Open innovation is innovation where companies or organizations reach out to other companies, individuals, and the general public to create innovative products and services. The internet has made this type of innovation far more feasible than it once was. Knowledge is widely distributed, and relying solely upon internal research can limit an organization’s innovative capacity. Open innovation has helped advance many industries, including IT, healthcare, and even public policy.
An example of open innovation that everyone is familiar with is the mobile device platform. Both Android and Apple have created platforms that encourage app development and that have resulted in huge numbers of apps that people use in countless aspects of everyday life and business.
Connecting internal organization resources with external ones to innovate produces many important benefits of innovation, including better products and services, lower research costs, better risk spread, and faster time-to-market.
Better Product and Service Offerings
Open innovation can lead to improvements in existing products and services or the development of completely new ones. For startups, in particular, getting that first product to market can lead to reluctance to invest more time and resources into yet another new product right away. Open innovation makes such an endeavor both less expensive and less risky. Think of how the world of apps has influenced phone and tablet makers to improve their hardware specifications over the years to meet consumer demands.
Lower R&D Costs
Today’s businesses must invest proportionally more in research and development than companies of earlier generations did, just to achieve the same level of results. Spending R&D resources wisely is imperative, and open innovation supports R&D while keeping costs under control. Drawing on the ideas of external partners like startups, individuals, or colleges and universities costs less while opening up organizations to new ideas that may never have been conceived under more restrictive internal innovation models.
R&D is expensive, but open innovation helps curtail the costs.
Better Risk Spread
Risk always accompanies innovation, including open innovation. However, open innovation helps mitigate risks by sharing them among multiple organizations. For one thing, multiple stakeholders invest their resources in open innovation initiatives, and they want their risks to pay off just as much as the originating organization does. Additionally, the multiple viewpoints that open innovation involves can help reduce the chances of innovation going wildly off-track.
Internal innovation is a stepwise process that must be carefully managed at every step. A budget hiccup could halt a project instantly, and innovations must all be tested carefully in-house. It not only costs more, but it takes longer. As a result, the time-to-market for an innovative product can be longer than expected.
Open innovation, by contrast, accelerates time-to-market, because many tasks can be done in parallel, by multiple organizations. This helps improvements on old products and innovative new ones make it to market faster. So ROI can be captured sooner.
Open innovation isn’t a new idea. But it has become more popular with the advent of technologies that make the sharing of innovations and ideas easier. It is becoming a mainstream form of innovation, resulting in new kinds of partnerships. Athletic gear companies may partner with professional athletes, healthcare companies may work with economists, and technology companies may partner with colleges and universities. The resulting innovations not only make it to market faster but often satisfy unmet or unrealized needs better than would the products of internal-only innovation.
More Access to Talent
According to a Global Innovation Barometer study, 57% of executives surveyed cited that a lack of talent or skills impairs their ability to innovate.
In companies of all sizes, groupthink can be extremely limiting. Open innovation acts as a bridge between various communities and networks, exposing your organization to a more diverse set of ideas and concepts from different people. By inviting a wider range of viewpoints, it’s easier for companies to find unique (and sometimes left-field) solutions to difficult problems.
Boost Product Visibility
When implemented correctly, open innovation can generate new interest in a product, service, or brand.
For example, LEGO® garnered a ton of media attention after their LEGO® Ideas platform was launched in 2014. This program encouraged customers to submit proposals for future LEGO® products and enter prize competitions.
Open Innovation Risks
Most of the time, the strategic challenges and limitations associated with open innovation aren’t related to the ideas themselves. But rather the way these ideas are collected, organized, and implemented. The most common open innovation risks can be divided into four distinct categories:
Ambiguous objectives: Conventional projects should have clearly defined goals to assess whether open innovation is a viable solution.
Intellectual property rights: Ranging from trademarks and patents to copyrights. The purpose of intellectual property law is to ensure that the inventor can profit from their innovations.
Lack of commitment: Many organizations merely observe participants instead of facilitating the collaboration process. It’s crucial to keep constant focus and reward engagement.
Unable to build an effective process: With the goal being to improve the quality and rate of development, all key stakeholders need to be involved in creating a process that can make sense of all the moving parts associated with open innovation.
Why is Open Innovation Important?
One of the main advantages of open innovation is that it eliminates the prevalent silo mentality.
Tech behemoths like Google, Microsoft, and Facebook are starting to adopt the open innovation process and continue to exchange ideas with others outside their company.
Part of its success can be attributed to the fact that open innovation doesn’t look the same for every organization. Not to mention, it’s proven to reach larger audiences, keep employees engaged, and create the potential for profitable partnerships.
Ideascale gives organizations the tools they need to manage innovation at every stage, and with every type of partner. We invite you to get a demo and learn how to optimize your innovative processes.