Open innovation definition is to find the resources a company lacks outside of it. But there are several factors to consider when implementing a business innovation strategy.
Crisis of the Closed Innovation model
What until recently represented the traditional model, is now called Closed Innovation since it requires the control by companies of all innovation processes.
It is based on self-sufficiency, i.e. making sure that you can plan and manage every stage of innovation in the company, from idea development to product implementation to commercialization and so on.
In addition, it is necessary to own the intellectual property of innovations to maintain a competitive advantage over competitors in the market.
The aspects that have challenged this model in the most recent period are related to globalization, the growth, and the mobility of the so-called "knowledge workers" that work for the knowledge management software alongside the enormous diffusion of digital technologies.
Investing in research and development processes, in order to be competitive and survive in the current scenario, is becoming more and more expensive; moreover, the increase of small startups and subjects that invest in this kind of reality has caused a revolution in the way of creating ideas and innovating on the market.
The Open Innovation model is the most suitable tool to face this revolution. In fact, according to PwC’s global study of 1200 executives, over 60% of respondents are embracing open innovation to generate new ideas (source: https://www.viima.com/blog/open-innovation-challenges).
The Real Definition of Open Innovation
Open innovation is a concept that has gained significant traction in recent years as companies strive to stay competitive in a rapidly changing business landscape.
But what does open innovation really mean?
At its core, open innovation is about tapping into external resources and expertise to drive innovation within a company. It is a departure from the traditional closed innovation model, where companies rely solely on internal resources and ideas.
Open innovation recognizes that great ideas can come from anywhere, not just within the company's four walls. By embracing external sources of knowledge and collaborating with partners, customers, and even competitors, companies can harness a broader range of ideas and perspectives to fuel their innovation efforts.
This shift towards open innovation has been driven by several factors. The growth of knowledge workers, who often move between organizations, has made it increasingly difficult for companies to keep all innovation processes in-house. And the rapid advancement of digital technologies has opened up new avenues for collaboration and idea generation.
According to a recent study by PwC, more than 60% of executives are now embracing open innovation as a way to generate new ideas. This aligns with the findings of the Open Innovation Outlook - 2023 Report, which highlights the widespread adoption of open innovation practices among leading companies.
The report reveals that companies are using various strategies to implement open innovation. Venture client models, innovation outposts, and antennas are being deployed in tech clusters to foster collaboration and idea exchange. Intrapreneurship programs are also being adopted to encourage entrepreneurial thinking within the organization.
Companies are also recognizing the importance of geographical presence in innovation hotspots like Silicon Valley, European hubs, Israel, and the East Coast. These locations offer access to a vibrant ecosystem of startups, investors, and experts. Additionally, companies are expanding their innovation efforts to regions like Latin America, China, India, MENA, and South Korea to tap into emerging markets and diverse talent pools.
However, implementing open innovation is not without its challenges. The report identifies rigid internal processes and cultural aversion to risks as the main barriers to successful collaboration between companies and startups. Overcoming these barriers requires a cultural shift within organizations, with top management leading by example and fostering a mindset open to innovation.
To promote a culture of open innovation, companies must also invest in knowledge management systems and networking dynamics. These tools enable effective communication and collaboration both internally and externally, facilitating the sharing of knowledge and ideas.
Open innovation is about embracing the power of collaboration and recognizing that innovation can come from anywhere. By tapping into external resources and fostering a culture of openness and collaboration, companies can position themselves at the forefront of innovation and drive sustainable growth in the ever-evolving business landscape.
Open Innovation in the world: the situation nowadays
The Open Innovation Outlook - 2023 Report analyses insights and assessments from the heads of innovation of several of the world’s most innovative corporates.
Those data have been collected by Mind the Bridge, an innovation consultancy, and the International Chamber of Commerce, during the annual Corporate Startup Stars Award in London.
About the innovation models, the report points out that 97% of the respondents already use Venture Client to do open innovation, while innovation Outposts and Antennas are deployed in the main tech clusters by 80% of the companies, and Intrapreneurship is adopted by the 70%.
Having an innovation outpost in Silicon Valley and the top European hubs is still at the top of the list, according to 80-90% of the respondents. Israel and East Coast are the other “must-have” locations: 65% of the companies already have an innovation presence in these regions and the remaining 17% are planning to put innovation boots on the ground soon.
Latin America, China and India are also attractive for global innovation leaders, while one-third of companies have expanded their prospecting efforts to MENA and South Korea.
When it comes to company-startup collaboration, the main barriers to the development of open innovation are due to rigid internal processes, according to 50% of the respondents, and the perceived cultural aversion to risks (47%).
The report has also identified the top 3 priorities for global innovation leaders for 2023. First of all the sustainability, including climate and decarbonisation; then the struggle to extract results from existing open innovation initiatives, get more coordination and alignment both with business units and R&D, and improve cultural change towards open innovation.
How to promote the culture of Open Innovation
In concrete terms, promoting Open Innovation means modifying, where necessary, internal processes and activities and rethinking corporate culture and procedures:
The diffusion of a mindset open to innovation starts from top management, which is called upon to impartially assess the leadership style and implement examples of positive change.
The formation of cross-functional teams, i.e. with different skills and backgrounds, allows innovative ideas and different approaches to problem-solving to emerge.
The spread of an entrepreneurial culture also depends on employee motivation. Putting in place a training and incentive system that values positive examples and personal initiatives helps employees understand the value of innovation.
Increasing the number of Research & Development departments can help people understand the potential of education and experimentation as an investment in the future.
Developing Knowledge Management systems and networking dynamics fosters a collaborative culture, through social and corporate networks of knowledge sharing, both internally and externally, such as co-creation practices with users.
Knowledge Management and Open Innovation
The characteristics of open innovation are speed, pervasiveness, and effectiveness: for this to happen it is necessary to use tools to support the company and to implement an open innovation strategy.
An innovative company, in fact, must allow employees and managers to do their jobs better, providing tools to support and increase productivity.
For this to happen, a knowledge management strategy is essential: having good corporate knowledge management allows you to optimize your resources, both internal and external, avoiding wasting time searching for information.
As a matter of fact, searching for information within a large amount of company documentation is binding for the success of an activity. If employees are not allowed quick access to the information they need to do their jobs, the work will slow down, if not stop, until the information is found.
In fact, knowledge management can improve communication both externally (with clients, suppliers, and other firms) and internally (between departments and divisions), thus supporting the open innovation strategy.
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