Open innovation: definition and details
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| Open innovation: definition and details |
Definition
Open innovation consists of an innovation management model based on collaboration with people and entities outside the company. In this sense, open innovation challenges represent a break with internal knowledge silos and the secrecy traditionally associated with business R&D.To embrace the company has to recognize the opportunity to co-create with outside professionals or organizations and also be willing to share the benefits of such collaboration. This is reflected through various forms of collaboration between organizations or with individuals, such as alliances, research chairs with universities, competitions through crowdsourcing, and innovation ecosystems.
The Origin
Collaboration and co-creation have always existed, perhaps since humans began trading or since the craft industry adopts know how other regions or cultures. Cisco may be the great pioneer of open innovation. Its acquisition strategy to make hardware and software compatible led it to grow very rapidly in the late 1990s. This strategy of innovating by focusing on the market made Cisco outperform other companies such as Labs or Lucent that we're unable to transfer a large investment in new technology to business growth. Another of the initiators, without a doubt, is the pharmaceutical company Eli-Lilly with its head of R&D strategy at the helm. In an industry of million-dollar investments and with success rates below 10%, this company considered in the year 2000 how to take advantage of collective intelligence through the Internet. the first online open innovation platform to connect with world scientific knowledge. Subsequently, this platform gives rise to Innocentive, a spin-off of, which offers to accelerate the development of products mainly for the pharmaceutical and consumer products sector. Connect & Develop, a new model for product innovation and development. Its main objective is to help P & G's maintain annual revenue growth of $ 2B, sustaining its investment in R&D. It is Procter who takes this open model of innovation to its maximum expression, reaching 50% of innovations from outside and increasing the productivity of its R&D by 60%.
Open vs Closed Innovation
The innovation is used in the company to generate and apply knowledge obtaining business results through new products and services, new business models, and more efficient operations. Traditionally, some companies have innovated with their resources. The main reasons are the traditional lack of business orientation of the scientific community and the idea of protecting company assets. That is why companies have traditionally prioritized the volume of resources, the number of projects, and investments in innovation. It is common to find in organizations with closed innovation large areas of research or projects with numerous resources that generate their knowledge. The more the merrier. In these organizations, innovation is measured using ratios such as the famous percentage of investment in R&D over sales. However, it is well known that these ratios in isolation only reflect the volume of investment, not so much the business results they generate. Today, with the speed at which technology evolves, in companies that apply closed innovation models: The knowledge generated is usually not complete. The contribution of external sources is key today due to the speed of technological development and the lower barriers to entry.
Sometimes that knowledge does not reach commercialization, sometimes because it does not respond to market needs, and sometimes because it is obsolete or because of a change in business priorities. Maintaining resources and budgets year after year is prioritized and external innovation is seen as a competitor, hence the famous “Not invented here”.More recently, the so-called open innovation has emerged that encourages companies to use the knowledge that exists outside their borders. Thus, relationships between companies, universities, technology centers, and other resources that can provide more knowledge are promoted. This innovation was born at the beginning of the century, fundamentally due to the opportunity offered by the Internet to easily connect with any part of the world.
In those organizations where open innovation is used:
It collaborates with external knowledge generators as one of the pillars of innovation. The internal organization is organized to connect and integrate internal teams with sources of external knowledge. Internal innovation also exists but it focuses on the creation of knowledge that does not exist outside and as long as it can be commercialized. To this day, open innovation has been adopted by many companies in the world as a way to accelerate innovation processes, reduce risk and do more with less. From a traditional innovation funnel to a rocket model
Traditional models of innovation use a funnel-type process that allows the most attractive ideas to be selected first and then to develop the best ones. In said model: Ideas and technical solutions come mainly from internal staff The contribution of some trusted collaborators is accepted.
On the contrary, models based on open innovation use a rocket-type process, in which both ideation and development accept external contributions. These contributions substantially increase the wealth in ideation and development and constitute a great valueIdeas are better connected with the market, they satisfy real needs. Solutions in the development phase are technically better.
This external contribution means that open innovation models provide more quality in terms of ideas, more speed in terms of technological development, and less risk due to their connection to the outside world. The use of an open model at the beginning of a project has great advantages for the innovation team. First of all, it makes it easier to understand the challenges to be solved. In addition, it helps the team to focus on the key points and to evaluate a greater number of possible solutions.
Comparison between closed and open innovation models
Closed innovation
Use of internal knowledge sources,
Open innovation
Use internal + external sources of knowledge
Closed innovation
Low project success rate (typically 20-30%),
Open innovation
Double the success rate in innovation projects, up to 80%
Closed innovation
Many re-jobs, low productivity,
Open innovation
40-60% increase in productivity
Closed innovation
Slower process,
Open innovation
Fast innovation (speed x 3)
engineering crowdsourcing
It requires a contribution of creative and innovative ideas while viable, that can be implemented. For this reason, in technological innovation projects, engineers are the ones who can best provide technical solutions to solve the challenges.
For this reason, the combination of open innovation with engineering crowdsourcing constitutes a very useful tool to achieve results in technological innovation projects. Engineering crowdsourcing allows easy access to professionals and technology-based companies - both SMEs and startups - with multidisciplinary, global, and cross-industry knowledge. This collective intelligence of engineers helps to quickly obtain multiple technical-economic solutions to the same challenge through a convergent process. Crowdsourcing engineering support ultimately companies to seize the opportunities of technological change and turn them into a competitive advantage.
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