergence of open-innovation systems in numerous sectors of the economy, by working closely with many organizations that have launched open-innovation programs and by running our own experiments.2 This research has allowed us to gain a unique perspective on the opportunities and problems of implementing open-innovation programs. (See “About the Research.”) In every organization and industry, executives were faced with the same decisions. Specifically, they had to determine (1) whether to open the idea-generation process; (2) whether to open the idea-selection process; or (3) whether to open both. These choices led to a number of managerial challenges, and the practices the companies implemented were a major factor in whether the innovation efforts succeeded or failed.

Karim R. Lakhani and Meredith L. Liu. 2012. Innovation at Charlotte-Mecklenburg Schools. Harvard Business School Case. Harvard Business School. Publisher's VersionAbstract

Following its 2011 win of the Broad Prize, the most prestigious award available for urban school districts, Charlotte-Mecklenburg Schools must hire a new superintendent. This case examines the context of a large urban public school district and how its Board of Education and superintendent were able to create an environment that successfully fostered innovation, using a variety of tools including policy, structure, tools, and culture. It explores the particular constraints and barriers of public education and how the district leadership navigated them. Covers issues such as the resistance to innovation in the public sector, the importance of leadership in building a culture of innovation, the use of autonomy and accountability to encourage individual creativity, the difficulty of managing multiple stakeholders, and the challenge of sustaining improvements over changes in leadership.

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