A New Paradigm: Open Innovation

Collaboration amongst companies has become the new approach to innovation in the 21^st 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 15^th 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 15^th December 2011]

Lindegaard, S. (c2010) The Open Innovation Revolution; Essentials, roadblocks and leadership skills, Hoboken, New Jersey: John Wiley & Sons Inc

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 15^th December 2011]

Innovating Vs Inventing

The terms ‘Innovating’ and ‘Inventing’ are often used interchangeably without a great deal of understanding of their subtle differences. This post attempts to resolve the confusion between the definitions.

Inventions are usually based on products designed by one or a few individuals; only part of the story of innovation. Through technologies, business models and experimentation, products are introduced to the market; experience a degree of failure which forms a part of success. Innovation, on the other hand, incorporates products and processes, dealing with change (dealing with necessity) to develop solutions and add value through continuous improvement. Examples and research discussed below explains these differences in a workplace context.

Sim et al (2007:422) investigated nine individuals who each contributed to stages of invention and new product development within an organisation. There were four divisions:

1. The inventors focused on the scientific and technical aspects prior to concept development
2. The champions responsible for selling the acceptance of the project into the organisation
3. Implementers who focussed on “facilitating the project through the firm’s formal development process”
4. Innovators who had no specialised area and were involved in all three stages

(Taken from Sim, E. et al, 2007:425)

Distinct differences were found between the personalities, perspectives, knowledge base, motivation and attitudes between the four divisions; undoubtedly illustrating the differences between an inventor and an innovator. The differences between the inventors and innovators are highlighted below (Sim, E et al., 2007:431).

Inventors:

• Are creative in technology
• Are strong introverts
• Prefer working alone
• Are task orientated
• Have a knowledge base in technology only
• Motivated by technology as the end goal
• Solely involved in the invention process

Whereas innovators:

• Are talented in a variety of areas
• Can work alone or as part of a group
• Have multiple orientations
• Have a knowledge base of technology, customer, market and business
• Are motivated by providing solutions to customer problems
• Participate in all areas

Sim et al. (2007:432) believe that inventors are concerned with technological innovations; involving high technological uncertainty and low customer/market uncertainty. In contrast, innovators concentrate on radical innovations with high technological uncertainty and high customer/market uncertainty.

A prolific inventor, Dean Kamen, urged ‘would-be inventors’ at a Licensing Foundation meeting to primarily focus on innovating before inventing; "Invent as a last resort” (Innovate First, 2006:9) which he describes as “the murky unknown”. For example, the Chinese required a device to help them navigate their way across the Gobi desert at night to sneak up on enemies. Over 1,000 years earlier they discovered they could produce a compass-like mechanism by placing a loadstone in a container of water and allowing the magnetic forces as navigation. However, this was an invention rather than an innovation. “By innovating this discovery—instead of inventing the South-pointing chariot—the Chinese could have had a much more (cost) efficient tool to solve their problem” (Innovate First, 2006:9).

References

Innovate First, Inventor Advises (2006), Research Technology Management, Vol. 49 Iss, 3 p9, Available from Business Source Complete at: http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=a397f483-c3cd-4f4b-a496-c6139cf3916b%40sessionmgr113&vid=4&hid=108, [Accessed 13^th December 2011]

Sim, E., Griffin, A., Price, R., and Vojak, B. (2007), Exploring Differences between Inventors, Champions, Implementers and Innovators in Creating and Developing New Products in Large, Mature Firms, Creativity & Innovation Management, Vol. 16 Iss. 4, p422-436, Available from Business Source Complete at http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=8befd7bc-2689-4a1c-a2d4-dcc58c2f27f0%40sessionmgr110&vid=2&hid=108, [Accessed 13^th December 2011]