My Best Innovation Advice? Be Promiscuous

Earlier this week, Netflix announced a winner in a $1 million contest designed to help the company improve its recommendation engine. While other companies shouldn’t blindly mimic Netflix’s specific program, they ought to step up efforts to share the innovation load as widely as possible.

Netflix announced its contest in 2006. Teams had to develop a technological solution that provided 10 percent more accurate movie recommendations than Netflix’s internal engine. The challenge literally came down to the wire &#8212 as two teams provided indistinguishable results, the prize went to the team that submitted its final algorithm mere minutes before the runner-up.

There’s a lot to like about Netflix’s approach. It focused on a “modular” problem (that individual teams could solve independently) with “measurable” results. It provided 100 million anonymous movie ratings to contestants to help them crack the problem. Thousands of teams from around the world tried to crack the problem, with the winning team ultimately constituting a merger of two other teams.

Netflix now plans to replicate the contest approach, creating a $500,000 prize for a team that develops the best algorithm to turn demographic and behavioral data into a “taste profile.”

The seemingly low success rate of Netflix’s first contest &#8212 less than 0.2% of teams hit Netflix’s goal &#8212 carries a hidden lesson. If you are inside a company, and you have a single team working on a tough problem, what are the odds that you can beat the dozens or hundreds of groups working on related problems outside your company?

Many companies will tell me they just don’t have sufficient resources for innovation. My first reaction to this statement is to ask the company to carefully assess how it currently is allocating its results. Further investigation often highlights that a scarily high number of resources are working on “zombie projects” that really have no hopes of succeeding in any meaningful way. Reallocating those resources can dramatically increase a company’s innovation capacity.

The second recommendation is to do what Netflix did and find ways to spread the innovation load. This isn’t just about running contests. It is about involving customers in the innovation process in new ways; finding creative ways to collaborate with erstwhile competitors, and tapping into individual experts wherever they might be.

This isn’t a new idea &#8212 Hank Chesbrough, Don Tapscott, and others have written very eloquently about the power of more “open” forms of innovation &#8212 but it is even more important when times are tough and internal resources grow increasingly scarce.

Companies shouldn’t go to the extreme of outsourcing innovation. Complete outsourcing builds dependency and leads to internal innovation muscles atrophying. The very process of innovation &#8212 even unsuccessful efforts &#8212 can teach companies important lessons. And some tasks can really only be done by internal innovators. As always, balance is critical.

I believe in promiscuity when it comes to searching for new ideas. Look in every possible direction. You’ll be surprised by what you find.