The Ultimate Mash-Up

Sticky notes with drawings of arrows on wall

Dr. Spencer Silver famously invented one of the most successful "failed" products of all time. His glue that didn't stick very well sat on the shelf for six years until one of his colleagues at 3M, Art Fry, needed a bookmark that could be repositioned in his church hymnal. The Post-it Note has since morphed into a household name and a line of more than 4,000 products.

Silver's innovation was the result of "permitted bootlegging," whereby a firm allows staff to spend company time on unsanctioned projects. Google's Gmail, News and AdSense products were born of permitted bootlegging at the web-search giant, and Microsoft has adopted the practice to catalyze innovation for its Windows Phone 7 mobile operating system.

Permitted bootlegging is a form of "inside-out" innovation, by which you generate ideas internally and throw them out to the world. But what would happen if your employees took permitted bootlegging on the road? Working side by side with your current (and maybe even potential) customers, your employees would experience your product as your customers do rather than imagining it through the sterile, arm's-length process of market research.

By taking an outside-in approach to permitted bootlegging, you can more quickly identify the self-evident, latent needs of your customers. Working outside-in made all the difference for IDEO, an industrial design firm in Palo Alto, Calif. that was hired to develop a data-input device for nurses assisting in a procedure in which a four-inch needle is inserted into a patient's spine. Stationed in the O.R., IDEO's designers noticed that nurses would calm patients by holding one of their hands. It became obvious that any two-handed device would fail, which led to the creation of a device operable with only one hand.

Neither this kind of outside-in innovation nor permitted bootlegging are in widespread use, despite their value as innovation drivers. Adopt one of them, and you'll get a leg up. But if you combine the techniques, mandating that employees spend some permitted bootlegging time within your clients' businesses, you'll tap a well of new ideas that can lead to sustained competitive advantage.