7 myths about Open Innovation
Both in my academic research and in everyday consulting practice, I am often confronted with questions about Open Innovation. The interesting aspect is that many scholars or practitioners — while intuitively understand what open innovation is — really have neither a basic, nor a clear understanding of the notion.
This is the list of Open Innovation myths that I had to demystify:
1.Either Open or Closed Innovation
Media, academic, blog tend to present Open vs. Closed innovation as a binary option, where a firm it is either standing on one side or the other. The truth is that Close to Open is a continuum where a large number of states exist: first and foremost because in large corporations open and closed innovation might coexist in different business units, with different approaches. But, moreover, openness is a fuzzy concept, which many firms embrace as simply as to source external IP or license own IP which has no use internally, while many other firms actively seek external partners to develop innovation capabilities which do no necessarily exist in either entity (e.g., collaborations between firms and research centers or university, crowdsourcing of ideas,…)
2.Open Innovation is cheap(er)
Many tend to believe that when innovation is Open, firms invest less money because they save in internal R&D development. While that is true once the system is up and running, and licensing an existing technology might be cheaper than developing it, most ignore that kick-starting an open innovation environment is expensive. With openness increases the legal protection requirements (e.g., how we share, negotiate and manage internal and external IP), but also the technology scouting process. When a firm opens up, it faces a highly asymmetric marketplace for IP and innovation capabilities, in which scouting can become very expensive, very quickly (whether it is executed or not through an intermediary).
3.Open Innovation is an homogeneous set of activities
Co-creation, crowdsourcing, corporate venture capital, corporate incubators, university research grants are just a few of the ways a firm can approach open innovation. Open innovation activities can be inbound or outbound, and have or not a pecuniary incentive (see my previous blog post on open innovation), and they are very heterogeneous. In a set of 20 different firms using Open Innovation, each one of them could be focusing on a sub-set of activities completely different from all others: they would all have embraced open innovation, but they would all execute it in a different manner.
4.Open Innovation is a radical new concept
While to certain extend, open innovation is a real management revolution, the under-lying principles where already existing. P&G before launching the Connect&Develop environment had New Business Development teams, scouting for ideas and IPs outside of the boundaries of the firm. Joint Ventures and alliances pre-date Open Innovation by nearly half a century, and technology licensing has always existed: Sony, which is world famous for launching the CD, licensed the CD IP from Philips at the beginning of the 80s. Open Innovation is where a lot of these underlying processes where systematized and nurtured.
5.Open Innovation is a fad
With Open Innovation being used for nearly 20 years, by hi-tech and low-tech industries, in Europe, Americas and Asia, by Large corporate and Small and Medium-sized enterprises, I am confident that it is not just a momentary fashion. It is also a living concept, which is changing and evolving, which is expected to revolutionize Marketing as much as R&D.
6.Open Innovation is simple
It is incredibly complex. It requires processes and skills to scout, negotiate, launch and scale businesses between competitors and/or firms whose culture could not be more faraway from one another. It requires international understanding of IP and trademark protection, networking abilities, and procedures to screen and filter ideas. It requires a decision making which needs to think in a multi-dimensional fashion: it’s not about answering questions on “whether we do it or not”, it’s about “should we do it internally or externally”, in “collaboration with” and so on.
7.Open Innovation is the future
On one end, Open Innovation is already the present and the recent past, but arguably is not going to be the only version of the future. There will be plenty of companies that will be disruptive and innovative, without being open on their IP side. This might happen because they have focus and knowledge internally. Being successful with Open Innovation entails being able to balance complexity and costs, by interfacing with external communities of partners. Not all company will succeed at that, but that does not mean they will die.
Originally published at www.amati-associates.com on April 19, 2016.