According to Innocentive – leading Open Innovation platform –, “Challenge Driven Innovation is an innovation framework that accelerates traditional innovation outcomes by leveraging open innovation and crowdsourcing along with defined methodology, process, and tools to help organizations develop and implement actionable solutions to their key problems, opportunities, and challenges”. What sets CDI apart from other methods is that the innovation efforts are focused on a well-defined challenge, problem or innovation goal. Once the challenge is formulated, it may be announced (crowdsourcing) through one or many different channels. There are up to three types of innovation channels, according to Innocentive:

  • Internal Channels, reaching the internal staff of the organization
  • Invitational Channels, reaching select groups of partners (suppliers, customers, etc.)
  • External Channels, reaching the public communities of experts and innovators

The nature of the challenge will determine if it is appropriate to communicate it through one or many channels at a time. According to Bingham and Spradlin – authors of The Open Innovation Marketplace –, the Challenge Driven Innovation method establishes seven stages:

  • Idea gathering: listing all the ideas available in order to select the most interesting ones
  • Filtering: selecting the most suitable projects in accordance with the business capabilities
  • Dissection: decomposition of every project into modules, each of which is a challenge
  • Channel distribution: assignation of every module or challenge to one or more channels
  • Evaluation and confirmation: the reception and evaluation of the delivered assignments
  • Assembly and integration: the reassembling of the modules into marketable projects
  • Launch: market launch of the product or service

The focus of the innovation efforts in a specific challenge is what makes this framework outperform others, usually characterized by dispersed attention and effort diversification. Further, the precise formulation of the challenge is what makes the method especially efficient. The challenge has to specify the need, the problem, success criteria (KPIs) as well as establish the inducements. It should also anticipate the target audience and the conditions to engage the target contributors. So far, this framework has been used for technological innovations, but it is applicable to other types of innovation, namely product or business model innovation.

Integrating the CDI approach into the organization as a common practice is also likely to provide a better understanding of the business strategy and goals to the stakeholders, thus fostering a mindset shift towards a more strategic and goal-oriented organizational culture. These are called Challenge Driven Enterprises (CDE), as they understand that challenges are actually the most effective and efficient way to organize work and achieve the desired results.

CDE organizations are characterized by three key competencies and behaviors:

  • Open Business Model: focus on the core competencies and mission, while orchestrating and empowering stakeholder networks to contribute in overcoming the business challenges. Needless to say that vision and open mindset are a must, as the most ambitious innovations need to question some of the deepest assumed paradigms and beliefs.
  • Talent management: understand the importance of engaging not only employees but also outsider contributors to attain and sustain competitiveness through constant innovation. Anticipating the organizations’ needs, identifying the talent pools, reaching and engaging them requires vision, focus, agility and flexibility, at the very least.
  • Challenge culture: employees and external stakeholders embrace innovation challenges as the key drivers to business success, caring about getting problems solved with transparency, project monitoring, and incentive systems aligned with contribution and results, while politics, bureaucracy and “not-invented here syndrome” are left apart.

When defining and prioritizing the innovation challenges, it is essential to understand the gap between the service provided and the customer’s desired outcomes, the importance of every attribute to deliver the desired outcome, and the satisfaction assessment about each attribute of the service. The most likely successful innovations stay in the attributes assessed as most important which at the same time have an average or low satisfaction assessment.

This article is from the White Paper “Envisioning Open Innovation in Destinations”, available for download in

Posted by Jordi Pera

Jordi Pera is an economist passionate about tourism, strategy, marketing, sustainability, business modelling and open innovation. He has international experience in marketing, intelligence research, strategy planning, business model innovation and lecturing, having developed most of his career in the tourism industry. Jordi is keen on tackling innovation and strategy challenges that require imagination, entail thoughtful analysis and are to be solved with creative solutions.

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