Digital Themes

Open Innovation

The term open innovation refers to an innovation strategy that calls for sharing information around research and development (R&D) of new products and services to authorized personnel both within and outside the organization. This means that rather than focusing on secrecy and hiding information, such as in a closed innovation model, an open innovation model instead looks to both internal and external ideas around how best to design and build something new. Open innovation processes have been steadily gaining popularity over the years, especially with the rise of venture capital markets and the wide availability of, and access to, skilled workers.

Closed innovation models are generally focused on the idea that successful innovation relies on complete control and ownership of every step in the process, especially in regards to intellectual property such as trade secrets and patents. However, closed innovation can suffer from a variety of issues, such as impractical ideas and ineffective focus. For example, if a bank is trying to come up with a new process, they need to make sure that the process is both feasible and in line with the bank’s business model. If it does not meet these requirements, then a large amount of time spent on internal innovation can be unnecessarily wasted.

In contrast, companies utilizing open innovation models will often times have an internal R&D team that takes external knowledge and applies it to the project. This external knowledge can come from a variety of sources, such as customers, universities, and even collaborations with rival companies. This allows for more voices to be heard, and for more ideas to be gathered than in traditional, internally developed products. By getting more information from more sources, businesses and organizations can ensure that they have the most relevant information for their end product. Furthermore, this allows more voices the opportunity to spot potential problems and identify the ways to correct and realign as needed. Proper open innovation management is necessary to make the most of this approach. This means that managers should ensure that all relevant information is being brought in and utilized, rather than just focusing on current ideas with no outside feedback.

Open innovations allow for competitive advantages in the following ways:

  • Global collaboration: Rather than just focusing on a small subset of people, open innovation allows for businesses and organizations to get information and ideas from around the globe. This can also help reduce the costs around conducting research, as there is not a large need to obscure and hide information that can provide useful insights.

  • Improved first generations: By utilizing external knowledge throughout the innovation process, businesses can ensure that they are building something that will be useful and has as few bugs as possible. Through increased beta testing and idea generation, businesses and organizations can ensure that the first version of the product or process has relevant research in its support.

  • Better marketing opportunities: With the advent of the internet, organizations have new ways of reaching a wider market than ever before. By opening up their innovation and development processes, businesses can allow for consumers to watch the journey from idea to creation and thereby allow for the potential of their product to go viral before it even releases.
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