Open innovation: an industrial perspective

Innovation can be broadly defined as taking new ideas profitably to market. The aspect of novelty is material to it, but so is the financial reward to successful inventors and entrepreneurs. In competitive markets, it is natural that private firms traditionally have preferred to safeguard their position by keeping innovation projects in house as much as possible.

While the commercial incentives for proprietary developments remain, a couple of factors have led to greater openness to collaboration in recent years. For example, these include an accelerating pace of technological change; more widespread transfer of ideas and concepts across industries; tightening global competition that drives a need to do more with less — in other words, to enhance productivity in innovation — or the advent of the digitally connected world that has radically simplified the search for new ideas and partners.

Strategic rather than opportunistic

Collaborative R&D and innovation partnerships are nothing new. But coining a term like ‘open innovation’ prompted practitioners to think of it more as a strategic rather than opportunistic endeavour.

In its basic form, open innovation can mean sourcing technology from an external party or forming a joint venture to leverage complementary skills in research and product development. At the far end of the spectrum, we find open platforms and crowdsourcing.

Here are some key points to be considered when crafting open innovation strategies:

With ideas, less can be more

In most technology companies there is no lack of ideas for better products or new businesses. The challenge is identifying those, which have the best chance of success in the marketplace while matching the strength of the organisation. Crowdsourcing ideas can be wasteful if no efficient mechanisms exist for the assessment of large numbers of solicited submissions. Companies should build a strong framework for idea selection ahead of the ideation process.

Innovation is an enterprise activity

It starts with new ideas, but the biggest effort and expense lies in taking these all the way to commercial offerings. Almost every company function, from R&D and engineering to supply chain and sales, needs to be aligned in execution. Engaging external parties adds significant complexity to the process, the cost of which may diminish the potential returns. Open innovation efforts should be supervised by a cross-functional steering group taking care of intra-company coordination.

Intellectual Property matters

Intellectual property (IP), in the form of both patents and trade secrets, remains an essential part of competitive advantage. Crafting IP agreements between independent partners can be a lengthy and costly process. And sharing confidential technical information with outside parties invariably bears risk. Therefore, trust and strong personal relationships are preconditions for success in open innovation. Building these can take a significant amount of time, which should be factored into project plans.

Despite its merits, open innovation is by no means universally endorsed across industries today. One of the impediments is the significant organisational effort required to manage such projects. Indeed, organising for success in open innovation means adopting processes that bring speed and scalability to external engagements. To simplify setting up collaborations between the private and the public sector, several actors in the field, including EIRMA, the European Industrial Research Management Association, EARTO, the European Association of Research and Technology Organizations, EUA, the European University Association, and ProTon Europe, the European Knowledge Transfer Association, have jointly published guidelines that can help structure and execute open innovation.

Open innovation can be an effective tool for technological innovation in companies. But their organisation needs to be prepared for it. And robust processes must be in place. Although cultural barriers are commonly cited as being the biggest roadblocks — such as the “not-invented-here” syndrome — it is actually structural misfits that pose the greatest challenges.

Universities and public research organisations can become more effective transferring technology, if they understand and adapt to the structures that govern the conversion of ideas into new products at the prospective partner companies.

Carlos Härtel

President EIRMA, the European Industrial Research Management Association

Featured image credit: CC BY 2.0 by Wonderlane

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