December 15, 2023 12:58
How Open Innovation Shapes the Digital Future
One thing has always been abundantly clear in the cutthroat business world – a company that doesn’t innovate will likely fall behind its competitors. However, it’s no longer enough to just innovate. Business owners must now embrace open innovation.
Open innovation refers to relying on external ideas, skills, tools, and solutions to create real value in the market. Of course, this doesn’t mean that internal resources should be abandoned. Open innovation simply emphasizes the importance of cultivating partnerships and leveraging diverse expertise for a company’s success.
With the basic information about open innovation out of the way, let’s dive deeper into the importance of this approach and its incredible ability to benefit companies of all sizes.
Innovation, the Driving Force of Every Sector
What happens to a company that doesn’t move forward? It stagnates. And before you know it, it might become obsolete forever.
The only way to keep moving forward is to invest in innovative methods supported by a robust Research and Development (R&D) department. This approach helps businesses stay competitive in the long run, meet customer needs, and adapt quickly, regardless of the challenges that might come their way.
But, as previously mentioned, there’s more than one type of innovation.
The Types of Innovation
There are two types of innovation – open and closed innovation. Both have the same goal: to drive progress. But it’s their approach to innovation that differs.
In closed innovation, a company will rely on internal R&D processes, essentially operating from the inside out. With this approach, the company has complete control over all projects and makes all the relevant decisions.
In the case of open innovation, on the other hand, a company will incorporate external knowledge into its innovation process. This outside-in approach results from the idea that innovation doesn’t have to be confined within organizational boundaries. In this approach, companies exercise less control over projects and ideas but potentially gain more in the long run.
This approach can also be broken down into two types of open innovation – inbound and outbound. The former seeks external inputs to drive innovation within the company, while the latter promotes outsourcing innovations created by the company to external organizations or markets.
Keep in mind that outbound open innovation is less safe, as it can jeopardize the company’s internal resources and intellectual property. That’s why it’s also less common than its inbound counterpart.
What do you need to know about open inoovation?
U.S. economist and professor, Henry Chesbrough, was the first to coin the term “open innovation.” In his 2003 book “Open Innovation: The New Imperative for Creating and Profiting from Technology,” he defined the term as a “more distributed, more participatory, and more decentralized approach to innovation.”
Granted, Chesbrough didn’t invent the concept of open innovation; companies employed similar tactics years before his book. He was just the first one to clearly define the term and put it into writing.
What Are the Benefits of Open Innovation?
Open innovation is crucial to any business as it expands the boundaries of creativity and problem-solving beyond the company’s internal capabilities. The result? Innovation comes much faster, creating a more adaptive business model.
Of course, this isn’t the only benefit of open innovation. This approach has quite a few far-reaching advantages. But to keep you fully informed, we’ll also explore the disadvantages and challenges of this type of innovation.
The Advantages of Open Innovation
More and more companies have started relying on the concept of open innovation to drive success. Naturally, this has to do with the many advantages of this approach:
Using already established resources can drastically reduce costs created by the internal R&D department.
Innovation processes and projects come with fewer risks.
Open innovation allows startups to focus on developing products and services from the get-go.
Thanks to a free flow of ideas, the company can quickly identify new business opportunities and innovate old products and services.
New technological trends can be implemented in a relatively short period.
Open innovation can create significantly more advantageous solutions for everyone involved in the collaboration.
Closely collaborating with other organizations allows businesses to unlock new revenue streams.
The Disadvantages of Open Innovation
As with any business approach, open innovation also has some downsides:
Open innovation can lead to longer project development times due to increased collaboration and coordination efforts.
The longer development time can dissuade the company from even attempting to innovate.
Managers have more on their plate coordinating both internal and external resources.
The Challenges in Implementing Open Innovation
As with any revolutionary concept, open innovation faces its own set of challenges. Here’s what those challenges are and how to overcome them:
Lacking innovation culture. A company accustomed to the traditional closed innovation approach might be reluctant to embrace something as different as open innovation. This challenge can only be overcome by cultivating a culture of innovation and continuous learning, encouraging employees to experiment and embrace new ideas.
Collaborating With New Partners. Collaborating with new partners isn’t always smooth sailing, especially if the partner operates differently. To avoid any issues down the road, the company seeking this partnership must establish clear communication and project management procedures from the get-go.
Failing to see results. Companies often wrongly assume that open innovation brings no substantial benefits to their business. But the truth is that the company just failed to measure results correctly. Avoid this pitfall by establishing clear indicators of success early on.
Companies That Have Successfully Used Open Innovation
Given the number of benefits open innovation brings, it shouldn’t be surprising that many companies pushed through the challenges, reaping all the rewards. Here are some of the most notable examples:
NASA. Using open innovation, NASA created the “Centennial Challenges” program that awards external people and organizations for developing innovative technology for the agency.
IBM. Through open innovation, IBM created IBM Research, an online platform that allows researchers worldwide to collaborate on innovation projects.
Coca-Cola. Coca-Cola has adopted several open innovation models. Arguably the most successful is its global “Business Accelerator” program involving startups from eight cities.
LEGO. LEGO’s “Shared Vision” open innovation strategy has involved the brand’s fans in product development with massive success.
How can your startup benefit from open innovation?
Sure, companies of all sizes can benefit from open innovation. However, startups might have the most to gain from this approach. Why?
Well, most startups have incredible ideas but lack the necessary resources to see them through. By relying on open innovation, they can secure these resources without building everything from scratch. By partnering with a larger corporation, startups receive the following benefits:
Accessing new markets
Learning from the corporate know-how
Securing venture capital investors
Improving the time to market
Gaining greater exposure
Attracting new customers
A corporate partner gives a startup access to all the drivers it has been missing – the market, the financial capital, and the people. But what’s in it for the corporate partner? Well, remember what the startup is starting with – an excellent idea. In partnering with the startup, the organization in question gains exclusive access to potentially groundbreaking solutions worth a lot of money, making this a win-win partnership.
Recent Examples of Open Innovation Projects
To help you understand how beneficial new ideas can be, here’s an overview of some open innovation projects recently approved by EIT Urban Mobility (a European initiative for creating livable urban spaces):
SCREEN – Revolutionizing the cycling infrastructure and experience in urban environments
GreenMob – Promoting sustainable transport options via a journey planner
AI4LIFE – Reducing traffic congestion in cities
Parkedbyme – Revolutionizing public space use through micro-mobility parking
EVOSS – Creating rapidly chargeable electric vehicles
StandTrack – Drastically enhancing goods distribution
Embrace Open Innovation With Green Brother
Leveraging our extensive EIT network, we specialize in connecting startups with major companies, simplifying their integration into cutting-edge open innovation programs. Our expertise in business development offers startups an unparalleled advantage in navigating the corporate landscape, ensuring smoother and more effective collaborations. Our partners gain access to a wealth of industry contacts, opening doors to opportunities. Green Brother actively facilitate engagement with large corporations, helping startups to effectively pitch their ideas and carve out a space in the competitive market. Our experts accomplish this by giving you access to valuable knowledge, proposing various financing options, finding applicable capital grants, and opening new cooperation opportunities for your startup with the ultimate goal of getting your product to the finish line.
Create an account today to get in touch with our experts and start reaping the benefits of open innovation.