Following our blog post “The Three Core Elements to make Open Innovation work” we initiate a series on the basic concepts of Open Innovation.
Companies often see Open Innovation as a way to find resources in the community at large. This is called outside-in open innovation and it is the principle behind the boom in corporation funded startup awards, challenges and hackathons.
While a lot of the hype surrounding those initiatives are used for communication purposes rather than innovation, outside-in open innovation can yield great results if applied correctly. The two main goals of an outside-in initiative can be idea generation or idea selection. Those two intentions imply quite different strategies.
An Idea generation initiative is a search for rare and often technical skills. A team launching an idea generation initiative should limit the territory on which the participants will be allowed to explore or risk receiving widely heterogenous submissions. This made clear by the precision of the technical challenges launched by GE. In early 2015, GE launched an aviation innovation challenge aiming to develop new parts inspection methods. The winner came up with an original approach using its 3D scanner technology and is now entering a joint development agreement with GE.
On the other hand, idea selection initiatives are often used by consumer goods companies facing a rapidly changing environment. Idea selection initiatives seek to gather the opinion of the crowd to select the concepts to be developed into products. It is a fast way to select products which will respond to the needs of the consumers. For instance, LEGO asks its customers to vote on which building landmark should be featured in the next Architectural Series box.
Another aspect of open innovation is less frequently explored but can yield even greater results. Inside-out open innovation is about allowing small motivated teams to break away from the company to develop a go-to-market strategy for a technology or project at odds with the company’s roadmap or strategy. Letting those teams leave the company, with or without strings attached, allows them to build a spin-off which would not have been viable in house. Large companies are great places to develop new technologies or discover new solutions. However inertia and red tape linked to their size make them ill-suited for the second necessary step to innovation: achieving product-market fit through iteration, trial and error.
Henry Chesbrough, the academic who coined the term “Open Innovation” looked at how numerous companies were created this way. For instance Adobe and 3com were offshoots of Xerox PARC, Xerox’s research institute in Palo Alto. While they were not Xerox subsidiaries, these companies were founded by researches of PARC who developed technologies that did not fit in the company’s strategy. 3com for example licensed the ethernet technology from Xerox that founder Robert Metcalfe had developed at PARC. 3com went on to develop numerous business applications for Ethernet and in turn generated great profits for Xerox by increasing demand for the technology.
Open innovation is a simple idea: create permeability between you and the outside. However when open innovation is implemented, numerous routes are possible. In anycase whether inside-out or outside-in, Open Innovation needs to be pursued with clear goals in mind and a strategy to achieve them.
