‘Open Innovation’ is currently shooting up the “Marketing Buzzword Hot 100” chart – but like so much jargon du jour its exact meaning is often elusive. In this case the definition is not only slippery, but also multi-faceted. On the one hand, ‘open innovation’ can reflect tapping research, products, services, inventions or technologies from outside resources. Taking intellectual property that is not being leveraged or utilized by the company and selling or licensing it to outside companies or partners is another concept that appropriately falls with the ‘open innovation’ domain. ‘Open source innovation,’ a close relative to open innovation, typically uses multiple input points to drive the design, development and/or production of a product or service. Software development is a common result of open source innovation.
Regardless of your exact definition, moving from a highly insular, controlled and confidential approach to innovation to one that is more open, collaborative and outwardly focused can be most challenging for organizations.
Companies have historically shied away from open innovation models for a number of different factors: fear of confidentiality breaches, ultra competitiveness, corporate ego or simply naïveté. Certainly the advent of on-line and electronic communications, the phenomenon of social networking and huge advances in technology have helped to provide greater awareness around collaborative innovation models, but two other key drivers are now causing businesses to consider a more open, collaborative approach to developing new products and services: Increased pricing pressures and the necessity to commercialize products at breakneck speed. With R&D costs skyrocketing and the need to commercialize products and services faster than ever, companies cannot afford to rely exclusively on their own internal research and development to drive innovation. A more open innovation model can tap exponentially more ideas, concepts or technologies from a wider variety of outside experts. Each of these outside resources brings a distinct point of view that can offer the company a fresh perspective – one that is not inwardly focused – but that draws off a completely different set of new values, insights, resources and applications. Typically, these unique perspectives can then be leveraged much more quickly and efficiently than if they were manifested internally.
Henry Chesbrough, a professor and executive director at the Center for Open Innovation at Berekley cites in his book, “Open Business Models: How to Thrive in the new Innovation Landscape”, a great example of an organization moving to a more open innovation platform: Procter & Gamble. He attributes P&G’s rejuvenated growth to their Connect and Develop program which “licenses in or acquires products from other companies (such as the Spinbrush, Olay Regenerist, and the Swiffer) and takes those products to market as P&G brands. The company now actively seeks external ideas and technologies through an extensive network of scouts.”
Clearly, the benefits of transitioning to a more collaborative approach are readily apparent. The key to starting that transition is creating a different mindset starting with executive management and shifting the corporate culture from looking inwardly to considering outside resources, experts and assets. The payoff of that shift in perceptions and actions will be imminent.
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