Innovation

Open innovation

Open innovation is about using ideas and people from outside your firm’s boundaries to help you develop new products and technologies

Most companies have always considered innovation as a very private activity, keeping their development projects hidden and filing several patents to protect their intellectual property. Today's buzzwords are 'open innovation,' which entails enlisting the support of individuals and ideas from outside your company to develop new goods and technologies, as well as selectively sharing your own innovations with third parties.

When to use it

● To assist you in developing new products and services more quickly.
● To tap into opportunities and ideas outside of your company's walls.
● To commercialize ideas and intellectual property that you no longer need.

Origins

The concept of open innovation, like many other popular ideas, appears to be new, although it has a lengthy history. The famed Longitude Prize, granted by the British government in 1714 to the inventor who could devise a method of determining the longitude of a ship at sea, is a good place to start. John Harrison, a little-known clockmaker who invented the first reliable nautical chronometer, eventually won the prize. Rather than hiring the finest experts and asking them to solve the problem, the British government made the challenge public, and the result was a success.

For nearly a century, large corporations have used official R&D facilities, which have always been open to outside sources of inspiration. However, during the 1980s and 1990s, the approach altered dramatically, partly due to the exponential expansion in the amount of scientific knowledge created during this time period, and partly due to the advent of the internet, which made sharing over long distances much easier. Firms tried a range of different approaches to innovation during this time, including corporate venturing, strategic alliances with competitors, technology in-licensing, innovation competitions, and innovation jams.

With his book Open Innovation, released in 2003, Berkeley professor Hank Chesbrough presented a practical means of bringing these disparate ideas together. Since then, open innovation research has exploded, with numerous practical and theoretical perspectives being investigated. New ways to open innovation are constantly being developed. Crowdfunding, for example, is a modern concept in which a person seeks finance for an entrepreneurial initiative from a 'crowd' of backers via an internet platform.

What it is

Companies must discover ways to tap into this information in order to out-innovate their competitors in a world where knowledge is broadly distributed. This can be accomplished through a variety of methods, including acquisitions, joint ventures, partnerships, and in-licensing, as well as more modern breakthroughs like crowdsourcing and crowdfunding. Companies must also enlist the support of external partners to commercialize their own ideas, such as through out-licensing or the formation of spin-off ventures.

In other words, the foundation of an open innovation strategy is a network of ties with external partners that collaborate to develop new products and services. However, because corporations rarely have exclusive intellectual property rights over discoveries generated in collaboration with others, this method necessitates a considerable shift in mindset and managerial strategy. Organizations gained competitive advantage in the past 'closed innovation' environment by safeguarding their intellectual property; in a 'open innovation' world, competitive advantage is likely to accrue to those companies that collaborate best or move quickly into new prospects.

Most significant organizations, particularly those in high-tech fields like information technology and medical sciences, have now adopted the open innovation philosophy. The exponential expansion in the amount of scientific knowledge in the globe, the availability of external partners and venture capital investment, and the ease of exchanging ideas through internet-mediated platforms have all contributed to this trend.

How to use it

Because open innovation is a broad idea, it is implemented using a variety of technologies and approaches. Here are a few of the most well-known: ● Customer immersion: entails engaging closely with customers and potential customers, for example, to solicit feedback on proposed new products or to enlist their assistance in the design of new products.

● Idea competitions: This entails inviting a big number of people (both inside and outside the company) to participate in a competition to generate fresh ideas. These are sometimes administered through online forums, such as IBM's well-known 'innovation jams,' and other times through in-person 'trade exhibitions,' where participants present their ideas to their peers. These and similar strategies give the organization low-cost access to a huge number of new ideas.
● Innovation networks: Many businesses create innovation networks in order to gain long-term access to pools of expertise outside of their own walls. In the IT business, for example, software engineers may be urged to join developer networks to help find and fix problems, with monetary incentives. Lego employs a similar strategy with its lead user communities, who participate in the design and improvement of new Lego goods before they are released.
● Product platforms: The corporation introduces a half-finished product, or platform, on which contributors can build additional applications or features. These contributors are generally able to increase the platform's functionality and appeal in ways the company would not have dreamed of because they contribute a variety of ideas and abilities to the development process.

This is not an exhaustive list of methods. Many of the more well-known techniques to open innovation, such as in-licensing, corporate venturing, and strategic alliances, are excluded. Furthermore, new approaches to open innovation are always emerging.

Top practical tip

Because the company no longer owns or controls its ideas in the same manner it did before, open innovation requires a significant mental adjustment. Of fact, patents are still extremely significant in several areas, such as pharmaceuticals. However, in an increasing number of businesses, the underlying technology is either shared among firms or made publicly available via a public license (such as the contents of Wikipedia or the Linux software platform). In many circumstances, companies generate commercial value by bringing a technology to market quickly, merging publicly available technologies in novel ways, or selling proprietary services on top of open technologies.
Another aspect of the mindset shift is that you can't expect to get ideas from outside sources unless you're willing to share your own. Working in an open innovation environment necessitates mutual trust and reciprocity, and a secretive mindset will be easily detected by those with whom you interact.

Top pitfall

Many businesses have tried out the concept of open innovation by establishing an idea scheme in which they ask employees, as well as people from the outside, to come up with suggestions for improvements. With such a procedure, you can make two major errors. One strategy is to ask a broad question, such as "How can we make our firm a better place to work?" This will generate a slew of ideas, such as more salads in the canteen or a pet-care facility. You must ensure that the questions you ask are adequately targeted in order to receive meaningful and useful responses. The second problem is to build such a plan without the necessary resources to read, filter, and act on the submitted ideas. Without such resources, the program is frequently overburdened, and the ideas are dismissed, leading to disappointment and cynicism among those who participated.