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Everything You Need To Know About Open Innovation

11 min read

Innovation

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Open Innovation is great in theory, but hard to implement. The UNITE Innovation Approach enables you to structure your innovation process, form valuable networks and make the most of your intellectual property.

Everything You Need To Know About Open Innovation

Although thousands of companies around the globe use the open innovation model, there’s still confusion about what it exactly is.

In this post, we’ll share everything you need to know about open innovation. We will discuss its advantages, how to use it, common open innovation models, and some examples.

What is Open Innovation?

The term open innovation refers to a situation where an organization doesn’t just rely on its internal resources, innovation process, innovation strategy, innovation management, resources, and knowledge for innovation but also uses multiple other sources (such as the public, external agencies, competitors, published patents, and customer feedback, etc.,) to drive digital innovation.

This is the practice of organizations and businesses outsourcing ideas from external sources as well as internal ones.

This means sharing information and knowledge about problems and looking to people outside the business for suggestions and solutions.

In practice, open innovation can take the form of established partnerships like Mobileye and Delphi working on autonomous driving systems. Others – crowdsourcing portals like the ‘My Starbucks Idea’ platform, or co-creation competitions like the BMW startup challenge.

Instead of the silo mentality and secrecy of traditional businesses, this invites a wider group of people to participate in product development, innovation process, innovation management, and problem-solving.

Open Vs. Closed Innovation

Before we go further in our discussion, let’s first see how it differs from the opposite closed innovation approach.

Closed innovation is the traditional innovation process of product development, creativity, and research that relies entirely on internal innovation management and expertise to generate, manage and sustain new business ideas. All information is contained within the company, within the R&D department, with no sharing with external parties.

On the other hand, the open innovation model refutes the traditional model. How? Simply by welcoming creative talent, research professionals, and subject matter experts from outside the company. The open innovation strategy that is deeply rooted in the notion of increased information sharing, collaboration, leverage, and synergy will invariably deliver better results.

Types of Open Innovation

Intracompany (Open innovation Process within the organization): Intracompany innovation is a form of the innovation process that occurs within an organization. Though the idea behind this innovation sounds contrary to the concept of open innovation, it brings resources, creativity & innovation from multiple departments within an organization.

Intercompany (Open Innovation between two or more companies): this form of innovation involves collaboration between two or more companies to achieve a common goal. A typical example of this type of open innovation is a corporate accelerator.

For Experts: This type of innovation brings in people from outside the organization who possess the required knowledge, experience, or technical know-how to provide relevant input.

Publicly Open: this is a form of innovation that invites all stakeholders from outside the organization, regardless of their background, to come up with a better innovation strategy.

The Purpose Of Use

After we determine the level of inclusion, we can define the purpose of use as one of the following:

  • R&D to develop new products or services.
  • Finding talent to enhance the company’s workforce’s overall skill set and productivity.
  • Gathering insight to identify and evaluate valuable information about current market trends and customer preferences.
  • Marketing to promote brand messaging and convey key information to the target audience.

For instance, let’s say your company wanted to fill new positions quickly. With an intracompany open innovation model to finding talent, you can identify skillful employees with relevant experience within your organization to quickly fill the position.

Suppose you want to develop products and services that will reach a wider audience. In that case, you can use a publicly open model to get insight from potential customers and experts during the development.

The level of inclusion you wish to work with and the primary goal are vital aspects that will determine the type of open innovation your business should choose. You can attain great heights with these parameters in mind to guide your open innovation strategy.

Different Open Innovation Models

Open Innovation Challenge

An open innovation challenge is a competition where people create ideas around a central theme, area of improvement, or generalized problem.

It is usually an event where entrepreneurs, researchers, and specialist teams compete against each other to try and solve a defined problem in the industry. One example is Unilever’s innovation portal, which seeks solutions to problems companies face with packaging, transportation, and storage of food products.

Open innovation challenge is perfect for companies that wish to acquire solutions for specific problems requiring experts in the field. In addition, the open innovation challenges are scalable and fast, making them useful tools for companies working on a time limit or a very specific field.

Open Innovation Lab

This is typically an internally facilitated and separately funded workspace for innovation void of the day-to-day processes and routines of the company. The individuals who take part in the open innovation lab are typically a team consisting of employees and new hires with the help of some external collaborators. The team’s mission can vary from coming up with targeted solutions to specific problems to imagining new ways to improve the existing innovation process.

Crowdsourcing

Crowdsourcing takes a similar approach to an open innovation challenge, where corporations partner with an accelerator to source innovation. The company comes up with an initial problem and calls on outside experts to put forward ideas or potential solutions.

Crowdsourcing is an excellent method of building partnerships that offer mutual value. In addition, it reduces R&D costs and cuts down on production time.

Examples of Open Innovation

Rapid developments in technology have encouraged more companies to experiment with innovation strategies. Here are some open innovation model examples from some well-known brands in the world:

Facebook (Intracompany)

The dominant force in the social media world nurtures on the inside with company hackathons, which help Facebook surface some of its best ideas from within its workforce. In addition, these events give employees the leverage to discuss and develop initial versions of product ideas.

By giving room to everyone- not just developers- Facebook offers all employees the chance to think creatively. It can even prove to be a springboard for some budding entrepreneurs to launch new ideas.

Samsung (Intercompany)

A typical example is the Samsung Accelerator Program which brings together innovators, designers, entrepreneurs, and experts and offers them capital, product support, and office spaces to yield exciting new solutions.

The Accelerator program provides a platform for four potential avenues of open innovation:

  • Commercial partnerships between Samsung and other companies
  • Like those that already run in Palo Alto, San Francisco, and New York, corporate accelerators.
  • Mergers and acquisitions where Samsung can acquire new talent and integrate small teams into the corporation to build new products for Samsung.
  • Venture capital funding to offer R&D investments to new startups and external businesses.

UNDP (For Experts)

The United Nations Development Program (UNDP) promotes collaboration and investment for social good on an international scale. A global pandemic has always been a catalyst for innovation, with experts from all fields working overtime to figure out solutions that can help the world in the new normal.

As Rwanda and other African countries struggled to cope with rising cases, the UNDP Accelerator Lab brought health professionals with the Ministry of ICT and Innovation to design and deploy anti-epidemic robots.

These advanced robots help screen people and detect COVID-19 cases at Kigali international airport and provide additional services in hospitals and treatment centers, including food and medication delivery.

Philips (Intercompany)

Philips was the foremost company to adopt open innovation when it first established the R&D ecosystem known as High Tech Campus Eindhoven. This campus is home to over 200 companies with product developers, researchers, and entrepreneurs from all over the world coming together to create new ventures.

Most of the projects created on campus focus on solving real-world problems, such as challenges posed by overpopulation, failing healthcare systems, and climate change.

What are the benefits of open innovation?

So, why should your organization consider this innovation process or innovation strategy? Here are some benefits of open innovation for companies that wish to use outside talent for product development.

Reduce costs and development timescales

Large enterprises can get stuck in their strategy execution held back by stringent processes. Meanwhile, smaller lean startups may have talent but often struggle because of financial resources.

A partnership reduces costs for small startups and accelerates product life cycles for bigger companies by coming together. The collaboration also spreads the risk for both companies.

Involve customers in R&D

Designing products and services according to customer needs is always important, regardless of how open or closed the innovation management is. However, open innovation additionally opens the door for potential customers in the product development (R&D) process from the very beginning. This increases the product’s viability as you get instant feedback regarding which aspects or features are useful to the end-users and which aren’t.

Improve PR & brand value

For marketing purposes, open innovation is useful for improving PR and gaining better brand recognition through wider outreach. Better brand recognition in a positive light increases brand value. This is especially important in competitive markets with high-consumption consumer products.

Chance for lucrative partnerships

When collaborating with external parties, especially when this happens between two companies, there is a high potential for the rebirth of lucrative partnerships. If the intellectual property of one company can be used by the other without too large an overlap in their respective markets, the partnership can be very symbolic. Both companies have much more creative potential at their disposal in such a case.

P & G exemplifies this win-win intercompany open innovation process through their Connect and Develop-site, where they aspire to find mutually beneficial partnerships with other private inventors or companies.

Finding new talent

Open innovation strategy can be a great process for finding great minds outside the company. A wide outreach helps find and engage individuals that are perfect for the existing job opportunities instead of selecting “nearly close fit” from inside the company.

Conclusion

Regardless of the industry you’re in; you can’t survive without access to information and expertise beyond your business. Instead of relying on internal know-how, you need solutions from new sources.

Open innovation is an excellent way to gather the best ideas the world offers and solve the hardest problems you may face in your organization.

By looking beyond your business for solutions to difficult problems, you can generate valuable ideas, expose yourself to different sets of expertise and capabilities.

Hopefully, this post has inspired you to come up with ways to incorporate open innovation you’re your business.


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