What Are Some of the Benefits of Open Innovation?

What Is Open Innovation?

The best summary of open innovation is “avoiding reinventing the wheel.” Open innovation organizations seek to develop innovation internally while seeking the work of others externally. For example, if you’re developing a new system, you might develop some parts internally, especially if they’re sensitive to company operations.

Yet for other pieces, where another company has already developed a solution, you would license those instead. In some cases, you might consider hiring an outside company with the expertise to develop a custom solution, but what you won’t be doing is rebuilding something when a suitable product already exists.

The Advantages And Disadvantages

Open innovation has some advantages that make it appealing:

• It improves focus on more difficult aspects of the problem.
• It reduces time spent on “busy-work” related to implementing an idea or developing a product.
• It leads to a more accessible and standardized product.
• It can bring in new perspectives and approaches to certain issues that you may not have considered otherwise.

There are, however, disadvantages to consider as well:

• It may introduce some licensing issues depending on your intended uses.
• You may be limited in your options if competitors have licensed similar solutions.
• It requires a commitment of financial resources that may need to be directed elsewhere.
• Vetting each product to ensure it meets client standards may consume as much or more time as saved by licensing a solution.
• In the case of academic or beta-tested solutions, you may need to do more work to get them “market-ready.”

As a result, most companies use a mix of open and closed innovation approaches. For example, you might notice that most eCommerce websites don’t require you to develop an entirely separate profile but rather use your social media logins to generate one, saving a few steps for the customer to buy. Yet, many companies will use internal solutions for more complex problems.

How To Incorporate Open Innovation?

Even if you ultimately don’t wind up going with another company, the key step with open innovation is to ensure your team asks itself a simple question: Has somebody else already solved this problem?

If the answer is “yes,” then you should seriously look at the solutions on the market and whether they fit your needs. An affirmative answer also has a follow-up question: How did they solve it? Understanding the thought process behind their solution will be helpful even if you don’t license it.

If the answer is no, then the follow-up question should be: Why not? Is this a problem too thorny for a standard solution?  Is your particular need more complex or unusual? Finding these answers will help you better understand the shape and structure of your problem. To learn more about open innovation and how it works with your innovation strategy, contact us!