5 Ways an Open Innovation Program Can Transform Your Business

When businesses provide internal and external resources that lead to collaborative innovation, that's called open innovation. Open innovation is when businesses build systems where ideas flow openly between your business and your customers, employers, and other stakeholders--all of whom are invited to contribute and build upon your resources.

Have you ever heard of application programming interfaces (API)? They're an example of open innovation. APIs are partially completed frameworks for other programmers to openly access, customize, and build upon.

Other forms of open innovation are idea competitions (i.e. hackathons for software developers), customer immersion, and collaborative product design and development.

So the question is how can open innovation be beneficial to your business?

1. Open Innovation Is Cost-Effective and Profitable

Many companies can't afford to rely entirely on their own research when developing products. With open innovation, they can buy or license innovations from other companies instead. Moreover, the cost of conducting research is lower with open innovation. Open innovation is also cost-effective because it also accelerates time-to-market and creates new revenue streams for companies.

2. Open Innovation Minimizes Risks Associated with Innovation

The more people build on a business' resources, the more projects are perceived as experimental ventures. This being said, risk and reward are shared in open innovation.

3. Open Innovation Helps Business Respond Better to Change

Open innovation forces your business to track and respond to changes in the marketplace. Getting outsiders' perspectives on your projects or resources can help you see how people are receiving it and what kinds of solutions they're developing with your business's resources.

4. Open Innovation Is Good for Marketing

Because more people are working with your business's resources, open innovation helps increase accuracy in market research and customer targeting. In addition, the potential for viral marketing is higher with open innovation.

5. Open Innovation can level the playing field

As a smaller company you can have access to new technologies and products that only the big companies had access to in the past. In fact some inventors prefer to deal with a smaller company because its a easier and more personal experience.

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This article originally appeared on Inc.com.