Open Innovation: A Way to Think Outside of Conventional Boxes

The world of business is changing. We've all heard about the phrase "open innovation" and how it allows for more effective product development, but what does open innovation mean? This post will break down a few key components of open innovation and help you better understand this new way to think outside of conventional boxes.

What is Open Innovation?

Open innovation is a business model for innovation that promotes collaboration with outside organizations. The phrase 'open innovation' was coined by Henry Chesbrough in his 2003 book "Open Innovation: the new imperative for creating and profiting from technology". According to Chesbrough, open innovation is an idea- or invention-generating process through which firms can increase the amount of knowledge available within their organization. This method has been used by many companies including GE, Apple Inc., IBM, Procter & Gamble (P&G), Google, Microsoft Corporation (MSFT) among others.?

Why do Businesses Use Open Innovation?

There are several reasons why businesses turn towards open innovative models. A few key driving forces include access to more resources than internally generated ideas, increased speed to market, reduced costs associated with research and development (&D), flexibility, agility, and the ability to attract externally driven talent.?

How does Open Innovation Work?

Open innovation can occur through many different types of business models including licensing, joint ventures (JVs), public-private partnerships (PPPs), and strategic alliances. With open innovation, there is an increased focus on collaboration with outside organizations for mutual gain rather than solely focusing on profits or financial motivation. This collaborative environment allows for more effective product development by accessing new ideas from previously untapped sources such as universities, small companies, startups, independent inventors/researchers, employees within your own organization, etc. There are several key things that businesses should consider when working in a collaborative model like this one including gaining commitment & buy-in throughout the organization, having the right people in the room, setting clear expectations, and establishing early wins.

How can Businesses Benefit from Open Innovation?

The use of Open Innovation can benefit organizations in various ways such as improved revenue growth rates due to increased product development success rates. It allows employees, customers, and external partners to share their thoughts on how a company should run or what should be developed next.?Here we summarize the 5 benefits that we consider companies gain when they opt for an open innovation strategy.

1. Engaging a larger and relevant audience

In open innovation, the size of your audience is virtually limitless and vastly larger than in closed innovation. If you're looking for insight about consumer buying habits on an everyday household item and want it as big a possible audience--reaching more people than before with no apparent limits to how large participation can get open innovation might be right up your alley.

One of the greatest benefits to open innovation is that it's easier for any company, no matter how niche their interests may be. With closed innovation you're limited by who can work on what and this affects which topics come up in conversation because not everyone will have knowledge about everything there is; some things just won't interest anyone outside of those within one specific organization.

A further advantage with doing business through an "open" model instead? The fact that finding your relevant audience becomes less difficult as well as considerably more economical!

2. Improving Cost efficiency

Internal innovation consumes hours of employee work as they participate in the management of the innovation process, as well as in the ideation itself. In open innovation, the time spent by employees is primarily spent managing the process. The overall costs of open innovation are likely to be lower relative to the number of ideas and input, which is especially profitable for companies.

3. Involve customers in R&D

It is always important to design products or services according to customer needs, regardless of how open or closed the innovation process is. Open innovation opens the door to engage customers in the R&D process early on, thus increasing product viability as you get feedback on which aspects or functions are necessary or useful to the end-user and which are not.

4. Partnerships

By collaborating with outside parties, there is the potential for lucrative partnerships to emerge. If the intellectual property of one company can be used by the other (and vice versa) without too great an overlap in their respective markets, the association can be highly symbiotic in nature. In such a situation, both companies have much more creative potential at their disposal.

5. Finding new talent

Open innovation can be a great tool for finding talent outside the company. A wide outreach helps find and engage individuals that are perfect for existing job opportunities, instead of selecting an "inside-the-box" fit from inside your organization

What are some of the Challenges Associated with Open Innovation?

These are some of the challenges that businesses may face with open innovation:

• Gaining commitment?throughout all levels within your organization as well as focusing on goals. It's easy to get caught up in the small details and lose sight of what's important.?
• Maintaining quality control as well as ensuring ideas stay within your company boundary. Many companies have found it difficult to maintain confidentiality when sharing their intellectual property (IP) or trade secrets so they aren't shared outside the organization without permission which can hinder progress on certain projects.
• Setting clear expectations from the onset; will help avoid any misunderstandings or mishaps down the road during collaboration sessions.
• Navigating through different company cultures and personalities – determining which approach (open vs closed) best fits each organization’s needs/goals, etc. What works well within one company culture may not work for another – thus creating challenges when collaborating on ideas & projects across organizations.?

In conclusion, while there are some potential benefits to open innovation business models, the process is not without its challenges. The key takeaway from this post should be that it’s important to think about these factors before jumping into such a collaborative process - especially if you are looking at incorporating external partners on your team or in your organization.?

If you have any questions or need more information on how you can create innovative culture join us at The Corporate Innovation Academy and understand the best innovation models for your organization, leadership Buy-in, and develop an innovation?culture mindset?company-wide to implement them successfully.