Open Innovation in the Cosmetic Industry: Forget about intellectual property rights and open the tap of innovation.
Open Innovation as a New Way of Producing, Developing, Commercializing and Implementing.
According to Chesbrough (2003), Open Innovation is 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. [This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology.” (https://www.forbes.com/sites/henrychesbrough/2011/03/21/everything-you-need-to-know-about-open-innovation/)
For many years, firms have been accustomed to produce, develop, create, commercialize, and implement their products and processes in-house, relying on internal and centralized R&D capabilities. In this model of closed innovation, firms believed that strong control was necessary for successful innovation. However, toward the end of the 20th century, a new model undermined this strong belief and focus on closed innovation. Indeed, instead of innovating internally, firms now increasingly develop new products and processes by exploiting both internal and external sources, opting for a model called Open Innovation. The model applies the principle of free trade of innovation between the firm and its outsiders, including customers, competitors or vendors.
This transition is mainly the result of a shift in mindset related to research and development, aroused from the increased connectivity and open data provided by the internet, social media, and other ways of communication. Other factors include the rising number and mobility of highly educated people as well as the increasing availability of venture capital, which helps young firms to finance and commercialize their ideas. Given the fact that the market is becoming more and more accessible, firms now accept that an ecosystem where ideas and knowledge flow across firm boundaries might be a reality.
The Advantages of Open Innovation
There are plenty of reasons why firms do need to revolutionize their innovation style and opt for strategies based on open innovation.
The most important one is the number of advantages provided by the new model, including the reduction of the costs, the accelerating time to market, the increasing differentiation in the market and the creation of new revenue streams for the company. Other incentives are based on the attraction and motivation of talented employees, the stimulation of innovation and generation of new ideas, the resolution of problems and the removal of barriers to the advancement of technology. Open Innovation therefore represents an opportunity for firms, as it allows them to better leverage their innovative capabilities and face their market challenges. Then, more than just providing a better understanding of customers’ needs, Open Innovation creates an environment of collaboration between customers and firms, where they can work together to co-create mutually beneficial solutions.
The Early Stages of Open Innovation in the Cosmetic Industry
In the cosmetic industry, intellectual property and the rights associated still represent the main way of doing. While famous brands such as L’Oréal, Chanel, LMVH Recherche and Shiseido already took the step of looking outside the company to develop innovative products or services, that is not the case of many cosmetic companies. However, there is now a trend of encouraging this model of open innovation. As an example, there is actually an international exhibition focusing on innovations and solutions for perfumery and cosmetics industry, called Cosmetic 360. (https://www.cosmetic-360.com/en/) Next to that, L’Oréal partners with Founders Factory in order to find innovative startups and develop innovative products.
“We believe that open innovation will be key to identify new disruptive ideas and co-develop new services to meet the aspirations of our consumers. We are excited to champion the next generation of beauty entrepreneurs through our partnership with Founders Factory and accelerate their development by bringing them our expertise of the beauty industry.” Lubomira Rochet, Chief Digital Officer, L’Oréal
However, in the cases mentioned earlier, it is all about companies partnering with other companies. What about co-creation with customers? What would be the benefits of such an alliance for the cosmetic companies as well as for their customers? A new way of thinking..
Even if many companies still believe that opting for Open Innovation is risky, as their goals, plans and objectives are exposed to the whole society, they should now consider that those risks are worth taking with all the advantages provided by the model.