Key Challenges in Open Innovation and how to deal with them

In a world where innovation is no longer optional but essential, businesses are embracing a game-changing approach—Open Innovation. Yet, while the concept promises breakthroughs and growth, it brings its own set of challenges. How can companies navigate this complex landscape to unlock their full potential?

The willingness to learn and adapt various ideas from external sources is essential in today's business world. Every day, new businesses establish themselves, and to keep up with the ever-changing globalisation, relying solely on internal R&D is no longer sufficient. This brings forward the concept of "Open Innovation", a relatively new term coined by the Father of Open Innovation, "Henry Chesbrough" in 2003. Now, to complete the cycle of open Innovation, it is also important for unused internal ideas to go outside for others to implement in their businesses [1].?

While open Innovation may be enticing for businesses to look into, business leaders need to understand some of the challenges that might come their way.

1. The Challenge of Finding the Perfect-Innovation-Fit

Lack of criteria to evaluate if a startup that provides Innovation is a good fit for the company seeking Innovation is a big pain point. As discussed earlier, Open Innovation is a new concept that could have several meanings depending on the business, which means a set of concrete criteria may not be set in place.

While it may be good to adopt external ideas by entering into a partnership with another business, it may only be a good fit for the company if we prioritise specific protocols and requirements that could help the innovation process progress smoothly.

The problems that could arise by entering into a partnership with the wrong partner:

• Reputation risks: Partnering with an unethical business could severely damage the reputation of any company.?
• Lack of commitment by the business partner/s
• Misaligned goals: the business objectives may not align, leading to conflict and a waste of resources
• Protocol or confidentiality breaches: having an unreliable partner may lead to leaks.
• Inflexibility: having a rigid partner may hamper the progress of ongoing projects should there be a need for changes to be made.

Solution

This brings the necessity of working jointly with an Innovation Partner. Try to choose one with a pervasive database of curated startups and strategic matchmaking services to help your business connect with innovative startups whose interests align with your business's objectives.?

BambuUP is experienced in making well-tailored Innovation Matching projects based on the business demand and in-depth analysis. But no rush, make sure we can have a 1:1 discussion first, we don’t want to make something as One Size Fits All! [2]

2. Lack of innovation training leads to a gap in innovation implementation

The absence of innovation training is a huge barrier, as innovation methods are restricted to a one-way, top-down approach. Employees across all levels frequently lack the necessary skills and mentality to participate successfully, resulting in a gap in adopting innovation. Lacking two-way communication and cooperation, frontline staff' ideas are neglected, and the organisation loses out on varied viewpoints. This leads to reluctance to change, disengagement, and underutilisation of potentially creative ideas. Should a business not cultivate a culture of innovation and change, it would be difficult to retain talented employees as the work environment could appear to be monotonous and provide no signs of progress [3].?

Without sufficient training and venues for inclusive involvement, innovation becomes a segregated activity, making it difficult to integrate into the company's culture and its general operations.

Solution

In order to tackle the issue of a lack of innovation training, businesses may create customised training roadmaps and host an Innovation Day that is consistent with their company culture. In BambuUP's experience,? Innovation Day effectively engages employees and piques their interest in innovation by offering a forum for creative ideas and collaboration. To ensure success, businesses should collaborate with expert facilitators who can create interesting, useful activities. These projects lay the groundwork for long-term innovation by equipping staff with the skills and mentality required to successfully integrate new ideas into daily operations [4].?

3. Big gap between Leaders & Executives?

In innovation, it is also essential to understand the necessity to build the right mindset for leaders and executives of companies and startups.?

Here are some negative leadership mindsets that could impact the implementation of Open innovation in an organisation:

• Short-term focus: Leaders prioritising short-term profits over long-term innovation could potentially prevent a company from entering a meaningful open innovation partnership.
• Underestimation of the complexity of collaboration: undermining the potential of open innovation and the work that goes into properly managing these partnerships could lead to poor execution of the project. Ultimately leading to resource wastage and goal misalignment.?
• Believe it would lead to lack of authenticity: giving preference to in-house ideas over external resources, may lead to less collaborations in the future, ultimately limiting an organisation's ability to access expertise and solutions from potential partners.
• Fear of lack of control: this will limit resources and decision-making allocated to a project dependent on collaboration, which does not give a good look to the company to potential collaborators.
• Lose out on opportunities should they resist innovation: leaders who cannot make decisions that support innovation or change lead to the stagnation of progress. Ultimately inhibiting the dynamic environment required for innovation.?

In this case, Kodak's downfall can provide insight into this situation. The upper management's uptight attitude towards innovation and the entry of digital photography led to their downfall. A company with decades of history filed for bankruptcy due to strategic failure and its inability to change with the tide. The first digital camera was built in 1975 by one of Kodak's engineers. However, the management could not see its potential and chose to ignore what ultimately they had to pay for in 2012 by declaring bankruptcy [5].?

Solution

Kodak's example truly highlights why it is essential for leaders to embrace innovation and change. While George Eastman, the founder of Kodak, was able to embrace disruptive photographic technology twice in his tenure, the upper management in the 1980s and 1990s could not do so, which shows that the mindset of a leader is critical to driving growth in a company.?

Working and leading 70 companies going global each year with the Global Unlock program, we empower business leaders to explore thriving ecosystems worldwide. By learning from innovative companies, executives gain insights and inspiration to spark a culture of innovation within their teams, transforming ideas into action.

4.? Undefined Focus: Why Targeting Matters

While many leaders are cautious in implementing open innovation, some could over enthusiastically dive into it without sufficient research and setting goals for the organisation.?

• Lack of direction: without setting precise goals, open innovation could lead to aimless research without fruitful outcomes [5].
• Resource wastage: investing time, effort, and resources into several projects altogether could lead to wastage if specific goals are not set, leading to subpar results.
• No benchmarks: The task of measuring and evaluating the success of the project becomes exponentially difficult without extensive criteria set in place. Moreover, stakeholders may lose interest if the company cannot justify their progress effectively.
• Indecisiveness: If a set of protocols is not met, deciding which projects to take on as an organisation could be difficult, leading to delays in decision-making processes.?
• Overload of opportunities: this could overwhelm decision-makers, leading to missing the golden time to start a project. [6]?

Solution

In today's changing world, business executives must make proactive decisions in order to effectively drive their organisations. Collaborating with an experienced innovation firm can yield significant insights into open innovation methods. Businesses may engage with professionals to explore bespoke methods and solutions that are aligned with their objectives. We have successfully helped connect several startups and other stakeholders capable of adopting creative ideas, ensuring that plans are actionable and effective for long-term success.

5. Navigating the First Steps in Open Innovation for Investors

In the current business environment, there are investors that wish to show support for open innovation, but are not sure how to navigate through the process.?

• Finding appropriate partners: without a suitable platform, it could prove to be difficult for investors to find the right company for them to invest their resources.
• Assessing market potential: as it is still a growing market, knowledge about open innovation is limited making it difficult to assess a startup’s market potential.?
• Shifting priorities: Constantly changing innovation environments may encourage investors to pivot, diminishing focus.

Solution

BambuUP’s Startup Marketplace and 1:1 consultancy services can connect investors with promising startups. Through our extensive network and research we can help investors find the startups that fit their requirements and educate them about the industry trends and innovation models. Moreover, investors can join the networking events and workshops BambuUP organises regularly to help like minded business individuals connect with each other [7].

Conclusion

Open innovation is a relatively new concept with immense potential in today’s business world, however there are a few challenges businesses and investors should keep in mind while delving into it.? Firstly, an increased chance of entering into a partnership with the wrong partner, secondly, inadequate innovation training could lead to skill gaps, and leaders that hold a rigid mindset towards innovation could lead to missed opportunities and inability to retain talent. Similarly, not having a targeted goal could prove to be detrimental leading to resource wastage and dissatisfied stakeholders. Lastly, for investors it could be difficult to find a starting point without the right guidance and industry knowledge. In order to mitigate these challenges, it is necessary to have an innovation partner like BambuUP, to navigate through them and successfully implement open innovation in businesses.?

M. Crystal Sanskriti Seneviratne