The Extent & Form of Open Innovation Today

Posted by Adi Gaskell on Aug 10, 2017 10:43:38 AM

Whilst challenge prizes have existed for hundreds of years, the concept of open innovation came to widespread attention through the work of Henry Chesborough. His 2003 classic Open Innovation: The new imperative for creating and profiting from technology highlighted the considerable potential of a more open approach to innovation, and alongside James Surowiecki’s Wisdom of Crowds, which was published the following year, showed a new way of thinking.

How have things developed since then? Well, the signs are promising, both in the sense that more and more organizations are using some form of open innovation, but also that there remains so much more that they could be doing. Lets consider the evidence.

A 2013 report co-authored by Chesborough highlighted that an impressive 78% of large companies are practising some form of open innovation. That was followed by another paper, this time from Accenture, which found that 26% of large companies currently practiced open innovation, while a further 38% expect to within the next three years. “As business leaders seek growth, they are increasingly finding the need to look beyond their shores and beyond their existing products and services,” the report said.

Unequal distribution

Suffice to say, not all organizations are deploying open innovation in the same way, and certainly not to the same extent. A recent study from The European Academic Network for Open Innovation shed some light on just what kinds of open innovation organizations are conducting.It found that the most popular activities were collaborative innovation, scanning for external ideas and customer co-creation, whilst areas such as IP licensing and crowdsourcing remained unexplored by many.

Definitions

  • Collaborative innovation: working with external partner organisations to develop a product or solution.
  • Crowdsourcing: enlisting the services and inputs of a large number of external people (the crowd).
  • Customer co-creation: working with customers to jointly develop new products and services.

For large companies (over 250 employees), the most popular activities were scanning for external ideas, customer co-creation, idea & start up competitions, using external networks and external technology acquisition. Whilst crowdsourcing had lower adoption in general, it appears to be pivotal for many smaller companies. This is due in large part to the way crowdsourcing allows companies to scale up rapidly by allowing them access to a potentially vast and diverse skillset that they could not possibly hope to gain access to via a traditional employment model.

Open innovation was also most popular among younger companies. For instance, the most fervent adopters of open innovation were fledgling startups up to 3 years of age, with the exception of activities such as IP licensing and technology acquisition, which were largely the preserve of larger, more established firms (classed as being 11 years or older). Younger companies were particularly keen on approaches that allowed them to scale up rapidly and cost effectively, including crowdsourcing and collaborative innovation with larger partners.

This kind of relationship is, of course, double-sided, and large companies were also heavy users of approaches such as scanning for external ideas and collaborative innovation, whereby they would search for smaller, more nimble operators to allow them access to technologies, skills and intellectual property. This is especially powerful when those skills and technologies are significantly outside the company’s traditional line of business, which is often the case for more revolutionary forms of innovation.

A growing movement

The report is confident that this is a movement that is continuing its rapid trajectory however. Across all industries and company sizes there was a strong desire to increase their open innovation work, especially in areas such as co-creation and external collaboration. Where companies struggled however was in accessing the talent required to make open innovation work.

For instance, nearly half of the companies surveyed revealed that they offer staff no training or support in specific open innovation skills, despite the strong emphasis placed on open innovation across the board. These include the ability to think and act entrepreneurially, engage well with external collaborators, understand the vagaries of intellectual property and working effectively across virtual platforms.

“Research on Open Innovation readiness suggests that employees require a certain education in order to be able to successfully apply Open innovation methods. Therefore, our results suggest that even though several companies use Open innovation activities, they are not exploiting its full potential,” the report says.

So how can such a gap be closed? Obviously partnering with external agencies that specialize in open innovation is one way to rapidly access the skills required, but the report also advocates working much more closely with academia to ensure that degrees incorporate open innovation in their courses.

This is perhaps a crucial next step, as despite it being nearly 15 years since Henry Chesborough brought the term to widespread attention, and despite the vast majority of organizations practising some form of open innovation today, it still seems like we are at an early stage of this journey.

What is equally clear however, is that this is a movement that is here to stay. Despite being at an early stage of their open innovation journeys, over 60% of companies reported successes from their open innovation work, particularly in the number of radical new products they have been able to bring to market. What’s more, there were also strong examples of the costs associated with this product development reducing, and the time to market also shrinking significantly.

It’s promising to see such impressive ROI from open innovation, despite the self-confessed weaknesses that organizations need to overcome. The sky really is the limit once we start to fully integrate open innovation in the skills we require from employees.

 

Where does InnoCentive fit in?

InnoCentive sits at the cross-section of many of these activities, using crowdsourcing to facilitate scanning for new ideas, collaborative innovation, co-creation, technology acquisition and IP licensing. Our services are most widely used by larger organizations.

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Topics: Innovation Insights

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