Transparency Is Out – Open Innovation Is In
Open innovation is the opposite of the old model of business – when all work circulated internally and presented a final polished face to the public and other companies.
On the contrary, open innovation is a two-way street, a “process for sharing knowledge and ideas with other organizations,” as stated in Harvard Business Review. It means that the pressure is off a company to develop and produce every idea internally; they can and should look elsewhere while sharing their own ideas, too. Every good idea is equal, no matter who comes up with it.
Open innovation since WW2
During times of war, governments frequently call on academic and corporate specialists to assist in their defence efforts. This principle developed especially after World War II and inspired companies such as Sears and Eli Lilly invest modestly in other companies, which then developed Sears and Eli Lilly’s own non-core projects. This was very like corporate giants today who fund useful projects at small start-up companies. Such inside-out open innovation builds networks, strengthens corporate relationships, and saves money.
On a macro level, open innovation allows everyone to focus their work. By sharing the information and technology which is broadly needed, each company can cut extraneous costs and specialize on what they do best.
R&D work, traditionally a closed internal circuit, might spend ten million dollars before it makes one. Through the practices of open innovation, profit-seeking companies can benefit from collaborations with academic researchers who focus on different priorities.
And the outreach doesn’t have to be coming from companies. For example, the University of Chicago, which has traditionally eschewed applied research, created a new research body specifically to collaborate in areas of quantum engineering, energy, and clean water technology with corporate partners, such as Argonne National Laboratory.
Such relationships grown into invaluable, long-term relationships. Corporations can access the creativity and experience of students and teachers. Academics can perform more advanced research thanks to resources provided by the corporation.
If the old ways were about keeping information locked away in “silos,” open innovation is like a community barn-raising, when everyone pitches in, knowing that help will be there for them, too, when they need it.
Today: citizen collaborators
In this new century, companies are taking advantage of social media, using it to reach the general population and across the world, finding innovations from consumers themselves. It shows up in the form of crowdsourcing, a form of open innovation, by democratizing the search for ideas and opening up the process to people outside of a company. A typical crowdsource might be when Doritos asked consumers to come up with the next chip flavour; the survey stirred up hype but also produced a body of informed ideas far superior to what Doritos might have invented in an isolated lab.
Open innovation has been compared to open source software: public, shared software which can be modified and improved by whoever is most capable. There is a loose similarity, but open innovation is driven not by the collaboration but by creating and building company value, using a collaborative process. (No one makes money off improvements to open source software).
Corporate culture is critical to open innovation
Innovation doesn’t just happen however. It needs the right culture which feeds that kind of thinking. It is not possible for a company with a “silo mentality” to achieve innovation or benefit from it. At Corporate Alchemists, we help clients analyse and understand how their corporate culture either promotes or stifles innovation. Where there is no match between the corporate culture and the innovation strategy, we help them to develop the right culture.
It is clear that open innovation is reaching new heights, when companies not only tell what they’re doing, they invite others to come and participate. Companies need to be savvy enough to recognize the benefits they can derive from such collaboration, and then embrace it. After all, no one knows where the next big idea will come from.