This article is by John Cronin, a former top inventor at
Every business needs to innovate in order to thrive. But as corporate research and development grows ever more expensive, it’s also becoming ever less effective. PriceWaterhouseCoopers reports that half of all companies say they are only “marginally effective” (i.e., bad) at converting R&D spending into actual products. Which explains why R&D is so often the target of activist investors.
Or as Sir Alexander Fleming, the discoverer of penicillin, put it, R&D is "a very good way of employing a certain number of people, paying salaries, and not getting very much in return.”
Maybe it’s time to innovate how we innovate. Instead of relying on capital- and labor-intensive R&D programs, many companies now have the option of using inexpensive yet surprisingly-robust Internet and crowdsourced invention tools to create high-value patented products and services. It's not suitable for every enterprise or industry, but what I call virtualized innovation can enable companies to respond much more rapidly and cost-effectively to declining product life cycles, accelerating technological change, and intensifying competition, including from non-traditional sources (see
Take a look at today’s virtualized innovation tool set. The Internet offers powerful market research, product testing, and technical expertise of all types, from science and engineering databases, technical document web crawlers, and subject matter experts to translation services, advanced patent searching, and market sizing and valuation tools. It also offers crowdsourced tools like Survey Monkey that let you conduct customer surveys, data analysis, and online focus group marketing, or Mechanical Turk for crowdsourced engineering talent, plus online product manufacturing marketplaces and patent prior art research and patent drafting services.
How can you put these virtualized innovation tools to work?
Let’s say you’re an innovation manager at an on-demand transportation firm competing with Uber. Your job is to continually improve your current service offerings while also developing profitable new product and service extensions to your on-demand business model.
Every innovation starts as a solution to a customer problem. And a search of online social media comments will reveal that one of the most frequently reported problems concerning on-demand services like Uber is that often the drivers don’t speak a customer’s language.
Solving the language problem in on-demand car services would be a fairly simple fix: Rewrite the app to select for language as an option, both the driver’s and the customer’s. That would be a useful improvement to the service, but perhaps not a profitable one. So why not innovate a solution to the language problem that also tackles a larger unmet need in the market?
The U.S. Travel Association reports that there are 1.7 billion leisure person-trips each year (defined as trips taken by U.S. or international travelers away from home overnight for leisure purposes). Further research online, including with a travel subject matter expert, suggests that an on-demand language-selectable tour guide service might be a viable offering.
But would consumers actually use it?
A traditional corporate focus group querying just eight to 10 people would easily cost upward of $10,000. But with our virtual innovation toolkit, it only cost $1,500 to use Survey Monkey to ask 600 Uber and Lyft patrons a set of straightforward questions. Would you use a language-selectable on-demand tour guide service? How often? How much would you pay for it?
When I conducted this survey, the results indicated that 57.4% of the 600 Uber and Lyft patrons surveyed said they were at least “moderately likely” to use a language-selectable on-demand tour guide service. The median price they were willing to pay was $25.
Now, according to this Forbes article, Uber alone was then, in 2014, completing 7 million rides per week. Given the company’s rate of growth and valuation today, it likely conducts 8 million rides per week today. Lyft’s internal data, leaked in this TechCrunch article, indicate that the company is completing roughly 3 million rides per week. That brings the total number of on-demand rides for both companies to 11 million per week.
To be sure, not every one of those 57.4% of Uber and Lyft users who say they are “moderately likely” to use an on-demand tour guide service would do so in any given week. But let’s assume that 1% of them would do so per week.
That’s a $1.5 million gross revenue business per week to start, or $78 million a year. And we haven’t even considered international users and the opportunity to capture some of the on-demand ride business of international firms like GrabTaxi in Southeast Asia, Didi Dache and Kuaidi Dachje in China, Ola in India, and BlaBlaCar in France.
The opportunity to develop a language-selectable on-demand tour guide service certainly appears lucrative enough to be worth pursuing further. And it has cost us less than $1,000 so far to acquire our initial market research, data analysis, and customer feedback.
But before we begin to develop the service, including crowdsourcing the design and producing a robust app by going to Mechanical Turk, we’ve got to make sure we can patent the service (and the app at its core) so that no competitor can free-ride on our innovation and block us from establishing a market beachhead.
Using patent analysis and landscaping tools that are either free or low-cost, we discover two important clues about the intellectual property landscape surrounding our prospective service offering. First, as the chart below illustrates, on-demand sightseeing is a largely untapped patentable opportunity, compared with much more heavily patented areas of on-demand transport services such as customer location and user interfaces. And second, most of the patent holders are independent innovators unaligned with the big industry incumbents like Uber or Lyft or IBM.
These facts suggest that we may be able to secure our own patents in this field (as well as license relevant third-party patents in order to buttress our overall patent protection). But to do so, we must use a crowdsourced patent research firm like Article One Partners or Patexia, to gain a clear understanding of the prior art in this field and the patentability of our innovations. Only then can we move forward with confidence in developing our app and service for the market.
You can complete this concept-proofing stage of R&D using virtualized online innovation tools much faster, better, and cheaper than you could using traditional corporate R&D. And this kind of virtual R&D is especially beneficial for smaller new entrants in a field, as it eliminates the necessity for an expensive in-house R&D and IP organization.
Virtualized innovation means better, faster, and cheaper R&D. And for those who still believe innovation-driven is the surest road to success, it has the additional benefit of removing R&D from the crosshairs of activist investors.
