Collaboration amongst companies has become the new approach to innovation in the 21st Century; termed ‘Open Innovation’. Chesborough (2011:1) emphasises that “successful innovating firms must open up, to work with external partners to commercialize internal innovations, and allow unused internal ideas to be taken to market by others externally” as knowledge is now available on a global scale. Organisations have discovered the value of social networking platforms to acquire its external resources; finding people with knowledge has never been easier (Lindegaard, S., c2010:4).
Open innovation can be defined as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation, respectively” (Chesbrough 2003a cited in Petroni, G. et al 2012:148). This form of innovation has resulted from growth within research and development (R&D) costs and the widespread nature of ICT (Petroni, G. et al 2012:147). As a result, innovation has become a 24/7 operation and, consequently, many businesses have R&D and innovation labs outside of their corporate Headquarters; increasing the possibilities for how innovation can be achieved and easy access for external contacts because to make innovation happen, the combination of internal and external resources has become critical to success (Lindegaard, S., c2010:3).
As stated by Chesborough (2003b cited in Petroni, G. et al 2012:147), the concept of open innovation was sparked by technology based firms, such as those operating in pharmaceuticals, achieved more successful R&D when collaborating with external sources rather than depending solely on their own department. Open innovation involves a high degree of trust as organisations join together as partnerships and alliances (Lindegaard, S., c2010:18). Collaborating and working together with rivals allows knowledge and ideas to be shared; assuring competitive advantage and be involved in co-operative buying. Co-operative buying is very advantageous for businesses as combining needs to purchase higher volume leads to bulk buying i.e reduced prices.
Quicker problem solving can be achieved when businesses work as a unit; a critical factor in the competitive and tough market in today’s economy. It is a necessity for companies that want to innovate to have an “ever-increasing range of expertise and knowledge” (Petroni, G. et al 2012:148). The timeline of the product life cycle has been significantly reduced, therefore, less time is available to make a profit on R&D which highlights the importance of being able to innovate and provide solutions at a significantly higher rate compared to previously. Open innovation ensures cost effectiveness in an efficient way due to the quicker process involved.
Collaboration is used strategically to ensure the market is captured; along with a proportion of market share to compete successfully. Synergy forms an aspect of open innovation whereby the output is great than the sums working together; allowing efficient operation in terms of speed, timings and costs. Benchmarking is a useful concept; enabling organisations to gain an insight into the works of its competitors as a way to set standards and potentially ‘steal’ their ideas.
Innovation can be inbound (commercialising external ideas), outbound (firms out-license or a spin-off internal ideas) or a coupled process which is a combination of inbound and outbound (Ollila, S., and Elmquist, M. 2011:274)
Successful examples
Procter and Gamble (P&G) effectively and successfully collaborated with Cisco TelePresence. Two years ago, P&G’s CEO suggested that “50% of product innovation and development come from collaborating with partners and customers” (Cisco, Accessed 15/12/11). Through open innovation with Cisco, a communication-enabled business process was created allowing true collaboration with partners and customers; eliminating the need for travel. Their video collaboration studios have reduced costs and allowed innovation to take place quicker, faster, smarter and in a more sustainable way. Cisco’s solution has improved business processes and the quality of life of its employees; allowing business to be conducted more effectively without leaving the office.
Founded in 1999, Yet2.com was launched; a network that brings together buyers and sellers of all technologies to ensure all parties benefit from a maximum return on their investments (Lindegaard, S., c2010:17).
In conclusion
Overall, open innovation can be highly beneficial to any organisation relying on a high degree of trust and acquiring the right people with the right mindset in the first place.
Lindegaard (c2010:15) summarises the main benefits of such innovation:
- An increase in the speed of new products and services
- Shorter time to take these products and services to market
- Reduced direct spending in R&D
- Improve the success rate of products and services
References
Chesbrough, H. (2011) Open Services Innovation; Rethinking your business to grow and compete in a new era, San Frasisco: Jossey-Bass
Cisco [online], Available from http://www.cisco.com/web/about/ac79/docs/wp/Procter_Gamble_Final.pdf, (Accessed 15th December 2011)
Giorgio Petroni, Karen Venturini & Chiara Verbano (2012), Open innovation and new issues in R&D organization and personnel management [online], The International Journal of Human Resource Management, Vol. 23 Iss. 1 p147-173, Available from SwetsWise at: http://www.swetswise.com/FullTextProxy/swproxy?url=http%3A%2F%2Fwww.tandfonline.com%2Fdoi%2Fpdf%2F10.1080%2F09585192.2011.561250&ts=1323960403695&cs=851018530&userName=5845157.ipdirect&emCondId=5845157&articleID=163263836&yevoID=3428396&titleID=103893&referer=4&remoteAddr=212.219.220.116&hostType=PRO&swsSessionId=5dhHMc4pF3Fg0pnK47tasA__.pasc1, [Accessed 15th December 2011]
Lindegaard, S. (c2010) The Open Innovation Revolution; Essentials, roadblocks and leadership skills, Hoboken , New Jersey
Ollila, S. and Elmquist, M. (2011), Managing Open Innovation: Exploring Challenges at the Interfaces of an Open Innovation Arena [online], Creativity and Innovation Management, Vol. 20 Iss 4 p273-283, Available from Wiley Online Library at: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-8691.2011.00616.x/pdf, [Accessed 15th December 2011]
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