OPEN INNOVATION: Which Innovation Strategy?

Markets are constantly evolving and companies need to understand which innovation model to adopt in order to remain competitive. What is the best way to bring innovation to your company?

January 30, 2021

Is it better to exploit only internal resources, thereby protecting your innovative product right from the beginning, or could you benefit more by opening up your project to outside collaboration?

According to the Open Innovation model, the best way to innovate is by leveraging your internal skills and also those which are external to your company.

As defined by Henry Chesbrough, a researcher at Harvard and Berkeley and inventor of Open Innovation, this model is based on “inbound and outbound knowledge flows aimed at accelerating 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”

Comparing Open innovation and traditional models of innovation.

The Open innovation model is totally opposite to the traditional model of innovation where the development of a new product begins in the department of R&D and its distribution is managed solely by the organization. In the traditional process of innovation, the company alone bears the costs of developing a new product or service, training specialized personnel and the launch of the product.

The risk of this approach is that, with the speed with which the digital revolution economy is moving, the company’s innovation arrives too late on the market.

The benefits of open innovation for businesses

Open innovation brings several benefits to companies

reduces the cost of design, prototyping, production and distribution,
shortens the time to market,
increases differentiation, opening up new outlets and creates new sources of revenue for businesses.

How does this happen? Value is created through contamination, cooperation, technology, information sharing, the resources mobilized within the company and exposure to diverse external individuals. External knowledge does not necessarily have to come from suppliers but can be gained from universities and research institutes, start-ups, consultants and consumers.

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How to implement open innovation?

To achieve open innovation, companies need to have a clear strategy. First, you need to understand your requirements:

make your expertise available externally and expand the market using the inside-out model.
leverage external expertise to incorporate it into your innovation process, using the outside-in model.

In the case of the inflow, outside-in model, you can adopt different strategies to enhance external contributions:

search for external ideas through crowdfunding or competitions
joint development or co-creation of a new product with your customers and partners

Open innovation is seen as an opportunity to create value in a diverse way: no longer via ‘behind closed doors’ and secrecy of the current innovation processes, but via co-creation and sharing with experienced partners instilled with a new digitized culture.

This process needs a clear strategy that has to developed according to the specific needs of a company. With the guidance of an experienced consultant, making the change towards a new culture of innovation is round the corner.