Open Innovation: Models and Best Practices
Evolution Of a Winning Model
The term Open Innovation refers to a paradigm that dates back to the early 2000s, a period in which it was essential to give a precise direction developing both new technologies and new companies.
Even today, this theme remains deeply alive and the paradigm, although varied in different business interpretations, continues to be a bearer of innovation and dynamism in companies.
Because of many tradition businesses still managing internally R&D’s activities, there is strong need for business innovation, specifically around the open innovation concept.
To define the term Open Innovation we can start from its classical definition, as conceived by Henry Chesbrough:
«Open innovation’s paradigm states that companies can and must resort to external ideas, as well as internal ones, and access internal and external paths to the markets, if they want to progress in their technological skills. »
(Henry Chesbrough, 2006)
Benefits for the Current Market
The dynamism and rapid evolution commonly found in today’s markets require a broad rethinking of businesses as opposed to the classic boundaries that businesses are currently accustomed to.
Thus, it is possible to produce only what concerns the company’s core business and procure externally what is needed by those who already produce it.
As a result, companies can focus more on their core business while exploiting other companies know-how to improve processes.
In a highly specialized globalized market, the ability to continuously innovate a business in both product and internal processes becomes strategic, and is essential to do so at a lower cost than in the past.
In most cases, using new innovation strategies is mandatory. In fact, to this day, there are only few companies in the world able to boast a wide range of internal resources so that they do not have to utilize an external market for support.
The benefits of this innovative model are also applicable for those all-inclusive companies.
In their case, it is another way to add to the classic “Make or Buy” managerial choice: sharing.
Assumptions
The implementation of such a complex and strategic corporate organisational strategy, requires the scrutiny and respect of some important prerequisites that must exist so that the Open Innovation fits best in the business environment.
In particular, two key elements are essential:
- The creation of a favorable environment simulates a continuous flow of knowledge from inside to outside and vice versa. The environment refers to the development of relationships between the outside, where new knowledge and dynamism are introduced, and the inside where the company and key personnel facilitate such a change;
- Different sources of knowledge to exploits than in the past. Einstein said: if you can not solve problems using the same level of knowledge with which this was created, in the same way you can not imagine creating truly disruptive products and business models, without constantly changing your point of view.
Internal Organization
Banalizing the concepts mentioned above, for most people Open Innovation corresponds to a mere collaboration, mostly commercials, with external actors.
It’s not like that. Making Open Innovation requires a very structured overall strategy and the deployment of a considerable company efforts, in terms both of time and resources, in order to change internal company balances.
First line management support is essential to balance this shift and to prevent the possibility of a rejection crisis. In particular, it is critical that three organizational aspects are always addressed:
- A strong commitment by the company’s top management to achieve the objectives’ set and their consensus on the tools identified to achieve them
- Involvement of the Middle Management in achieving the objectives set by top management
- Clear and transparent identification of responsibilities for each of the different streams of open innovation, that will empower all the players in the field and makes sure that things “happen”.
If those steps are correctly managed it is possible to nurture the corporate business model and increase in a sustainable way the company’s ability to generate internal innovations and to capture the maximum value of the innovation generated by the others.
Classic tools for companies
What are the tools that are usually used to import the paradigm in companies?
There are many tools at company disposal. Choosing the correct one depends on what you want to achieve, as each tool requires a different quantity of internal resources in terms of both time and budget constraints.
CALL FOR IDEAS, HACKATHON, AWARDS
In many cases, companies are looking in the market for new ideas that can improve or revolutionize their businesses or their internal processes.
Call for Ideas are very useful when you want to explore the market but do not have a final result in mind. Once new ideas are proposed, organizations can potentially develop new technologies, new business models, or address unexplored market needs;
Hackathon: in this case, the objectives set by company are a bit more stringent and must have showed, at least as a Proof of Concept (PoC) within a very short time (24–48h). The aim is to present a technological solution relevant to the problem presented by the organizing company
Awards: another tool to quickly find ideas on the market can be to reward valuable ideas among those presented and continue with them through a more direct and targeted collaboration.
INCUBATORS AND COMPANY ACCELERATORS
To introduce innovation into the company, another important tool could be “Incubators” and “Business Accelerators”. The contingency is a must because all too often these tools are used to disguise simple business spin-offs or to constrain the applicants so rigidly to distort the entire concept of Open Innovation (i.e. the exchange of information between different companies aiming to a total growth of the entire system).
Ideally, Incubators and Accelerators have the capacity to support the initial efforts of young companies and accompany them in their growth by providing tools and spaces useful to develop an effective business.
PARTNERSHIP
With the spread of Open Innovation, partnerships acquire a new value, becoming an instrument of growth no more limited to single project’s extemporaneousness, but with a long-term sight relying on a much wider audience.
Many companies use this strategy opening HUB with other companies of their own field and creating agreements with Universities and Government’s Research Centers.
ACQUISITIONS
Acquisition is not a new concept for companies, even though it is now considered one of the main tools to do Open Innovation.
Companies taking over the share’s majority of new companies, assure to themselves ideas, technologies and skills in one fell swoop.
In several cases, the acquisition also involves the recruitment of the partners and / or employees of the startup, to maintain continuity with the previous management and integrate the identified digital talents into its staff.
The Alan Advantage Approach
This increased need for Innovation has led to the emerging of many business entities on the market.
Some of these businesses are specialized on strategic consulting, while others are focused on creating solutions that promote integration between the demand for innovation (the so-called Seekers) and the innovators (called Solvers).
The second type of company follows the well-established trend of web-based marketplaces (a very well known example is that of Innocentive). According to this model,
anyone with a problem goes to the marketplace in order to solve the issue, simply publish his requests and waits for Solvers’ applications.
This kind of marketplace let proposals to be presented to Seeker’s management, that will filter them out in order to find the best fitting solution to solve the problem. In this scenario, the role of the platform is pure intermediation and it acts as a facilitator between the two parties.
Another kind of approach is that of Alan Advantage, resting on the conceptual pillars identified so far but, at the same time, differentiating itself over the years due to the use of different methodological strategies.
The key points of Alan Advantage approach are:
- The consultancy role of addressing and / or guidance, aimed at achieving the goal of the seeker;
- High specialization on the themes of Artificial Intelligence and on new technologies in general;
- Careful selection of partners and corporates (for reliability and competence of the team, technological skills, the innovation of products / services offered, and a common business vision) in order to find an innovator in your own network before having to look for it in the rest of the universe of innovators;
- Confidence. Alan Advantage’s relationships with clients and his own network are based on a deep knowledge and esteem of each other’s competences that lead to strong trust on anyone belonging to the network, thus facilitating the creation of new relationships, and the finalization of very complex projects.
In recent years, Alan Advantage approach has been constantly tested on the market until now being a strong differentiating component.
The main benefits for customers, but also for partners and for members of the network, can be summarized as follows:
- All innovation projects have always been successfully completed;
- Low latency time (from the customer’s request to the first PoC), on average five days;
- High retention of customers, who continue to take advantage of company consultancy for other projects after the initial one.
Conclusions
Implementing new Open Innovation projects that imply such a profound revolution of the company’s business is anything but trivial. In addition to highly technical skills, a firm needs a strong commitment by top management.
Only on these solid foundations it is possible to begin such profound analysis of the business context essential for planning, positioning and for future actions.
If there are no internal competences, it is very important this phase being followed by professionals with qualified experiences in structured Open Innovation projects. They need to succeed not only proposing specific instructions, but also guiding the company through all possible internal and external obstacles.
The consultancy of external consultants allows the company to gain new, alternative perspectives. Thus respecting the primary idea of Open Innovation for which external resources are incredibly valuable to increase a wealth of skills and, ultimately, leading to the success of a project.
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