To help you maximize the benefits of open innovation, we’ve created this guide, packed with actionable tactics, inspiration and best practices for tailoring your own open innovation process to your business.
In today’s world, when staying relevant in the market is no longer enough to remain competitive, we, as businesses, need to start thinking ahead and walk the extra mile in order to become the change-makers who outperform the competition.
Continuous improvement is great, and it helps us to constantly improve little by little. However, if we want to outperform the competition and truly delight our customers, we need to start looking for ideas, technologies, and new ways of doing business outside of our own organization’s walls.
The most successful companies around the globe are implementing open innovation strategies because finding opportunities and innovations outside their organizations boosts their business growth exponentially, enables them to stay ahead of the competition and ensures that their customers and employees are engaged and loyal to the company.
Yet many innovation managers and leaders struggle with building scalable and effective open innovation processes that bring the results they expect.
Because open innovation is a new and complex concept. It involves many different stakeholders within an organization as well as third parties outside of it, and necessitates building brand new strategies and processes from the ground up.
But first things first, let’s review what open innovation means.
"Open innovation" refers to an innovation approach where organizations absorb external ideas into their own business, new technologies, trends, business models, or new approaches to launching a new product or service, and by doing so, are able to grow their market share, improve their competitiveness, and improve their processes.
Widely acknowledged as the "father of open innovation," UC Berkeley Professor Henry Chesbrough originally introduced the term in 2003. Now, open innovation has also come to describe a company's ability to institute a cultural change, specifically its attitude toward interfirm collaboration.
In his groundbreaking book, “Open Innovation: The New Imperative for Creating and Profiting from Technology”, Henry Chesbrough argued that in the face of changing market circumstances such as globalization, digitization, shorter product life cycles, or complex social and economic challenges, large companies could no longer afford to rely solely on their internal ideas and capabilities. Instead of pursuing innovation on their own, Chesbrough advises companies to leverage external sources of ideas. Chesbrough argued that by embracing external inputs, companies would be in a much better position to advance their business.
Open innovation's philosophy is based on the idea that companies may not employ all the bright minds in the world, but they can still work with them. Using open innovation, companies can tap into the collective knowledge and expertise of their key audiences and stakeholders.
In the closed innovation world, there is a strong belief that companies should control the creation and management of ideas and, therefore, intellectual property. Companies engaging in closed innovation tend to believe that the smart people in the industry all work for them. They think that only by isolating ideas and inventions from the competitive outside world will they win the race. This paradigm of inward orientation is often referred to as the "Not-invented-here syndrome."
The open innovation approach is just the opposite. Not only can you collaborate internally and externally, but open innovation can also be implemented through various approaches, depending on the direction of knowledge flows. Additionally, open innovation builds on the belief that knowledge sources for innovation exist both inside and outside the boundaries of a company.
While supporters of closed innovation typically see collaboration with external parties as cumbersome, unmanageable, and potentially dangerous (especially IP-wise), open innovation practitioners believe the exact opposite, i.e., all knowledge outside an organization's boundaries can be specified and managed, and collaboration in general brings value to a company.
Open innovation challenges the status quo by disrupting the traditional view on how a business should operate. Instead of using only our own internal employees, resources, and knowledge, open innovation expands the opportunity set for innovation by allowing us to create value using resources and solutions that are sitting outside of our organization. As a result, open innovation offers tremendous potential for more growth and value while also helping to tame the costs associated with innovation.
Especially in the face of changing market trends, even well-established organizations recognize the limitations of their innovation capabilities. To stay relevant and profitable, every organization should consider the compelling benefits of open innovation.
Open innovation provides:
An in-depth case study exploring the Fujitsu Activ8 program for customer co-creation.
Open innovation is an exercise in knowledge exchange, transfer, and management. Knowledge can either flow toward an organization (outside-in), away from it (inside-out), or in both directions (coupled).
The outside-in approach – undoubtedly the most popular approach among successful global players – has two main focuses: the acquisition of ideas and the integration of partners into the development and implementation process.
To let knowledge flow into an organization, companies can:
In the inside-out approach, internal knowledge is exploited externally. To let knowledge flow out, companies can:
Finally, in coupled process mode, companies can simultaneously let knowledge flow in and out of their boundaries by creating:
To leverage external innovation sources, organizations must set up appropriate structures and mechanisms like:
Open innovation promotes change as a source of value for an organization because, for effective open innovation, organizations must nurture a culture that accepts new ideas, encourages experimentation, promotes trust and sharing, and supports continuous learning and adaptation.
Follow the steps below, tailored to your company’s individual requirements, and you'll have a solid foundation for your innovation management:
To design and implement a successful metrics-based open innovation performance measurement system, companies should adhere to three principles:
The term open innovation platform usually refers to either, very generally, a system of stakeholders and rules to conduct open innovation or, more specifically, a software platform with dedicated functionality to conduct open innovation. It all depends on individual use cases. Here are some examples:
Managing a complex process with so many stakeholders involved, the right open innovation software is essential to help you automate and streamline your processes, keep everyone up to date, and achieve the best results.
There are various software providers in the market, including HYPE Innovation. Our open innovation module, which is just one of the innovation ecosystem building blocks we offer our clients, can serve as a central hub for all your innovation needs and is customizable for any type of company and use case.
Living labs are open innovation networks where users, consumers, and households are systematically involved in the emerging, iterative development of new solutions. They can be companies, NGOs, governmental offices, universities, or citizens, collaborating for the creation, prototyping, and validation of new solutions, products, and services.
The key idea is to use open scenarios to test software and services outside closed-lab environments.
Innovation consultancies usually offer the full spectrum of innovation services for your innovation program, from goal setting to strategic planning and implementation. You may already have a problem or a goal in mind but the necessary resources might not always be available in-house. That’s when innovation consultancies can play an important role as an extension of your team for a project or a period of time.
At HYPE Innovation, our team of ex-innovation managers and innovation consultants are always ready to offer their full support for your innovation program, from strategic planning to hands-on implementation and execution.
With HYPE you can tap into the full power of external collaboration.