What does open innovation mean? | Innovation Intelligence

Open innovation is a process where organizations work with external partners to create new products and services. Learn more about the benefits of open innovation and how you can start implementing it in your business.

As companies around the world grapple with the fallout from the Covid-19 pandemic, many are turning to open innovation as a way to adapt and find creative solutions.

Open innovation is a collaborative approach that can play to all companies' strengths and produce unexpected results. The main initiatives are innovation hubs, innovation labs, digital transformation, corporate venture capital, and open innovation departments.

However, making open innovation work effectively requires that companies put aside traditional concerns over intellectual property (IP) and focus on other ways of creating value. They must also effectively leverage their partners' motivations to maintain a productive working relationship. And finally, they need to embrace new partner models that may be outside their comfort zone.

What does open innovation mean?

The term Open innovation is used to describe how companies use external ideas and resources to create new value. It is the opposite of closed innovation (internal innovation), which focuses on developing new business models, products, and services within the confines of a single company.

Professor Henry Chesbrough first popularized the concept of open innovation in his 2003 book Open Innovation: The New Imperative for Creating and Profiting from Technology. Chesbrough argued that companies needed to embrace a more open approach to innovation to succeed in the 21st century.

According to Henry Chesbrough, there are several reasons why companies might want to consider open innovation. First, it can help them overcome the "innovation paradox." This is the tension between a company's need to protect its existing business while pursuing new growth opportunities. Open innovation can provide a way to do both by allowing a company to focus on its core competencies while tapping into external ideas and resources to create new products and services.

Second, open innovation can help companies accelerate the pace of innovation. By leveraging the ideas and resources of others, companies can get new products and services to market faster.

Third, open innovation can improve a company's chances of success. Chesbrough has argued that the failure rate for corporate research and development (internal R&D) projects is as high as 95%. By contrast, the success rate for open innovation projects is much higher. This is because open innovation projects are typically less risky and more focused than traditional corporate R&D projects.

Finally, open innovation can help companies build better relationships with their customers and other stakeholders. By involving them in the innovation process, companies can create a deeper connection with their customers and generate valuable feedback that can improve the quality of their products and services.

Despite these advantages, there are also some challenges associated with open innovation management. One of the biggest challenges is requiring companies to let go of some control over their IP. This can be difficult for companies to do, especially if they have been successful in the past with a closed innovation approach.

Another challenge is that open innovation can be difficult to manage effectively. This often involves working with partners who may have different motivations and objectives. As a result, companies need to clearly understand their own goals and how to best work with their partners to achieve them.

Open innovation can require companies, especially large corporations, to embrace new partner models that may be outside their comfort zone. For example, companies may need to work with start-ups or other small businesses that they are not used to working with.


Corporate Innovation Business Case: NASA

NASA has embraced open innovation to solve a variety of challenges, including the development of a mathematical algorithm to determine the optimal content of medical kits for future manned missions.

In order to reach an innovative solution, NASA collaborated with TopCoder, Harvard Business School, and London Business School. TopCoder members provided 2,833 code submissions to help NASA build the intended algorithm in this collaboration. The winners are offered $24,000 in cash prizes plus having seats to watch remaining shuttle mission launches.

By leveraging the ideas and resources of others, NASA was able to develop a new algorithm more quickly and effectively than if they had tried to do it on their own. This example shows how open innovation can be used to solve complex challenges.


Innovation Business Case: Coca-Cola

Coca-Cola is one of the pioneer companies in the field of innovation back to the Coca-Cola fountain dispenser designed by Raymond Loewy in 1960. Currently, the company is adopting open innovation models on levels between the team and other entrepreneurs from one side and the company and its consumers from the other. The Coca-Cola Accelerator program aims to help start-ups in eight cities worldwide; Sydney, Buenos Aires, Rio de Janeiro, Berlin, Singapore, Istanbul, San Francisco, and Bangalore. Those start-ups aim to think in innovative ways to build the Happiness Coca-Cola brand.

By involving start-ups in their innovation process, Coca-Cola can create a deeper connection with their customers and generate valuable feedback that can improve the quality of their products and services. In addition, Coca-Cola's open innovation team can tap into new ideas and perspectives that they may not have otherwise had access to. This allows the company to be more agile and responsive to the ever-changing needs of its customers.


How Business Leaders Should Commit To Open Innovation

In order to successfully commit to open innovation, company leaders need to cultivate a corporate culture that facilitates and rewards behaviors that encourage good open innovation practices. This can be done in a variety of ways, such as involving customers in the innovation process, working with start-ups, and offering incentives for employees to come up with new ideas.

One known barrier to the success of open innovation initiatives is the "not-invented-here syndrome," or a negative attitude against external ideas that can create friction against advancing all sorts of initiatives. Business leaders need to be open to new ideas and perspectives from outside the company to combat this. They should also make sure employees feel comfortable sharing their own ideas, even if they are not fully developed yet.

Finally, business leaders should offer incentives for employees to come up with new ideas and participate in open innovation initiatives. These incentives can be financial, such as bonuses or commissions, or they can be non-financial, such as recognition or awards. By offering these kinds of incentives, business leaders can show their employees that they value innovation and are willing to invest in it.

In Conclusion:

In today's fast-paced, global economy, businesses must always be looking for internal and external ways to stay ahead of the competition in the short and long term. One way they can do this is by embracing open innovation. Open innovation is a concept that promotes sharing ideas and information across organizational boundaries in order to create value. By openinnovating, companies can tap into new markets and access a wider pool of talent and resources. Additionally, open innovation can help businesses to speed up the product development process and bring new products to market faster. In a world where change is the only constant, open innovation can give companies the agility they need to thrive.