In today's business landscape, innovation is a buzzword AND a key driver of success. Organizations…
Innovation means developing something new. But not just anything. Something which is successful in the target group. For companies, this usually means designing new products, services and business models. When companies open their doors and arms to cooperation with outsiders, this is called open innovation. Whether and to what extent open innovation should be part of the innovation process is an important decision in the innovation strategy. Like all strategic decisions, open innovation also has many aspects as well as strengths and weaknesses. The most important perspectives and experiences from numerous industrial projects are compiled here.
If you want to go fast, go alone. If you want to go far, go together.
This saying could be the motto for open innovation. Because in some cases open innovation actually leads to results faster than doing it alone. But typically it takes more time to achieve the better result.
Innovation development behind closed doors is called closed innovation. This is where companies get the best and most competent employees and develop innovations relatively independently of the outside world. This can succeed if the company has a real knowledge advantage over the competition. Until a few decades ago, closed innovation was the common way to create innovations. And in many companies this is still the standard procedure today. An approach that works for many companies. More and more, however, pure closed innovation processes are being replaced by open innovation. Or at least partial aspects of open innovation.
Open Innovation – cooperation or collection of ideas in different directions
There is a large variety of different open innovation processes. The opening can take place in various directions. And companies rarely open up their innovation processes in all directions at the same time.
A) WITH FUNCTIONAL AREAS OTHER THAN DEVELOPMENT (COOPERATION)
A homogeneous team of engineers is a pretty weak setup for innovation.
Opening the innovation work to cooperation between several departments is a first step for open innovation. What may sound like ridiculousness for industrial companies with a pronounced ability to innovate is perhaps a difficult hurdle for medium-sized engineering companies to overcome. So the standards are very different. And what open innovation means, how it works and what results can be expected is just as different.
B) WITH ANY IDEA CONTRIBUTORS IN THE COMPANY (COLLECTion of IDEAS)
The streets are paved with good ideas. We just have to collect them.
And if the company’s biggest challenge is lacking employee engagement, then listening, collecting ideas and simply implementing them can actually be a solution. It often isn’t. Because the ideas are often well suited for continuous improvement. Snack vending machine in the canteen. Minor improvements at the production line. Telephone boxes for the open-plan office. But for new products and services with good market prospects, the ideas are usually not mature enough. As an open innovation, the approach of broad employee participation can still have positive effects.
C) WITH CUSTOMERS (COOPERATION)
It took us years to build our image as the “high-gloss expert” and now we’re supposed to tell the customer we don’t know what they really need?
Taking customers behind the scenes is a major hurdle for many businesses. Especially for those who are organizationally very mature and obviously professional. Especially in business-to-business (B2B). Because behind the scenes, not all that glitters is gold. This shows weakness and makes you vulnerable. A major threat to middle management. And we need to take that seriously. With regard to innovation success, cooperation with direct and indirect customers or users and users is an extremely valuable component of open innovation.
D) WITH POTENTIAL CUSTOMERS (INTERVIEW & DIALOGUE)
Innovation doesn’t like to cook in its own juice.
When today’s salesperson talks to today’s customer, you learn exactly what you already know today. New pairings of conversations are more promising. B2B customer interviews in particular are an often underestimated tool for far-reaching innovation approaches . With existing customers. Or with customers you couldn’t win. But especially with customers who have not yet been addressed. So potential customers. They are another building block for open innovation. It is important not to jump straight into the house with the sales door. If the first conversation is future-oriented, then the sale will come naturally.
B2B Contacts and Customer Interviews
With clever questioning technique to innovation. Let’s talk details and use cases!
E) WITH PARTNERS IN THE “INNOVATION ECO SYSTEM” VALUE CHAIN (COOPERATION)
Yesterday’s extended workbench can be tomorrow’s partner.
Whether upstream, downstream or at the same level in the value chain. In any industry, many are in the same boat. But not everyone rowing is a competitor. Though, opportunities for cooperation are seen much less often than potential competition. There are psychological reasons for this. There are many similarities. Many value-added stages perform for the same end user. Many companies have the same customer. And many companies could work together to solve problems that no one has yet seriously considered. The growing interconnectedness between companies that are open to innovation is one of the strongest trends in open innovation.
F) WITH UNIVERSITIES AND RESEARCH INSTITUTES
You don’t always have to reinvent the wheel (yourself). Many others are already doing that.
In particular, research institutes and universities invent wheels that industrial companies would have no time for. Unfortunately, the results are not always nicely packaged. The commercial viability is unclear, the slides look terrible and communication is anything but easy. The good thing is that not many people take these rough diamonds seriously. It took almost 10 years after the development of the mp3 format until the first mobile mp3 player was launched.
G) With Startups (Cooperation)
You must have chaos within you to give birth to a dancing star [Nietzsche].
Nothing else are startups. Chaos. Chaos & Rough Diamonds. That makes it difficult to work together. And yet industrial companies and startups can learn a lot from each other. And you can still benefit. Because in addition to the free side effects of throwing off a few layers of dust, the industry can implement good ideas and put them on the road that might have failed miserably in a startup.
H) With Startups (Mergers & Acquisitions | M&A)
If I can’t beat you, I’ll just buy you!
Of course, the purchase of a startup is rarely a hostile takeover. But it is always an opening for ideas from outside in the sense of open innovation. With all the opportunities and risks that come with external ideas. Maybe they don’t fit. Maybe they won’t be accepted. Or maybe they pass, are accepted, but then fail anyway.
- Festool buys Shaper Tools
- Unilever buys Dollar Shave Club
- Facebook buys WhatsApp (after WhatsApp is founded by former Facebook employees because the idea for WhatsApp was not wanted by Facebook)
I) With freelance idea creators (Crowdsourcing)
1000 eyes see more than 2.
There are so many people. Don’t they have ideas that can be used? Sometimes that’s how it is. In recent years, an entire industry of idea developers has emerged. Full-time creatives developing ideas 24/7. On crowdsourcing platforms you will find exactly these full-time creative people. Anyone who knows what they are looking for can find solutions with crowdsourcing. For example in the form of typical user problems, very technical solution ideas or inspiration for rusty developers.
J) with competitors (Kooperation)
Coopetition [kəʊˌɒpəˈtɪʃ(ə)n]: willingness to cooperate with the competition for a better end result.
If BMW and Mercedes manage to work together, then you can too. In fact, BMW and Mercedes cooperate in the ShareNow car sharing business model. Incidentally, this also works in B2B. The steel trader Klöckner has teamed up with its direct competitors to set up a steel trading platform. A bold step. For many, this might not be the first thing that comes to mind when they think of open innovation. And maybe something more for advanced innovators.
K) With professional Support (Consulting)
I would do everything I have done the same again, with one exception. I would have found better advisers sooner.“ [Aristoteles Onassis]
Innovation consulting covers several approaches of open innovation. In addition to the technical expertise, the consulting team usually contributes an expert network, experience in the innovation process and the necessary moderation.
Benefits of open innovation
All that glitters is not gold.
The devil is in the detail and every opportunity always comes with a risk. But open innovation also has numerous advantages. Used skilfully for the right purposes, this can be of great added value for an individual company or an entire industry. And the added value is not limited to new ideas. The new ideas are often not the exciting thing about open innovation. The innovation system usually benefits elsewhere.
1. More ideas
If you ask a lot of questions, you’ll get a lot of answers.
And if you ask for ideas, you will get them. Even if many ideas are not automatically good ideas, sometimes there is actually a lack of ideas. Open innovation can help to get the ball rolling, to get ideas out of the drawer and, above all, to get ideas from parties who have not been asked before.
2. more diverse ideas
Everyone stews in their own juice.
With expertise comes operational blindness. This is unavoidable in the long run. A change of perspective and exchange with outsiders can help to make progress faster and clearer with your own thoughts. At first it seems to be a hindrance that the financier does not understand the engineer and the physicist does not understand the philosopher. And most importantly, the developer does not care about the customer. But in the end, that’s the benefit. Long-trodden paths can be left when things are rethought and reconsidered. This creates a variety of ideas.
3. GREATER CHANCES OF SUCCESS
It doesn’t matter how beautiful your theory is, it doesn’t matter how smart you are. If it doesn’t agree with experiment, it’s wrong. [Richard Feynman]
Expertise is important. But no matter how much expertise comes together, acceptance on the market and in the target group can only be tested. And involving the customer early in the innovation process enables this test to be carried out long before market entry. Direct customer dialogue helps to design products and services in the way they are needed and bought. The chances of success of innovation projects therefore increase with open innovation with existing customers and potential future customers.
4. Failing faster
Fail faster. Succeed sooner. [David Kelley]
Having the market and customers on board at an early stage is good. It makes dreams shatter faster. And that is good, too. At least for those ideas that would never have made it onto the road successfully anyway. And there is a lot of that in many companies. Experts have been developing solutions for too long before there is gossip on the market and customers do not buy, buy hesitantly, do not show the expected willingness to pay and would have been interested in completely different things altogether. Therefore, it is better to use Open Innovation to find out more quickly when something is nonsense.
There are no quick wins in business – it takes years to become an overnight success. [Richard Branson]
Quick wins and low hanging fruits are often the fatamorgana that keep us from going full steam ahead down a rocky road. And yet open innovation often delivers quick wins that you wouldn’t want to miss. In B2B, cooperation at eye level with customers and partners in the value chain often creates simple sales successes apart from the actual innovation process. “Wait, you are still working that way today? Then your really need to hear about a good solution which have just ready for you. It would be best to talk to my colleague about it tomorrow.” These or similar situations are the order of the day in open innovation. Provided the right people from the entrepreneurial ecosystem are on board.
Risks of Open Innovation
But the coin has two sides.
Is open innovation the perfect solution to all innovation problems? Certainly not! Open innovation does not suit everyone and does not help everyone. In the end, not everyone needs it. As is so often the case, the most important disadvantages and risks lie in the interpersonal area, but also in the level of innovation and the evaluation of too many ideas.
Ensure Innovation Success
Innovation has many obstacles and risks. Let’s talk about the specific company situation and possible solutions!
1. More Ideasn (Even more ….)
So many ideas, so little time.
But aren’t many ideas good? Didn’t Thomas Edison, Linus Pauling and other clever minds already say that? Yes, they did. And they are right about the ideas in their own heads. And they are right for all those who are good decision-makers and have no problem with focus and distraction. If you can decide quickly and effectively, too many ideas are not a problem. For everyone else, and this includes almost all companies that are not run autocratically, too many ideas are a huge problem. And without a clear focus, open innovation nothing less than Pandora’s box. A bit like giving a messie a whole flea market.
2. IMMATURE, INAPPROPRIATE AND BAD IDEAS
Nothing dies harder than a bad idea. [Julia Cameron]
Open innovation can be tempting to consider every idea that comes from anywhere as important. This also brings idea contributors to the scene who are not full-time innovators. The positive side of it is of course the view and the idea from the outside. The other side of the coin are the numerous ideas that have always wanted to be said, that currently do not fit into the picture or the objective at all, and those ideas that simply have no chance but still cannot be killed. Especially in a constellation where feedback shouldn’t be as harsh as it might be. Because open innovation teams are often rather loose gatherings where long-term team building has not yet been able to take place.
3. DIFFICULT IDEA EVALUATION AND DECISION
Evaluating ideas means comparing apples with pears.
Too few guard rails and the ideas scatter from candy vending machines in the canteen to solar cells in South America to the next “data-is-the-new-oil-business-model”. Too many crash barriers and the idea engine doesn’t even start. The evaluation and decision for or against developed ideas is crucial for success and is often difficult. With an effective idea evaluation, for example using the Pugh Matrix, the worst can be prevented. Provided that the evaluation criteria are defined and coordinated with all those who are later to push the implementation.
4. DISCLOSURE OF KNOWLEDGE TO THE OUTSIDE WORLD
Three may keep a secret if two of them are dead. [Ben Franklin]
If you want to know something, you have to give something away. The problem, the strategy or maybe even your own ideas. And the fear of the stolen idea quickly becomes an obstacle to cooperation. Even if ideas are rarely stolen in reality (people usually have drawers full of unrealized ideas themselves), it is still a relevant topic. Because there are also exceptional cases and actually stolen ideas, economic and industrial espionage.
5. DIFFUSION OF RESPONSIBILITY
Responsibility is indivisible.
Keeping the threads together is often difficult. Even more difficult when parties are involved, some of which follow their own agenda. Leading open innovation to good, next steps is therefore a major challenge. Experienced project management and moderation in the ideation process are important so that responsibility and the desired end result do not fall by the wayside. Otherwise developed approaches end up in drawers or gather dust in display cases in the reception area.
When is open innovation suitable?
Innovation tools are a dime a dozen. Using the right tool at the right time is crucial. But when and for what is open innovation really well suited? Opening up the innovation process to selected outsiders is particularly helpful in the following cases:
AN UNSOLVABLE PROBLEM
A technical challenge is holding up progress. It is clear that the problem must be solved. Or that it would at least provide a major competitive advantage. The crowdsourcing platform Innocentive, among others, has dedicated itself to this goal. A clearly defined task, a tight evaluation corset for new ideas and the right, broad-based experts are decisive for success. In addition to crowdsourcing platforms, targeted ideation workshops are also suitable.
Lack of Inspiration
Where innovation is required, there is often a lack of a clearly described problem. The team has no idea what to actually work on. So no problem solutions are required, but rather inspirations in which direction one could think. Platforms have also established themselves here. For example Jovoto. A large number of freelance idea developers are available, work out possible ideas for the future and, above all, help to visualize these ideas in an impressive way. The implementation requirement is often not as high as with other approaches. A design thinking workshop is another approach to developing inspiration for a defined target group.
LIMITED MARKET UNDERSTANDING
Even the primary target group is not always well known. For example, the reason why products are bought or not bought is often a mystery. This means that relevant differentiation and a unique position in this target group are also a major challenge. Open innovation as a joint effort with partners and customers in the value chain provides valuable insights. Findings that go far beyond questionnaire studies and the capabilities of market analysis agencies. Understanding the target market means understanding the people. And open innovation can be a very direct and fast way to do that.
THE DESIRE TO appear INNOVATIVE
Some organizations are already satisfied with their innovative strength. The only thing missing is the exterior. They don’t seem innovative. On the one hand, open innovation is widespread enough as a buzzword, but on the other hand it is still attractive enough. Anyone who communicates an open innovation initiative skillfully can attract a great deal of media attention and make the PR department happy. A popular tool, especially for employer attractiveness and employer branding.
Incidentally, this also works for organizations that are not or do not want to be innovative at all, but can benefit from just having an innovative image.