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Today we hear a lot “ Open Innovation ” but actually there are a lot of people who are not sure what it means exactly. As this topic is important nowadays, we decided to write an article about it to clarify all your doubts.
What is Open innovation?
Open innovation is about combining internal resources with external ones to boost the innovation culture in the company. For example, big companies like GE, Cisco or Microsoft, etc. tend to have 8-12 different value pools, for instance, think suppliers, startups, customers or universities, etc. to consider for their open innovation efforts.
In other words, open innovation is a business model that encourages you to connect with outside sources so you can profit from exciting new startups and product opportunities, get a broader pool of talent, and collaborate with others to come up with an innovation that you could never do just by yourself.
Actually, now, large multinationals including Kraft, KLM, Pfizer, and Siemens actively and openly participate in collaborative, online innovation communities where seekers and solution providers work together. Much like the way tech companies use hackathons to get outsiders to contribute to their goals, OI-committed businesses announce proudly that they’re taking full advantage of the global innovation community. That transparency demonstrates to the market that they have a clear strategy for the future and they’re aggressively pursuing it out in the open.
Open innovation may seem to be for big business. But it is an approach that can be used by all companies, especially start-ups and small businesses. It may be as simple as inviting a trusted supplier to help you develop ideas or launching a website, etc.
So, find the right collaborators! One of the most visible open innovation actions these days is suggested websites or special places on the web that invite customers and the general public to submit ideas on how to improve a company’s products and services. And then, on these websites, companies publish hackathon info to find the right partner with the most brilliant idea.
Benefits of Open Innovation
1. Creating new products and services
Especially when you’re a startup, there’s nothing more exciting than getting your first product out on the market. But it’s easy to get stuck, focusing all your efforts on selling your first product rather than thinking of what else you could provide for your customers. It can be scary to invest time and resources into creating a new product, especially taking into account that startups have limited budgets. Yet, by investing your resources and the resources of the third parties into creating something new, that you know will bring value to your community. This move may help you increase your profits and create buzz around you.
2. Innovating old products and services
Sometimes, you don’t need to create new products. Sometimes, your older service has the potential to be better, has the potential to attract a lot of clients. This is when you need to get a creative team together to improve your idea. One of the benefits of open innovation is that the process never ends. You’re always thinking about how you can make your organization better.
3. Building a strong community
Lego is a great example of how a company can engage its fans on a wide scale by using open innovation. No matter the size of your organization, a great benefit of open innovation is taking the time to get in touch with your fans and your soulmates, new talents. Get to know what your community wants, and then give it to them. In the process, you will find that enthusiastic community members are willing to dedicate their time and ideas to helping you create something better. These relationships are key and will help your company build a strong community dedicated to your project.
4. Keeping your employees engaged
One of the main sources of employee dissatisfaction is a lack of feeling of ownership of the projects they work on. Sometimes, your team may have some great ideas but might not feel comfortable bringing them forward. By bringing an open innovation initiative to your workplace, your team can get involved in big-picture planning, and make it their project. When people feel more invested in the bigger goals of the organization, it makes them more excited to come to work in the morning and put their heart and their soul in it.
5. Staying ahead of the competition
By keeping your team and your community engaged and on the lookout for new ideas, you make sure that your organization stays helpful and relevant to your community. Using open innovation can help you find the niche that makes your organization uniquely valuable to the community.
6. Costs reduction
When you work with other companies, you split the costs. Moreover, you become more efficient because in each company, each member works on what he is good at.
7. Time-to-market acceleration
Instead of figuring out how to make a desired product, train your people, buy equipment, etc, you just start collaborating with a company that already has all this, which allows you to bring the product to market faster.
8. New revenue streams
Did you know that some businesses get more revenue from secondary products rather than from the primary ones? Working with other companies will allow you to enter a new market with an idea and product you have.
9. Innovation risk reduction
Any innovation has risks, but if you work with experts you minimize your risk of failure, especially if you are agile and get feedback from your target on a regular basis.
Let’s look at open innovation case studies
GE is one of the leading companies implementing different open innovation models. Their Open Innovation Manifesto focuses on the collaboration between experts and entrepreneurs from everywhere to share ideas and passionately solve problems. Based on their innovation Ecomagination project that aims to address environmental challenges through innovative solutions, GE has spent $17 billion on R&D and received total revenues of $232 billion over the last decade. GE is famous for its open innovation challenges and initiatives on its open innovation page. Through these challenges, GE familiarizes itself with future potential talents.
For example, the Unimpossible Missions: The University Edition challenge is clearly targeted at students that are creative, have a certain level of technical skills, and a clear recruitment motivation. Through the challenge, GE aims to get three smart and creative students to have their internship at GE.
Another example is GE’s project – First Build, a co-create collaboration platform, which connects designers, engineers, and thinkers to share ideas with other members who can discuss them together. It is one of the open innovation models that aims to provide a platform that can help both external and internal individuals to collaborate together in terms of ideas sharing and manufacturing to reach innovative ideas for products and services.
Open innovation was also adopted by NASA in order to build a mathematical algorithm that can determine the optimal content of medical kits for NASA’s future manned missions. In order to reach an innovative software that can solve this problem, NASA collaborated with TopCoder, Harvard Business School, and London Business School. The application of open innovation created a cost-effective and time-effective solution that could not be reached using the internal team alone.
Currently, the company is adopting open innovation models on levels between the team and other entrepreneurs from one side and the company and its consumers from the other. The Coca-Cola Accelerator program aims to help start-ups in eight cities around the world; Sydney, Buenos Aires, Rio de Janeiro, Berlin, Singapore, Istanbul, San Francisco, and Bangalore. Those start-ups aim to think of innovative ways to build the Happiness Coca-Cola brand.
Another open innovation model presented by Coca-Cola is the Freestyle dispenser machine that allows users from around the world to mix their own flavors and suggest a new flavor for Coca-Cola products. The new product records the consumer flavor so they can get it from other Freestyle machines located around the world using the Coca-Cola mobile application. This model of open innovation puts the consumers at the heart of the production process as the company uses the suggested flavors as part of the external ideas that can be evaluated and processed as a new product line.
The new LEGO strategy aimed to focus on the consumer by linking both business and creativity. This strategy was known as, LEGO’s Shared Vision. In order to innovate new LEGO sets that can achieve success in the market, LEGO started LEGO Ideas, an initiative based on a co-create open innovation model. On this online website, LEGO consumers can design their own LEGO sets either using LEGO bricks or computer 3D applications. Other users start to discuss the idea and vote for it, once the idea reaches a targeted vote, LEGO can consider it as a new product by giving a small part of the revenues to the creator of the set. This model contributes to putting the consumer at the heart of the innovation process and helps the team to target sets that can achieve success based on the LEGO Ideas votes and comments. This co-create platform can also contribute to reducing the risk of innovation as this feedback from the website can give business analysts ideas about the viability of the new product.
Another great open innovation step LEGO did was building a partnership between the company and MIT Media Lab to deliver programmable bricks, which was introduced as LEGO Windstorm.
Samsung adopts an open innovation in order to build its external innovation strengths through the Samsung Accelerator program. The initiative aims to build a collaboration between designers, innovators, and thinkers to focus on different solutions. The program provides office spaces, statical capital, and product support to entrepreneurs to help them to build software and services. Samsung does open innovation collaboration, especially with startups.
The distinctive part of Samsung’s open innovation collaboration is that Samsung divides it into 4 categories: partnerships, ventures, accelerators, and acquisitions. Typically Samsung partnerships aim for new features or integrations within Samsung’s existing products. Ventures can be described as investments in early-stage startups. These investments can bring revenue in case of exits but also provide access to new technologies that Samsung can learn and benefit from. For example, Samsung has invested in Mobeam, a mobile payment company.
Accelerators provide startups with an innovative and empowering environment to create new things. Samsung offers these startups an initial investment, facilities to work in, as well as some resources from their vast pool. The idea is that the products coming from internal startups could become a part of Samsung’s product portfolio over time or just serve as learning experiences for the company.
Acquisitions aim to bring in startups working on innovations that are at the core of Samsung’s strategic areas of the future. These acquisitions often remain independent units and can even join the Accelerator program.
As an example of Samsung’s collaboration with startups, Samsung has acquired an IoT company called SmartThings to gain an IoT platform without having to spend money, and more importantly, time on R&D. Samsung sees potential in the IoT industry and views it as a strategic important part of their future business and thus an area where they want to be a forerunner. Smart Things still continues to operate as an independent startup fueled by the resources of a big company. With the investment potential and home electronics of Samsung, SmartThings can really be developed into an integral part of Samsung products, by creating new IoT possibilities for homes.
By collaborating with startups, Samsung aims to benefit from the variety of innovations that smaller companies have already come up with. These companies often have products that can complement or be integrated into Samsung’s own products, creating value for both parties.
The Entrepreneurs in Residence program allows Cisco to invite early-stage entrepreneurs with big ideas for enterprise solutions to join their startup incubation program. This includes access funding from Cisco, potential opportunities to collaborate with their product & engineering teams, co-working space in Silicon Valley, and much more.
Wayra by Telefonica has been around for three years, and today, it is present in 11 countries across Latin America and Europe. It seems to be very well organized and it is very active with more than 300 startups engaged so far.
It is one company in particular that has really embraced the ideals of open innovation. It has developed labs where open innovation thrives. It has created an open innovation team that links collaborators that are researchers and entrepreneurs in business, government, and academia, to come up with innovative solutions to hard problems with the goal of developing breakthrough technologies.
The French car manufacturer has launched a collaborative project to design the cars of the future and aimed at multiplying the company’s partnerships with scientific laboratories all around the world. This project materialized into the creation of a network of OpenLabs. These structures are designed to allow the encounter between the group’s research centers and the external partners. They have a goal of thinking about the future of the automotive industry, particularly according to scientific advances.
P&G’s open innovation with external partners culminates in its Connect+Develop website. Through this platform, P&G communicates its needs to innovators that can access detailed information related to specific needs and submit their ideas to the site. P&G recruits solutions for various problems all the time. Connect+Develop has generated multiple partnerships and produced relevant products.
The idea for Nivea’s B&W deodorant was coined together with Nivea’s users through social media. The way Nivea collaborated with its users throughout the R&D process is very interesting. They pretty much said that “Okay, we know that our current product can be connected to stains in clothes. Could you share your stories and home remedies so that we can develop a better product?” Nivea then partnered up with a company they found via pearlfinder and developed, together with the users, the B&W deodorant. This admittance of issues in their product could have been seen as a sign of weakness, however, users were very active in collaborating with Nivea and the end product ended up being a great success.
Telegram is a messenger application that works on computers and smartphones very much like WhatsApp and Line. However, what makes Telegram different is how much users can contribute to its content openly. Users with any developing skills can create their own stickers and bots on the Telegram platform. Telegram also promotes the best stickers by updating an in-app list of trending stickers.
Open Innovation Books
To learn more about Open Innovation, I recommend you to read these interesting books about open innovation.
Open innovation is one of the hottest topics in strategy and management today. The concept of capturing ideas in a hub of collaboration, together with the outsourcing of tasks is a revolution that is rapidly changing our culture. A Guide to Open Innovation explains how to use the power of the Internet to build and innovate in order to introduce a consumer democracy that has never existed before. With corporate case studies and best practice advice, this book is a vital read for anyone who wants to find innovative products and services from outside their organizations, make them work, and overcome the practical difficulties that lie in the way.
In his book, the author demonstrated that because useful knowledge is no longer concentrated in a few large organizations, business leaders must adopt a new, open innovation model. Using this model, companies look outside their boundaries for ideas.
Chesbrough shows how companies in any industry can make the critical shift from product- to service-centric thinking, from closed to open innovation where co-creating with customers enables sustainable business models that drive continuous value creation for customers. He maps out a strategic approach and proven framework that any individual, business unit, company, or industry can put to work for renewed growth and profits. The book includes guidance and compelling examples for small and large companies, services businesses, and emerging economies, as well as a path forward for the innovation industry.
The authors describe an emergent model of innovation in which firms draw on research and development that may lie outside their own boundaries. The book will be key reading for academics, researchers, and graduate students of innovation and technology management.
This practical guide reveals that, without the right people to drive innovation processes, your odds of success shrink dramatically. And as open innovation becomes the norm, developing the right people skills networking, communicating with stakeholders, building your personal brand and the ability to sell ideas is essential for your innovation leaders and intrapreneurs.
Authors Alpheus Bingham and Dwayne Spradlin draw on their own experience building InnoCentive, the pioneering global platform for open innovation. Writing for business executives, R&D leaders, and innovation strategists, Bingham and Spradlin demonstrate how to dramatically increase the flow of high-value ideas and innovative solutions both within enterprises and beyond their boundaries.
This book brings together distinguished scholars from different disciplines: economics, organization theory, innovation studies, and marketing in order to provide an improved understanding of how technological as well as symbolic value is created and appropriated at the intersection between online communities and firms. Empirical examples are presented from different industries, including software, services, and manufacturing. The book offers food for thought for academics and managers regarding an important phenomenon that challenges many conventional wisdoms regarding how business can be done.
Robert Motzek’s study investigates the most important factors controlling user innovators’ motivation and will derive suggestions on how manufacturers can address these points in order to tap the full potential of user innovation for their new product development.
The work benchmarks a model for designing Open Innovation Platforms and takes a theoretical standpoint in the socio-legal approach, viewing regulatory interventions and constructions of contractual and intellectual property law as the legal framework enabling the creation of openness, which in turn affects the choices made in the business arena.
Open innovation has been widely implemented in small and medium enterprises with the aim of influencing business promotion, value gain, and economic empowerment. However, little is known about the processes used to implement open innovation in SMEs and the associated challenges and benefits. This book unites knowledge on how SMEs can apply open innovation strategies to development by incorporating academic, entrepreneurial, institutional, research, and empirical cases. This book discusses diverse policy, economic, and cultural issues, including numerous opportunities and challenges surrounding open innovation strategies; studies relevant risks and risk management; analyzes SMEs evolution patterns on adopting open innovation strategies through available measurable criteria; and assists practitioners in designing action plans to empower SMEs.
11. Open Innovation Essentials for Small and Medium Enterprises: A Guide to Help Entrepreneurs in Adopting the Open Innovation Paradigm in Their Business by Luca Escoffier , Adriano La Vopa, Phyllis Speser, Daniel Stainsky
Small and Medium Enterprises have to approach open innovation differently than large companies. This practical guide on open innovation is expressly for entrepreneurs and managers in SMEs. The authors provide strategies, techniques, and tricks of the trade enabling SMEs to practice open innovation systems profitability and enhance the long-term value of their company.
This book represents a powerful synthesis of that work in the form of a new paradigm for managing corporate research and bringing new technologies to market. Chesbrough impressively articulates his ideas and how they connect to each other, weaving several disparate areas of work R&D, corporate venturing, spinoffs, licensing and intellectual property into a single coherent framework.
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