What’s the Difference Between Open vs. Closed Innovation?

Two people sitting at a table having a discussion.
Sometimes you need to be close to work.

There are a multitude of approaches to innovation management. One key factor, however, is “open” innovation versus “closed” innovation. While the names are slightly misleading, they’re important to understand as you approach your change management strategy.

“Closed” Innovation: What To Know

A better name for closed innovation might be “close innovation.” In a closed innovation system, everything surrounding an idea is generated within the company, from the initial idea to the final product. This doesn’t mean that the company hunkers down completely, just that when it comes to certain areas such as product development, nothing leaves the house.


  • Clear, internally designed structure.
  • Less complicated legal compliance and intellectual property issues.
  • Higher chance of “first-to-market” ideas.
  • Tighter focus.


  • Can lose focus of others in the industry.
  • Slow to incorporate external research and approaches.
  • May duplicate work of others.
  • Limited by internal budgets; you pay for all the work.

Open Innovation: What To Know

Open innovation, meanwhile, is more networked, using both internal and external resources to develop new products and approaches. This could range from working with promising academic researchers to even other companies.


  • Broader scope
  • More access to research.
  • More closely tracks other approaches in the industry.
  • Can reduce costs by finding others’ research.


  • More difficult to control and be first-to-market.
  • More complicated legal and IP issues.
  • Faces too-many-cooks problems as the committee expands and new research is incorporated.
Open innovation can broaden the scope of projects.

Which Approach Should Be Taken?

As you can see from the pros and cons, there’s rarely an organization that’s truly either open or closed in terms of innovation. Even the most brilliant shop with the brightest minds will pull research, inspiration, and possibly even personnel from others in their industry and practice. Your innovation strategy will need to be a balance of the two.

Ask yourself these questions:

  • What are the legal and corporate implications of pursuing a specific strategy? For example, government contractors may be forced to pursue one strategy or another by their obligations to the client.
  • Who are the stakeholders in this particular project or department? Depending on their needs, culture, and approach, they may look for more closed innovation or open.
  • What are the goals of the project? The more modest and internally focused a goal is, such as improving a software engine’s speed or developing more efficient internal processes, the more closed the process will naturally be.
  • What resources are available for the project? Depending on what you need, the scope of what you’re aiming to do, and what’s on hand, you may have to use open innovation or keep a project close to the vest.
  • What’s culturally compatible? Some companies are naturally open, while others are naturally more inward-focused. If you have to engage with other cultural concerns before you can launch, you may need to consider your strategic approach.

Regardless of the pursuit, a clear, thoughtful innovation strategy will be crucial to achieving your goals, so take the time to consider these questions thoroughly. To learn more about both open and closed innovation and how they can affect change management and product development strategy, contact us!

Comments are closed.