presentation about open innovation

What is Open Innovation: a definitive guide

Table of contents.

Introduction to Open Innovation

Definition of Open Innovation

What is the difference between open and closed innovation.

• Who introduced Open Innovation?
• Which company uses Open Innovation?

What are the types of open innovation?

Internal Open Innovation vs. External Open Innovation

• What is Internal Open Innovation
• What is External Open Innovation

The differences between Inbound, Outbound and Coupled Open Innovation

What is outbound open innovation, what is inbound open innovation, coupled open innovation, why do we need open innovation, advantages of open innovation, disadvantages of open innovation, how to implement open innovation, what is an open innovation strategy, what is an open innovation platform, best practices to enable open innovation.

Examples of Open Innovation:

• Lego, L’Oréal & Philips
• TotalEnergy

Introduction

Remember Boaty McBoatface?

In March 2016, the UK’s Natural Environment Research Council (NERC) launched an online competition to determine the name of its newest research vessel. The ship was meant to join the British Antarctic Survey and the organizers therefore hoped to receive a raft of lofty suggestions suitable for the grand ambitions of the NERC.

Instead, they got Boaty McBoatface. In a sign of the times, the British public did not hesitate to lampoon the NERC’s overly posh aspirations. The name Boaty McBoatface won the popular vote by a landslide and the NERC now had a public relations crisis on its hands. They could not possibly accept a name as silly as Boaty McBoatface for their expensive vessel, but they also knew that in a country simmering with populist sentiment on the eve of the Brexit referendum, the general public would not like it if their choice was overruled by the NERC’s leadership.

Fortunately for the NERC, then science minister Jo Johnson managed to save the day by naming the boat after national treasure Sir David Attenborough. For good measure, the name Boaty McBoatface was recycled for one of the remotely controlled submersibles on board of the RRS Sir David Attenborough.

Submersible Boaty McBoatface started its maiden voyage on the 3rd of April 2017.

Now that five years have passed, this incident seemed like a perfect introduction to the fascinating power (and glorious pitfalls) of what experts in the field like to call Open Innovation.

The Open Innovation methodology promises a lot of opportunities for advancement but can also be difficult to navigate. At SteepConsult, we understand that in such a situation, good guides are everything.

Without Virgil, Dante had never been able to reach Paradise after all. Over the course of this guide we will cover all the ins-and outs of the topic which are important for practitioners and thus support you in building your own Open Innovation paradise.

It is often said that wisdom begins with the definition of terms.  By defining terms, we are able to categorize items based on their relevance to our challenge. In other words, by defining terms we equip ourselves with the focus needed to tackle complex issues.

This is particularly challenging in the context of innovation, where the old Facebook motto “ move fast and break things ” still exerts a romantic pull on many fledgling innovators. Failing to properly define concepts and procedures can be a costly mistake to make however and we would therefore like to help you avoid this common pitfall. We have already written an article on the differences between innovation and invention , so in the next paragraphs we will focus on the correct definitions of open innovation in particular.

What is open innovation?

According to Henry Chesbrough, the Berkely Haas professor who first coined the term back in 2003, the Open Innovation paradigm assumes:

Definition That firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.

Open Innovation therefore takes an expansive view of the innovation process in contrast with more traditional methodologies. It emphasizes cooperation, transparency, and pragmatic thinking in the sourcing of ideas.

On first glance, this is not so different from older approaches which also seek to promote these traits, but traditional methodologies seek only to promote these traits within the boundaries of their own firm.

The traditional view as described in Chesbrough’s 2003 book

Open Innovation is more inclusive, as it seeks to involve external parties in the innovation process. As can be seen when comparing the figure below with the figure representing the traditional view, this inclusivity increases both the number and strength of the interactions throughout the innovation process.

Open Innovation as described in Chesbrough’s 2003 book

While this increases complexity, open innovation also provides a more diverse set of methods to anchor knowledge within an organization. If done right, the absorptive capacity of a firm is enhanced right at the moment when more ideas present itself through the various interactions with the world outside of the confines of the traditional R&D department.

As stated earlier, in stark contrast with more traditional closed-system innovation, Chesbrough and his disciples argue that enterprises in Open Innovation systems do not keep their innovation efforts restricted to their internal R&D departments.

Firms using this Open Innovation approach seek to involve other areas of their business and even outside parties in the innovation process. This does not mean that these firms outsource their R&D efforts. They remain active participants in the process and the R&D departments’ traditional role is not so much diluted as it is becoming more focused on capturing value. Either by internal development like before or by laying claim to some of the value created by R&D efforts outside of the organization.

In the wickedly complex world that we live in, this approach allows Open Innovation firms to attract valuable insights and methodologies from outside of the firm. By working together, different approaches and expertise are blended together to reveal insights that the narrower view of the traditional closed-system approach would never be able to cover.

Who introduced open innovation?

The guru of the Open Innovation movement is the aforementioned prof. Henry Chesbrough, but many other influential voices have added to the debate and research about Open Innovation over the years.

Other interesting people to follow are prof. Joel West, prof. Wim Vanhaverbeke, prof. Martin Curley, prof. Ward Ooms and many others. Aside from individual researchers, there are also several big corporations which have experimented with Open Innovation over the years.

Which company uses open innovation?

The list below is non-exhaustive, and the successes and failures of the included companies will be discussed more in depth in the paragraphs to come when their experience is illustrative for the concepts and approaches under discussion:

• Total Energies

The increasing number of firms leveraging open innovation to create value is a testament to the developments we have underwent as a society. Innovation has never been as crucial for success as it is today, but at the same time the people organizations need to realize their innovative potential have never been more empowered.

While the Great Resignation that came about during the CoVID pandemic was unprecedented in scale, the mobility of highly educated workers had been on the rise for several decades. Pockets of knowledge now exist well outside of the research laboratories of large enterprises and have drastically broadened geographically as well. These alternative clusters are often more appealing to skilled staff members than a purely corporate existence.

Investing in Open Innovation allows traditional organizations to access this knowledge, but it is also a hedge against the departure of key workers. Before the trend in Open Innovation came under steam, such a loss could prove critical to innovation programmes, causing many years of delay. Through being more flexible about in-and outsourcing knowledge however, this risk is now much easier to mitigate against.

Another important aspect has been the development of new sources of capital. In particular, the rise in venture capital activities has been significant over the past two decades. Now that everyone seems eager to put their money to work, it has become much easier for firms to e.g., spin out promising products into new enterprises that are better able to respond to market forces.

Open Innovation is a multi-faceted concept. It is therefore possible to divide it further into many different subcategories, depending on the dimension that is in focus.

The proliferation of terminology has contributed to a veritable Babylonian confusion within the field of innovation.

For a layperson, it is not easy to get a grip on the subtleties that separate one dimension of open innovation from one of the others. 

The most important of these subdivisions shall be discussed in this paragraph, so that we have a proper understanding of the complexities involved.

Internal open innovation vs. external open innovation

A first relevant subdivision is that between internal open innovation and external open innovation. People often make the mistake that internal and external open innovation are mutually exclusive, but they are not.

What is internal open innovation

Internal open innovation (sometimes also referred to as intracompany open innovation) is the first step away from the traditional closed innovation model. Instead of confining innovation to the R&D department, an internal open innovation approach seeks to engage as many employees as possible in the innovation process. In this way, a much greater diversity of perspectives is considered.

The power of internal open innovation lies in three major advantages. First and most obviously, it allows for a wider sourcing of potential solutions. This is a common advantage of all open innovation approaches, so it is no surprise that it is also a powerful driver of the adoption of internal open innovation.

Secondly and more importantly, the implementation of internal open innovation allows for a wider sourcing of problem statements. This is even more crucial than the first advantage as most projects (innovative or not) fail before they even get started as they fail to properly define and address the exact problem they seek to solve.

Thirdly, internal open innovation allows employers to galvanize their labour force. People have a strong need to feel valued, to be trusted and to have the ability to develop their own talents abilities. A great indirect benefit of open internal innovation then, is that when properly run, it allows employees to meet these needs and increase their performance, job satisfaction and lower employee turnover.

External open innovation

Companies that employ external open innovation go a step further. These companies work together with external parties for example dedicated innovation firms, research bureaus, consulting services and universities but also suppliers, customers and in some cases even competitors or the general audience.

To further narrow down the scope of the partnerships’ companies are willing to engage in, various subcategories have been created to help specify the types of external open innovation partnerships out there. The main difference between the various categories is the level of transparency organizations are willing to engage in.

For the categories with the greatest target audience, the shared information tends to be less sensitive in nature and the need to have a specific expertise to weigh in the lowest. These tendencies are not necessarily the right approach however, as breakthroughs can far outweigh any risks related to transparency. Not to mention that often times it is very difficult to determine which information is truly sensitive and which expertise would truly be of service in the quest for a solution towards the innovation challenge the company in question is seeking to resolve.

The most important subcategories of external open innovation are:

• Intercompany
• For experts
• Open to the public

In the subcategory “Intercompany”, knowledge is shared between various partner organizations who collaborate to solve a given problem. Each of the collaborating organizations possesses a piece of the puzzle and the goal is to unite so that the full picture can be unlocked. This type of collaboration works exceedingly well when the relationships between the participating companies are symbiotic in nature (e.g. when they are active in distinct areas of the supply chain for a good or service) and each participant is secure in their added value.

The “for experts” subcategory then, refers to partnerships in which the target group is limited towards a specific group of professionals. If the problem in question is highly complex or technical, it might require the help of dedicated researchers and specialists to be solved.   Collaborations with universities or research institutes are often set up when this type of external open innovation is needed.

The last subcategory of external open innovation is labelled as “open to the public” because the organizations using this are open to ideas from the general population. Everyone, regardless of expertise or demographic characteristics is invited to get involved. The most famous incarnation of this type of external open innovation can be found in the form of the open innovation challenges of companies like Agorize but also the crowdsourcing of ideas as in our Boaty McBoatface example can be categorized as a publicly open form of external open innovation.

The main advantages of this approach are mostly the same as the ones we have already touched upon in the paragraphs about internal open innovation. The direct benefits of such an approach are twofold in the sense that they again allow for a wider sourcing of solutions and problem statements, allowing companies to use niche specialities that they could otherwise not afford to consult.

Indirectly, there is again the benefit of increased proximity and trust within a well-oiled external open innovation ecosystem. For example, if companies are proactively solving problems for their most valued customers, these customers will experience far better service and therefore be more willing to purchase more or different services than before.

While companies that rely on external open innovation usually also engage in internal open innovation, that does not necessarily need to be the case. It is perfectly possible for a company to bet heavily on external open innovation while focussing their internal innovation efforts in a single, traditional R&D department.  

Example of open innovation at Nokia

A good example here comes from Finnish telecom giant Nokia. The company first rose to prominence as a manufacturer of mobile devices. Unfortunately, after leading the pack in this field for many years and building up an internal research division of 1300 people, the beginning of the smartphone era turned out to be very bruising for Nokia. It made several wrong bets and, in the end, found that it was being surpassed by many of its rivals on all fronts.

Drastic measures were needed to give the company a new lease on life. The management at the time adopted a radical way forward. It sold the mobile device part of the business that had made the brand famous around the world and instead decided to place great bets on IoT, 5G and other telecom technologies. After the sale, the internal R&D team went down from 1300 to 80 people, although numbers rose fast after Nokia used the money from the sale to acquire the hallowed Bell Labs in New Jersey.

Bell Labs and what little remained of Nokia’s original research department would serve as the linchpin in a new open innovation network that would see Nokia work together with external parties to create value for itself. Over the years, a number of initiatives has been launched with the cooperation of several partners.

The five most important of these are the Nokia Veturi programme , the open ecosystem network , Invent with Nokia , the various Nokia Garages and NGP Capital. With the exception of NGP Capital, which functions much like the Unilever Ventures initiative discussed in the section on inbound open innovation, all of these initiatives will be discussed briefly in the next paragraphs.

In the Veturi programme, Nokia collaborates with governmental entity Business Finland to boost both its own Finnish R&D expenditure and that of its partners to help Finland reach the targeted four percent of GDP spent on R&D in Finland by 2030. This ambitious programme, funded with money from the European union sees Nokia partner with partners across Finland to reach the ambitious target. By taking on a leading role in this programme, Nokia secures heavy government support, additional funding for itself and a way to strengthen its partnerships in its home market.

The open ecosystem network is less geographically restricted. It is a free-to-use open innovation platform set up by Nokia and focussed on fostering links between companies of all sizes and individuals of all walks of life to share their real-life problems, insights, assets, and innovative solutions. While it is mostly focused on connectivity, Nokia has stated that it would like to extend the platform towards areas outside of Nokia’s core focus as they believe that turning their platform in a hub with overlapping open innovation ecosystems would pay the most dividends. Invent with Nokia is a fairly similar initiative, although it is a lot more focussed since it specifically targets inventors who can submit ideas for review by Nokia’s researchers. A process that allows Nokia to get quickly involved when promising opportunities present themselves, while the inventors benefit from the feedback the expert scientists at Nokia are able to give.

Nokia has furthermore also created variety of hubs called the Nokia Garages. The Garages are meant to serve as physical gathering points for innovators, a sort of bricks-and-mortar complement to the open ecosystem network discussed in the previous paragraph. In these Garages, employees from Nokia as well as invited collaborators can innovate and tinker without pressure. There are no directives, regulations or other demands coming from the company. Apart from the occasional event organized to focus people in a particular direction, no company intervention is intended so as to empower people to develop their wildest ideas into a reality.

The subdivision inbound/outbound/Coupled open innovation is often used interchangeably with the internal/external subdivision described above. Unfortunately, this in incorrect and the cause of much confusion as both subdivisions differ in focus.

The internal/external subdivision essentially focusses on who participates in the innovation process. It is therefore used to describe differences in approach between various organizations. The inbound/outbound subdivision on the other hand, was conceptualized to study the direction of the open innovation strategy of a company.

Companies engage in outbound open innovation when they transfer innovations (be these tools, technology, processes, or anything else that creates competitive advantage) outside of their enterprise. There are many reasons why organizations choose to do this, but it is usually done because organizations believe that the business model of the receiving organization has a greater chance at successfully commercializing the technology.

The most expedient example of this belief is the out licensing of IP and technology to third parties in exchange for payment. The pharmaceutical industry, with its ruthless portfolio management strategies provides us with many use cases for this type of arrangement. Given the vast sums involved in the development of new treatment options and the huge costs in bringing these to market, Big Pharma needs to focus its resources on certain focal areas (e.g., Degenerative Nerve Diseases) to ensure that results are achieved

The open innovation example of Pfizer

It often happens however, that pharmaceutical companies bump into compounds or treatments that might be interesting for diseases outside of their core area of expertise. A popular option for not letting good work go to waste is to out license the discovered compound to a third-party player with a greater fit with the product.

A good recent example of this is Pfizer’s decision to out-license two potential treatments for cancer to Pyxis Oncology . In exchange for the deal, Pfizer received an upfront payment, as well as an equity stake in Pyxis Oncology and the promise of future pay-outs if certain targets are met.

Aside from out licensing, many other forms of Outbound Open Innovation exist such as spin-offs, spinouts, carve outs, split offs and so on. Some of these will be discussed more in depth in the “How to Set Up an Open Innovation” programme section.

The open innovation example of Tesla

One last example of a peculiar kind of outbound open innovation comes from the waiving of IP rights. This is a strategy that has recently been popularized by companies like Tesla and Panasonic, which have recently (partly) adopted such an open-source approach. The later in the field op IoT and the former in the field of electric vehicles.

In Elon Musk’s now famous 2014 post on the Tesla blog called All Our Patent Are Belong To You, he gave the following reason for embracing the open source movement and releasing the patents Tesla had accumulated up until then:

“We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly evolving technology platform.“

This seems to be an incredibly noble statement of intent, but as always, there is more to this than meets the eye. In the modern economy, platforms have become incredibly important. They act as powerbrokers between buyers and sellers, leveraging the power of network effects to devastating effects against competitors.

One of the reasons why a company could therefore choose to waive its IP right might therefore be exactly to set the standards in a particular field. If everyone else builds further upon innovations initially set by your own firm, there is much opportunity to be mined from the fact that as the original innovator, the firm waiving its IP rights has a huge advantage in capturing the added value that is created. Something we suspect Mr. Musk to know all too well.

The open innovation example of McLean

An incredibly successful example of this strategy can be found in the creation of the standardized shipping container. The idea of containerizing goods was far from new, but only in 1956 did the quiet revolution begin that would power much of the economic growth of the past half century. It is at that moment that Malcolm McLean, an American captain-of-industry decided to waive the patents he had held on to the design of container that was easy to stack and transport.

Before the advent of the modern standardized shipping container, goods were shipped in satchels, wooden barrels and crate that had to be moved around by legions of longshoremen. The process was not standardized at all, prone to disruptions and theft.  All of which were quite memorably depicted in the classic film On the Waterfront starring Marlon Brando.

Many people had tried to improve the inefficient transport of goods by ship before, yet none had succeeded because no one had been willing to share their designs. Their existed a plethora of different containers before Malcolm McLean came along, but because every firm stuck to its own designs, no real gains were achieved. Quite the opposite as the various designs made an already dismal mode of transport even more complex.

After Malcolm McLean shared his IP, the true potential of containers quickly came to fruition. Due to their uniform design, they could be easily stacked on top of each other. (Un)loading would also be standardized as everyone could tweak their machinery and procedures around one design. This lead to huge savings on labour costs, better protection against theft and unexpected benefits like lower insurance fees.

All in all, it is estimated that containerization increased bilateral trade by a whopping 790% over 20 years, thus vastly increasing the amount of value that was created. The world thus enjoyed great benefits from McLean’s clever stratagem and the man itself did not do too poorly for himself either. In 1996 he sold his share in Sea-Land, the container business he had created and turned into the biggest global shipper of its day. That deal netted him a cool 160 million USD, which came on top of the fortune he had already build for himself throughout the years.

For inbound open innovation the direction of the knowledge transfer is reversed. Companies are said to employ inbound open innovation when they acquire external innovations to be implemented in their own operations. Sourcing innovations elsewhere is done to either accelerate internal innovation efforts or to expand the market for the external use of innovation.

Research seems to suggest that many more firms are open to inbound innovation than outbound innovation, so for organizations that are just beginning to contemplate new innovation practices, it might be relevant to start experimenting with Inbound Open Innovation first.

To enable the successful implementation of Inbound Open Innovation, three elements need to be brought together for the perfect mixture. The first important element that needs to be brought into the mix is the adoption of a clear strategic direction. Unambiguous statements of intent from top management are crucial here, as their sponsorship and commitment of the Open Innovation approach will help assuage the fear of people that external innovations do not pose a threat to existing jobs.

The second element is the scanning of the external environment for clues to identify, select, utilize, and integrate new findings. An important but often overlooked aspect successful open innovation efforts, organizations ignore this part of the process at their own peril. Without a proactive search strategy based on the clear strategic directives discussed in the previous paragraph, organizations are forced into a purely reactive roll. When such an unfortunate turn of events takes place, organizations will necessarily be bound into follower strategies.

After strategic directives have been set and the discovery phase has delivered a first clutch of promising solution, the third and final element needs to be added to the mix. All the discovered solutions must now be integrated into the organization. This requires a lot of absorptive capacity and a clear change management strategy that is consistently and conscientiously executed.

There are many methodologies available to guide an organizations’ search for greener innovation pastures (e.g. technology sourcing, in-licensing, working together with innovation studios, etc.). The best way to understand how these can make a difference is by looking at a case study in which some of these techniques were successfully implemented.

The example of open innovation at P&G

One of the most striking examples in this area comes from P&G. They implemented a new programme called Connect+Develop in the early 2000s after realizing that the old-fashioned organization of their R&D efforts was not contributing enough to top line growth.

The increasing complexity of the world and the rapid pace of technological progress had created an environment in which P&G’s costs for R&D were rising, but the marginal gains were diminishing rapidly. The internal R&D department was no longer able to help the company meet its targets on its own. After suffering a huge drop in stock market value, P&G gained the courage to radically change their approach. Instead of the traditional invention model, in which the bulk of innovations is be sourced from within the organization, they decided to make a solution search outside of P&G integral to their whole innovation process.

For any given problem P&G would seek to innovate its way out off, R&D staff were instructed to first search outside of their department, but within the wider P&G organization itself for a solution. In many companies, resources are not allocated efficiently because teams from various departments are working on similar problems without coordinating their efforts. If nothing is found searching internally, the R&D staff would then broaden the scope of their search to determine whether research being done at other companies, universities or any of the other innovation hubs could provide the silver bullet needed to solve their challenges. Only if these steps proved fruitless would P&G seek to develop a solution from scratch. That way, their internal researchers would only be brought to bear on the problems that really mattered, instead of wasting money on developing new solutions where other methods already exist.

This approach was then tested first in a couple of limited trials. The success rate, which was better than results on comparative projects which had solely relied on the old invention model, convinced top management of the viability of their new open innovation model. For the companywide implementation of their program, the exco started by setting an incredibly ambitious target for P&G. Fifty percent of the new innovations it wanted to implement would be sourced from outside of the company from then on. Due to the strong exco support of this target and the fact that this support was broadly communicated throughout the entirety of the organization, concerns about job loss and gradually atrophying internal capabilities were assuaged.

To further ingrain the open attitude, steps were also taken to adjust the internal reward systems of P&G. From then on, top management made it clear that they did not care where the solution hailed from. If an idea turned out successful in the market, rewards for the teams and individuals involved would be the same regardless of whether it was an external, internal, or mixed development.

Now that P&G’s top management had set the scene, it was time to create a comprehensive body of procedures and guidelines to identify the right problems and attract the right solutions to reach the ambitious targets P&G had set for itself.

For P&G, it was quickly decided to adopt two general rules about where and how to search. The first rule was that ideas sourced outside of the company would already need to have gained some traction. This could come in the form of working products, prototypes or demonstrated consumer interest. Furthermore, as a second rule it was decided that these ideas needed to benefit from the capabilities that P&G itself could bring to the table. With these two general rules in the back of their mind, the strategists at P&G started to plot the organization’s new course.

Since a behemoth like P&G is active in so many different fields, there is a vast array of potential areas for it to innovate in. To maximize P&G’s return on investment, it was decided that innovation would be focused based on the results of an extensive needs analysis. At P&G, this analysis was build around three core tenets.

First, P&G started a companywide effort to determine the ten most pressing customer needs that if addressed, would help drive growth at their brands. This is done first at the level of the individual business that together make up P&G, and then all these lists are weighed against each other to create a top ten for the company as a whole. These needs lists are then given over to the company scientists to be transformed into clear scientific problem statements. This often results in elaborate technical briefings which can be send out to partners around the globe who can then help source solutions.

Secondly, P&G also requires its various businesses to put work into identifying adjacencies. These are new products or services that are related to existing products offered by P&G. The idea here is that P&G’s brand power, marketing acumen and other skills build by offering the related product could allow for the new products to piggyback on the strength of the existing products’ standing with consumers.

Thirdly, P&G has chosen to institute a regular cycle of technology game boards. This is a gamified planning tool that allows P&G management to assess the ripple effect caused by the insourcing of new innovations into the company. As each acquisition changes the innovation landscape within P&G, this approach allows management to stay on top of the organization’s strengths and weaknesses. If a particular weakness is identified after a technology game board review, the search can be started to find a patch for it. Conversely, if the game board identifies a core strength, the search can be geared towards finding other ways to boost the innovation’s performance even further. This process can also provide an answer to difficult questions about outbound innovation, like which proprietary technologies to out license, spin off or codevelop with external parties to maximize return on investment on it.

The results of all this analytical work would be brought together and passed on to the various networks in which P&G participates. The company’s directive on this front is quite clear, within the boundaries defined by the need’s lists, adjacency maps and technology game boards everything is fair game. P&G is open to work with anyone from the usual suspects like academic institutions and government labs to individual inventors, venture capitalists, start-ups, suppliers, competitors and so on. Due to the fact that P&G is a massive corporation, it also had the resources to build several proprietary networks. For example, they build a series of connect and develop hubs around the world which are strongly rooted in their local context. The goal of these hubs is to focus on the core strength of the various regions they are in, as well as to discover new products and services that their markets would respond positively towards.

This is only part of the equation, however. P&G also participates in other open innovation networks (e.g. NineSigma, InnoCentive, Yet2.com, etc.), so even companies without the resources to build a proprietary network can be reassured that open innovation holds opportunities for their enterprises.

Another company that is following a similar playbook to P&G is Unilever. One big difference between the two firms is that Unilever, through its 2014 flagship The Foundry  initiative, puts an even greater emphasis on attracting start-ups with capabilities to help Unilever steal a march on its competitors. The idea was for Unilever to get involved directly with new companies in need of fresh capital and expertise to market their products.  The idea behind The Foundry was to attract these fledgling companies with marketing support, financial rewards in case their solutions help Unilever meet some of its identified needs and access to Unilever Ventures, which could provide successful applicants with the capital required to build a profitable large-scale business.

Coupled open innovation then, is the combination of Inbound and Outbound Open Innovation. Organizations engage in coupled open innovation when the flow of knowledge is a bidirectional process (i.e., when an organization both imports and exports innovations.

As can be inferred from its name, coupled innovation involves close integration and commitment to co-creative processes to work as intended. The giving and taking of knowledge is essential to achieve innovations that add value, but the interactivity that this entails soaks up time and resources. Organizations wishing to leverage coupled open innovation will therefore have to have a longer investment horizon than organizations that opt for the comparatively simpler forms of Inbound or Outbound open innovation.

This is mainly the result of what the research literature has dubbed the paradox of openness . Especially in a corporate context, innovation involves two main challenges. First, innovations must be created. This is a challenge that all players in the field of innovation (be these companies, universities or otherwise) face and it is here that openness can have its biggest impact. It is much easier to create innovative solutions in a process of co-creation, particularly in the highly complex world we live in and where many different types of insights need to be combined to create a functioning product or service.

The second challenge, however, is fundamentally different in nature. After coming up with an innovation, companies also need to commercialize them. This usually requires a completely different skillset. It is in this phase of the endeavour that openness is perceived as detrimental, as commercialization in the traditional mindset cannot be done without protection (e.g. in the formalized form of patents or the informal use of trade secrets).

While there are many organizations nowadays buck this traditional mindset, it is understandable that a lot of more traditional companies get cold feet at this point in the process. Not everything can function like GitHub or Wikipedia, where everyone is free to add and use to the resources developed by the vibrant communities that provide the content on these platforms.

With the right legal frameworks in place however, there is no reason to introduce a binary divide between the traditional patent-driven method and the open-repository approach employed by GitHub and Wikipedia. It is perfectly possible to harness the power op open innovation to boost the creation phase and then deploy more traditional techniques for the commercialization of the innovations that came out of the open innovation efforts.

The maintaining of these frameworks and the relationships that they are meant to regulate and protect does require constant attention. It will endure throughout the entire give and take process inherent to coupled open innovation.

Before embarking on coupled open innovation, it is therefore important to assess the absorptive capacity of your organization and in case this is found lacking, to remedy this problem before actively engaging in the coupled innovation process. To do this, new organizational practices must be set up to handle the external knowledge coming in (acquire and assimilate) and the internal knowledge going out (disseminate, monitor, and improve).

While this seems scary, it is not that different from how successful companies handle traditional outsourcing or decide how to deploy freelancers alongside internal teams. Clear stratagems and rules are an essential ingredient for success, we shall therefore discuss this at length in the section on how to set up an open innovation programme.

The example of Coupled open innovation at Intel

A good illustrative example of a firm that has successfully engaged in Coupled Open Innovation is Intel Corp. Their Components Research Laboratory in Oregon was set up to connect the company with the outside world. The firm has acknowledged that linking their corporate practices with outside researchers has cost a lot of work, mainly to improve the speed of transferring promising research results from outside researchers into the organization. Their determination has however created great dividends, as since its inception, the Components Research Laboratory has helped introduce revolutionary technologies such as High-K metal gate technology, Tri-gate 3D transistors, strained silicon, embedded multi-die interconnect bridge (EMIB) package technology, extreme ultraviolet lithography (EUV) technology and more.

Now that we have defined Open Innovation, it is time for us to zoom in more on what matters most to our clients, namely the advantages and disadvantages of implementing an Open Innovation programme. 

Open Innovation helps these companies beat their competitors by allowing them to be flexible in their innovation practices. Companies adopting an open innovation mindset recognize that not every valuable perspective can be insourced. In other words, there are many smart people outside of the enterprise whose insights could unlock value.

This insight does not mean that the firm itself should stop innovating. Indeed, one of the hallmarks of successful firms in the modern era is that they never stop investing in innovation. Rather, the implication of all of this is that internal R&D efforts should be reconfigured so that it is capable to harvest as much of these outside insights as possible. Creative firms have found a myriad of ways to do so.

Successful examples include Lego, L’Oréal, and Philips, which have all reaped the benefit of the Open Innovation approach but who have gone about it in very different ways. Lego is most famous within the field of Open Innovation for having pioneered the Lego Ideas initiative, which allows it to crowdsource new product ideas from its fans, thus ensuring that they are never out-of-touch with consumer demands. The longevity and success of the platform is often held up as the poster child for publicly open inbound open innovation.

The examples of Lego, L’Oréal, and Philips

Philips flagship initiative on the other hand involved opening a High Technology Campus in Eindhoven (HTCE). On this campus, Philips had centralized its traditional R&D activities since 1964. The watershed occurred when Philips opened up the doors of its HTCE to outsiders. Universities, innovative start-ups and traditional companies flocked to the HTCE’s spacious campus and turned Eindhoven into a powerful innovation hub.  The HTCE nowadays describes itself as the smartest square kilometre in Europe and is able to back up that claim by pointing to the 235 innovative companies that are a part of its ecosystem.

Compared to Philips and Lego, L’Oréal is a relative newcomer to the scene of Open Innovation. This has allowed it to benefit from wisdom build up by others over the years and to plug in its own investments into pre-existing accelerators and incubators. One good example is L’Oréal’s participation in the Parisian Station F, the largest start-up campus in the world, where it is responsible for the exclusive beauty tech accelerator. While the achievements of L’Oréal are not to be discounted, it is a good example to include here as it shows that companies do not need to invent the wheel when it comes to Open Innovation. There are recipes for success and existing initiatives that have gained traction. As part of any Open Innovation strategy, it is worthwhile to look at what is already out there before inventing your own Open Innovation accelerator from scratch.

What the three examples above illustrate is that Open Innovation can take many different forms and process many different types of inputs. It can be laser-focused on one particular group (e.g., Lego and its hardcore fan base), but it can also be expansive, taking in a lot of different stakeholders ranging from individual creatives to large institutions, suppliers and customers to competitors.

By banding together in this type of Open Innovation ecosystem, the pace of discovery can be quickened. However, the advantages of Open Innovation do not end there. In many sectors, innovation has become an incredibly expensive endeavour. While there are still inventors tinkering around in their garage boxes, most inventions and scientific breakthroughs today are made by groups of researchers working together. Moreover, these groups usually use a lot of expensive equipment.

The capex requirements this entail might prove too much for the individual enterprise, but combined with the resources of others, the sort of R&D investment needed to produce a breakthrough and then commercializing it no longer looks infeasible.

This is a crucial advantage of the Open Innovation approach, as it also allows companies to get involved earlier in the value chain and fund their own basic research in the long run. This has the added advantage of mitigating risk for companies. On their own they cannot commit to every possible innovative idea, but the impact of missing out on the next big thing is a terrifying prospect (as exemplified by the rat race of companies investing in e.g. the meta verse or EV’s). By working together with others, an individual organization can put its finger in many more pies and thus it can ensure that finds itself on the winning side of history when the next technological breakthrough arrives on the scene.

There is no such thing as a free lunch, as Nobel prize winning economist Milton Friedman already pointed out in the title of his eponymous book from 1975. While the drawbacks of Open Innovation do not necessarily outweigh the advantages of the system, it is important to be mindful of them. After all, it is only by recognizing risks that mitigating actions can be identified and afterwards successfully deployed.

For the first obvious disadvantage, we only have to point to the curious case of Boaty McBoatface with which we started this introductory article. Opening up your innovation practice to outsiders entails giving up some degree of control over (the outcome of) your innovation process.

Therefore, it is paramount never to embark on an Open Innovation journey without carefully considering the scope, scale and implications for the rest of the business. Luckily enough, the right set of constraints actually enhance creativity (perhaps a topic for another article in the future). If done right, the outcome of your Open Innovation journey would therefore not be adversely affected.

Another potential pitfall with Open Innovation is the so-called flight of knowledge. While we live in an age that – on the economic front at least – favours connectivity, interoperability, and the free exchange of ideas, few would argue that keeping certain technical or commercial information hidden is an unwise move.

Striking a right balance between divulging certain trade secrets and maintaining competitive advantage is one of the more challenging balancing acts an organization faces when seeking to operate in an Open Innovation paradigm. Ultimately, this is a matter of Strategy and any decision here should be made based on strong factual assessments of the business environment.

To answer this deceptively simple question, we first need to clarify the question. We do this by breaking the questions down to first principles. Using that approach, our quest starts by finding an appropriate description for strategy.

The earliest definition of strategy to have had great impact is the one written by Prussian general Carl Von Clausewitz in his classic 1832 work Vom Kriege (On War). In it, he defined strategy as:

 “the use of the engagement to attain the object of war.”

This definition is rather bellicose, as it reflects the military context from which it hails. Nevertheless, Von Clausewitz’ work definitely serves as the beginning of serious thought about strategy in the western canon and influenced later descriptions like that of the Strategic Thinking Institute have defined strategy in a business context as follows:

“Strategy is the intelligent allocation of resources through a unique system of activities to achieve a goal.”

While more modern definitions are more accurate, as well as better contextualized to the business context on which this article focusses, the older definition by Von Clausewitz rooted into war hints at a fundamental truth about strategy. It is not something that you want to get wrong as an organization or individual.

When strategy fails, it can threaten the very existence of companies. While there are phoenix stories, like for example the Nokia case study discussed in the section on external open innovation, these tend to be exceedingly rare.

In this, strategy fundamentally differs from innovation. Where failure is anathema to strategy, it is the bread and butter of innovation efforts. Although we would like to have a 100% failproof way of delivering both radical and incremental innovation, the truth is there is none. To win big, organizations must be willing to take risks. That is great when bets pay off, but inevitably some will not. The goal for these unfortunate failures of course, is to always fail forward and to chip away at our organizations’ problems one step at a time.

If strategy and innovation differ so fundamentally, how can both concepts be brought together into a comprehensive whole? That requires some flexibility as both concepts need to be applied less rigidly than most people would like.

Good innovation strategies commit to an innovation mission that is shared throughout the entire company and is of course meant to sustain the organization’s future prosperity. This is different from the more discrete goals that are advanced by the company (or business unit’s) overall strategy. Innovation strategies should be as succinct and elegant as possible, as they should not stifle creativity. In this regard, the golden standard is set by Apple with its devilishly simple, yet expansive purpose off:

 “creating products that enrich people’s daily lives.”

The innovation strategy begins with that common goal and should then further define the key activities envisioned to bring that common goal within reach. This includes taking decision on the openness of the organizations’ innovation practice to input from and collaboration with actors outside of the company, as well as decisions on the degree of experimentation allowed and the autonomy of staff to pursue innovation efforts without oversight from senior management.

The resulting strategy should be broadly disseminated amongst the companies’ innovators. For companies that choose to implement an internal open innovation process, this should be scaled up to include all the employees within the company. If external open innovation is also on the cards, the organization should also assemble a communication plan for dedicated groups of outsiders (e.g. external technology entrepreneurs or suppliers) and disseminate the relevant parts of the innovation strategy to these groups.

It is very important at this stage for senior management to step in and show dedicated support for innovation within the firm. Sponsorship Is one of the most important enablers of positive and lasting organization change, so the innovation strategy must be seen to have the support of everyone in management. That way, understanding of both the inevitability and the importance of the innovation strategy to the organization’s future success will trickle down until it permeates the entire organizational structure. When all the people who could potentially be involved in the process know and understand the organization’s innovation strategy, it becomes actionable, and the company can get to work.

The example of open innovation at Netflix

That good innovation strategies do not necessarily have to be ultracomplex is illustrated by the example of Netflix. According to Netflix’ CEO Reed Hastings, if the culture is right, strategy can be incredibly easy. At Netflix, the innovation strategy is built on four core principles and meant to help Netflix reach its desired goal of entertaining the world.

The first is called farming for dissent . Whenever someone comes up with a new idea, they are expected to present this to their peers. These peers are then asked to give their opinion. Netflix has a very assertive culture, and this principle is the clearest expression of that. In case employees disagree with any given proposal, they are expected to vocalize their opinion. While this is no panacea to all ills and there are questions to be asked by the impact of this policy on more introverted team members, it does suss out problems sooner rather than later. In that regard, this Netflix stratagem is not that different from Apple’s emphasis on collaborative debate which we shall discuss in the section on how to implement an open innovation programme.

The second principle is the importance of experimentation . Experimentation lies at the heart of any innovative organization, but Netflix goes above and beyond this by not setting any limitations on the experimentation process. There are no gatekeepers, so if someone believes something should be tested, they can take the initiative to do so even if their superiors are against it. By doing this, Netflix cuts through a lot of red tape, and speeds up the innovation process dramatically.  

The third principle is the role of informed captains . Netflix likes to devolve authority to lowest ranked person capable of making a decision. Instead of governing by committee, Netflix allows individual employees to take on decision-making responsibility. Each of the captains is expected to listen to other people’s opinion and feedback on their project, but ultimately, it is only the informed captain who gets to decide.

The fourth and final principle is one of accountability . It is important for Netflix to wind down initiatives that underperform as quickly as possible. While success is to be celebrated, failed projects are not necessarily seen as a cause for alarm. After all, they provide excellent learning opportunities to help avoid similar mistakes in the future. An informed captain who notices that one of their calls is turning sour is therefore expected to intervene immediately. This helps the company move forward at breakneck speed.

Open Innovation platforms are a tool meant to help organizations simultaneously streamline the open innovation process and lower the barriers of entry for outsiders to get involved with solving the companies’ problems.

Typically, the Open Innovation platform is meant to be user-friendly, with a core division of the website into certain focal areas underneath which distinct challenges are posted. The level of detail included under the challenge will depend on the sensitivity of the project and the target audience. Challenges open to highly specialized individuals will typically include more details than challenges aimed at a wider audience.

While not necessarily the case, the platform is often intended to facilitate at least the earliest stages of the Open Innovation process. It can do this by for example, helping people and organizations-built connections to jointly tackle a challenge, allow for Q&A with company insiders, the submitting of first designs, rating of ideas and so forth.

Open Innovation platforms come in many shapes and sizes. The most important division between the various platforms is that between proprietary and open platforms. The former is dedicated exclusively to one single company, often relying on a push-based approach to attract as many potential solution providers as possible to the party. These types of platforms are mostly custom build for the benefit of the company and are therefore entirely in line with the companies’ internal processes and approach.

The latter on the other hand strive to be as accessible as possible and to foster communities that frequent the platform regularly. These types of platforms stimulate people, teams and organizations to look over the fence and see whether their expertise would also not be in demand in places they had not considered at first. These platforms are built to accommodate many different organizations. Their customization to the recipient partner-organization is therefore low or even non-existent, which might cause issues

The example of open innovation at TotalEnergy

An example of a proprietary platform is the Open@TotalEnergies platform that was created by the eponymous oil major to accelerate ideas that could have an impact on reaching a carbon neutral future. On the platform, TotalEnergies has identified nine core innovation topics (ranging from e.g., oil and gas, to new energies and Industry 4.0.).

For each of these topics, it regularly launches dedicated challenges that are meant to address gaps in TotalEnergies that the company has identified itself. Start-ups with a potential solution are encouraged to apply with the promise of financing, real-life testing, and co-innovation/commercial development opportunities with TotalEnergies’ internal teams.

For a platform open to calls from many different organizations, InnoCentive is a particularly good example. This platform was initially created by employees of the American pharmaceutical company Eli Lilly and was later spun-out in a clear example of practice what you preach as this was a solid example of an outbound innovation.

InnoCentive offers organizations roughly two big options. The first is that their platform is offered to the organization’s employees, partners or customers so that these valuable stakeholders get a somewhat customized platform in front of them. The second option then is that InnoCentive presents an organizations’ challenges to a (specialized part of its) network of 380.000 problem solvers. In case a challenge is resolved successfully, cash prizes are usually handed out to the wining team of problem solvers. This can range from the average of 20.000 USD per solved challenge to high awards worth more than 100.000 USD.

While platforms are often part of the Open Innovation mix, they are not essential to implement an Open Innovation strategy. It is always important to think about the goals of your organization’s innovation strategy and based on that decide whether these platforms can be of use. If the answer to that question is positive, the next step is determining what kind of platform would be needed to best answer your organization’s challenge before then looking for a solution in the market.

The most important question that remains is how to effectively implement a consistent and successful open innovation programme. This is a multifaceted challenge and is highly dependent on the sector, organizational culture, and leadership of any given organization.

Despite this, we have compiled a short list of best practices which will help shape the success of your Open Innovation efforts. We will weave in and out of our list with best practices which was compiled based on our own experiences and mixed with insights from scientific research and use cases to help clarify the factors you need to consider maximizing the value added to your organization by your open innovation efforts.

To begin our list of best practices, we shall begin on the highest level. As management guru Peter Drucker was want of saying that culture eats strategy for breakfast, it stands to reason that we also have to begin with this dimension.

In our experience, which is further supported by the use cases discussed in this article, truly innovative companies always share one important attribute: they are open to debate and everyone’s point-of-view is considered valuable.  

This mess of opposing views can be difficult to navigate for more authoritarian managers, however, it is precisely the ever-clashing comparison of opinions that help organizations chart the most profitable path forward.

While the modalities of such an open culture can differ (e.g. Netflix’s culture is famously combative, while a Japanese company like Fujitsu is less assertive), the fundamental thing they all have in common is a high degree of psychological safety.

For an organization to have a high degree of psychological safety, it needs to incentivize curiosity and critical thinking throughout the entirety of the organization. Even the most junior employees need to feel like their contributions are valued and that it is okay to disagree respectfully with both their peers and their supervisors.

Work should be framed as much as possible as a learning problem and people should be given the room to upskill themselves and help others do so as well. The best way to achieve this is to incentivize good behaviour. For a primer on how leading Chinese companies tackle this issue, we are glad to refer you to our article on the DEDA Management philosophy which is currently giving the adhering Chinese firms a competitive edge over their peers.

To start considering work as a learning problem, it is also important to recognize one’s own fallibility. No one is right all the time and when people feel secure enough to openly recognize that fundamental truth, they will be much more open towards owning any mistake. This is critical to help weed out mistakes and underperforming projects, which allows for resources to be allocated far more efficiently.

If your organization has not yet achieved a high-level of psychological safety, then we would advise you not to expend scarce resources on extensive innovation programmes (open or otherwise). While companies without adequate psychological safety can certainly innovate, we can guarantee that they will not do so efficiently. Therefore, it is important to first ensure that psychological safety becomes integral to your organization’s culture, an approach that will pay dividends across all your activities before focussing on trying to germinate an innovation programme in poisonous ground.

If you are curious about the psychological readiness of your organization to embark on its next innovation journey, we warmly recommend using the Morale / Cohesion Matrix . This framework allows for quick and intuitive assessment of your companies’ readiness for complex changes.

As mentioned earlier, a good innovation strategy should create a common mission for your organization to rally around. The strategy should be concise, clear, and actionable. Furthermore, it needs to leave room for failure and be communicated to all stakeholders involved in the innovation process.

As part of the strategy, decisions have to be made about what type of open innovation collaborations your organizations want to engage in (internal and/or external) and what the aim of the open innovation effort is (inbound, outbound or coupled).

These decisions should be coupled to fair assessment of your organization’s current absorptive capacity and if necessary, a plan to increase this capability in the future through for example hiring new people, restructuring the organization or utilizing new sources of finance. The absorptive capacity of the enterprise tells you how able the organization is at integrating new innovations into the fabric of everyday life.

This capacity takes both financial and non-financial parameters into account (e.g., availability of staff members) and will determine both the scale of your Open Innovation efforts (e.g. an ambitious fifty percent external innovation like P&G or something a little more modest) and the type of tools you can use. Organizations with lots of financial firepower for instance, will be more able to rely on acquisitions and in-licensing than organizations that need to bootstrap and would be better served by formulas where it only pays for success (e.g., a successfully solved problem posted on one of the many open innovation platforms).

Another important aspect to be considered is the leadership given to the people within the organization. Even the best strategies will fail when senior leadership within the organization fail to pull their weight.

Successful organizations have a management that practices what it preaches and leads the way. This in turn inspires people to also pay attention to fostering the culture of psychological safety and will increase the organization’s overall absorptive capacity, as well as streamline the discovery process from where new innovations are sourced.

The example of open innovation at Apple

An interesting case study about the people aspect of innovation comes from Apple. This might be surprising to some readers with a bit more experience in the field, as Apple is not known for being an enthusiastic proponent of the Open Innovation movement.

Apple has contributed more to the Open Innovation paradigm than people realize, in part because a lot of Apple’s strongest work here actually predates the formulation of the concept by prof. Chesbrough. From a very early-stage Apple became a systems integrator. Standardized components were used to build early Apple products like the Apple 1, II and Macintosh before this approach became fashionable. This allowed Apple to focus more of its efforts on the development of its software, which Jobs and Wozniak rightly saw as the most important part of their final product.  

A more recent example where Apple turned to the wisdom of the crowds to gain a competitive advantage can be discerned in the history of the App Store. Before the advent of this type of marketplace, it was a pain to get third party software distributed. The App Store and its competitors made this process much easier, which led to a great increase in value for users who could now find a vast range of better apps on their smartphones. Part of this value could be capture by smartphone manufacturers like Apple, as users were more easily swayed to pay a premium for their phones.  

The two examples above notwithstanding, it is true that Apple’s openness in the present day leaves some things to be desired. Where they do succeed in (and that admirably so) is how they manage their people into wrangling every bit of value out of the innovation process. It is in this that their example merits further study.

To begin to understand Apple’s success at managing the innovative potential of their employees, we need to start with its organizational structure. While Apple is now the largest company in the world by market value, it has resisted the temptation of adopting the typical multidivisional organizational model favoured by large multinational corporations and instead has opted to remain organised as a functional organization.

• Functional organization: The company is divided into parts based on areas of functional expertise (e.g. sales or operations)
• Multidivisional organization: The company is divided into parts based on the completion of specific tasks and/or the management of operations within a single region [e.g. General Electric’s product divisions like Aviation and Healthcare or PepsiCo’s geographically distributed business units like North America Beverages (NAB) Quaker Foods North America, Latin America, Europe Sub-Saharan Africa (ESSA)]

This was not always the case. Before Steve Jobs triumphant return, the poorly performing company was managed in the traditional multidivisional way with separate business units run by general managers responsible for their own P&L’s. Jobs did not believe in this organizational model and faulted it for Apple’s rubbish performance as an innovator in the years of his absence.

He therefore decided that the general managers had to go. Instead, he would reinstate a functional organisational structure. One that would remain in place (with some new functional areas added over the years) throughout both his tenure as CEO and that of Tim Cook, his even more successful successor. All of this despite the fact that Apple multiplied its revenue fortyfold since then. Now, we certainly do not want to claim that the functional organizational model in itself was enough to create the innovation colossus that Apple is today. If that was the case, many more firms would be dazzling us with such a deluge of great new products and services that we would simply be swept away by it. Far more important were the steps taken after the institution of this functional model.

The first and most important of this is that Jobs wanted Apple to celebrate its experts. He famously stated that Apple only hired the very best, which is something a lot of Fortune 500 companies claim and none of the others could lay claim to such a vaunted performance as Apple has had over the past decade. Some might argue that this simply meant that Jobs was actually right, but we believe that it was more a case of hiring excellent (though not necessarily the best) people who were then lead in a way that made the actual difference.

We have already talked about the importance of having a clear strategy for (open) innovation efforts. Apple’s states elegantly that its raison d’être is that it is in the business of creating products that enrich people’s daily lives.  We will not discuss it in depth here but suffice to say that this (and Apple’s other strategic directives) give a clear direction to the companies’ efforts.

The 3 building blocks of open innovation at Apple

On top of this strong sense of purpose, Apple has built its innovative efforts on three core building blocks. The first is deep expertise. The late Jobs believed strongly that it was easier to turn functional experts into good managers than good managers into functional experts. While there is something to be said for this vision, it is not something that is necessarily true (or at least not true all the time). What is important in this approach, however, is that it empowers the people with the right knowledge to accurately assess which bets could be truly transformative.

This is also important in the context of open innovation, as the paradigm is certainly not an excuse to outsource innovation to specialized firms. On the contrary, it is precisely the people who are currently doing innovation within the firm that should be empowered to guide the search for solutions outside of the companies’ own premisses. In that way, the best voices within the company are amplified and are able to reach a far greater volume than if locked inside of restrictive boundaries of the traditional invention model.

An added advantage of this lionization of expertise specifically for organizations with a functional organization is the fact that there is a deep bench of specialists to fall back on. All of the experts together create the opportunity for a virtuous cycle of learning as the experts challenge and learn from each other.

A second important building block for Apple’s innovation success is the immersion in details of its managers, which is made possible by the fact that they are all experts themselves. In most organizations, there is a tendency to simplify projects as they climb the hierarchical ladder. At Apple however, managers are encouraged to drill down on the details and to really take their time to probe everything that attracts their attention.

This is an incredibly important part of the innovation process, that is often overlooked by managers in less successful companies. A culture of psychological safety, where employees are empowered to ask question so that together they can improve on projects is essential to success. Not just in innovation efforts but also in other less exciting aspects of running a company.

The third and final building block of Apple’s people strategy for innovation that is edifying for other companies is the spirit of collaborative debate it fosters. This is an extension of fostering the culture of psychological safety that was discussed in the previous paragraph. The highly complex technological landscape that Apple has to navigate often requires collaboration between members of many different teams and their leaders.

In these cases, Apple expects its leaders to simultaneously be partisan enough to fervently defend their own views and open-minded enough to change their views in case the other side of the argument makes a better case. This might seem simple at first, but psychological research has shown that it is actually incredibly hard for people to change their opinion, even when confronted with facts. This is particularly the case when egos are at stake and people are in competition to secure certain spoils (e.g. promotions, etc.) for themselves.

Apple gives a lesson into stimulating this difficult combination of attitudes by having its leaders maintain a deep understanding of and devotion to the company’s values. Guided by that central drive to create outstanding products, the culture of psychological safety fostered through many years of hard work allows for the open debate that is required to unlock the company’s collective intelligence for better decision making.

While the above building blocks offer important lessons for companies setting out on their own paths to reap the rewards of open innovation, Apple is not done with its lessons. After all, one important question remains, how can organizations future proof this recipe for success, especially when in periods of growth that keep adding more responsibilities towards management. Some firms respond to this by simply hiring more managers. This can however create a lot of clutter and makes it harder for the necessary quality of leadership to be maintained. Apple then, has sought a solution in what it has called its discretionary leadership model.

This model divides the time of its leaders into four distinct activities based on the level of attention that is required and the depth of expertise possessed by Apple’s leaders. The four dimensions are own, learn, teach and delegate . Under teach and learn we find those activities that require great attention of the leader. The difference between the two dimensions is that activities which are owned are considered to be part of the leader’s core expertise, while activities outside of the leader’s core expertise and for which they need to acquire new knowledge, fall under the learn dimension.

In both cases the leader retains oversight, but Apple insists that their style of questioning the details is adapted towards the dimension the activity finds itself in. In the own and teach category, leaders are expected to question subordinates from a deep reservoir of expertise. When activities are in the learning and delegating dimensions, Apple’s leaders must be more mindful of their own limitations and launch inquiries while being aware of their status as novices to that particular activity.

Activities that fall under the teach and delegate dimension do not require the direct attention of the leader. If these are activities that fall under the leader’s core expertise, they are expected to pass these skills on to others so that they can take over ownership of that activity. Crucially, Apple expects that even its most senior leaders spent time teaching their core skills to their subordinates in the areas that fall under this dimension. In case the leader is not an expert in the activity, they can delegate the task to others who are. This last category is not favored by Apple, as it generally seeks to maintain its expertise driven culture and this category falls more into general management territory.

The discretionary leadership model is an insightful tool that can also be used by other companies to focus their leaders’ efforts on value added tasks. We would therefore recommend applying this tool towards your own innovation efforts, as it allows for increased focus, provides a clear understanding of activities for which staff members could use help, allows them to pass on skills and finally makes it clear which items to delegate.

Experimentation

A commitment to experimentation should be demonstrated by leadership, included in the organization’s strategy, and be embedded in an organization’s cultural DNA. Due to the importance of good experimentation, we decided to mention it separately here even though it is something that should already be presented in all the other dimensions mentioned above.

Experiments have made the modern world. Their transformative power caannot be underestimated, and no modern company can do without them. The aggressive pursuit of experiments to establish as rapidly as possible whether something works or not is essential to good resource allocation.

Of course, experimentation should be done in a correct way to fully leverage the results they produce. To do that, it is important to devise a common roadmap for experimentation. This should decide who has the authority to launch an experiment (we advise to devolve this to as low a level as possible), what methodological steps need to be taken (as a good experiment can be hard, as all professional scientists can attest) and most importantly of all, how results should be documented. Particular care should be taken to ensure that even unsuccessful experiments are documented and made available to other employees in the company. Mistakes are only human, but successful organization ensure that they never make the same mistake twice.

Targets and Renumeration Policy

As part of the companies open innovation strategy, we find it wise to follow the example of P&G and adopt a concrete target for the percentage of innovations sourced from outside of the traditional boundaries of the internal R&D department.

These target, like the strategy, need to be clear, concise, and actionable. What is also important is that they are adequately rewarded. The idea behind open innovation is to focus the efforts of internal researchers only on significantly hard problems for which no off-the-shelf solution is available. If the people identifying problems and solutions are however told that they are evaluated based on the source of the innovation instead of the speed of delivering a solution to a problem the organization is facing, then naturally people will prioritize internal developments even when these are not the most cost-effective or even best response to the challenges faced by the company.

Talent Management

The final best practice we wish to discuss is the talent management within the organization. Organizations with the right culture, strategy and leadership will attract the right people who will be willing to experiment and reach targets efficiently and effectively when properly incentivized.

There is however more organizations can do to keep the right profiles at the organization. Clear policies on how the organization should upskill internal employees and use freelancers, consultants and other external parties should be drafted and kept up to date.

They should allow their staff the freedom to tinker and explore (a bit like Nokia is doing with its Garages) and co-create an educational journey to ensure that their employees innovative prowess is preserved.

As with all things, it is not the size of your Open Innovation effort that matters, but the way you actually use it. Even a limited foray into the wonderful world of Open Innovation can pay dividends while a gigantic commitment does not necessarily guarantee success.

This overview, however, was written to enable practitioners to use their resources in a smarter way, thus ensuring success. Armed with the knowledge found withing you should be able to set your first tantamount steps towards setting up or participating in an Open Innovation programme.

Now that we have reached this point, it is time for us to say goodbye. In the words of the great Dante Alighieri, as spoken by the poet Virgil at the end of Dante’s climb out of purgatory “No longer wait for word or sign from me…  over yourself I crown and miter you.”

Stay tuned in the future for more tips on how to up your organization’s (Open) Innovation game and many more topics from the good people at SteepConsult.

Brought to you by

Arjan Keijser is a Senior Innovation & Change Management Consultant at SteepConsult

After having amassed a wealth of experience in Innovation & Change Management, Arjan joined SteepConsult to support our transition towards an innovative, solution-oriented, and sustainable future. As our in-house intellectual, he enjoys sharing his knowledge with customers and colleagues alike.

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de las Heras-Rosas C, Herrera J. Research (2021). Trends in Open Innovation and the Role of the University. Journal of Open Innovation: Technology, Market, and Complexity. 7 (1), 29. Retrieved from here

Di Minin, A., De Marco, C. E., Marullo, C., Piccaluga, A., Casprini, E., Mahdad, M., & Paraboschi, A. (2016). Case studies on open innovation in ICT.  Science for Policy Report, European Commission Joint Research Centre.  Edmondson, A. C. (2018). The fearless organization: Creating psychological safety in the workplace for learning, innovation, and growth . John Wiley & Sons.

Enkel, E., Gassmann, O., and Chesbrough, H. (2009). Open R&D and open innovation: Exploring the phenomenon . R&D Management, 39 (4), 311-316.

Fajsi, A., Tekic, Z., & Morača, S. (2016). Open Innovation in Manufacturing SMEs – Integration into Value Networks. 26th DAAAM International Symposium On Intelligent Manufacturing And Automation . Retrieved from here

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Why Now Is the Time for “Open Innovation”

• Linus Dahlander
• Martin Wallin

Covid-19 has shown how companies can work together to solve problems.

As companies struggled to adapt to the fallout of the Covid-19 crisis, many turned to open innovation — a collaborative approach that plays to the strengths of all companies involved and can produce creative, unexpected solutions. It’s a kind of collaboration, the authors argue, that’s worth pursuing whether or not you’re in a crisis. Making it work, however, requires that companies: momentarily put aside traditional concerns over IP to focus on other approaches to creating value; leverage their partners’ motivations effectively to maintain a productive working relationship; embrace new partners; and commit to the projects they pursue through open innovation to reap their benefits. This approach can be extremely fruitful, and not just in the middle of a crisis.

In these difficult times, we’ve made a number of our coronavirus articles free for all readers. To get all of HBR’s content delivered to your inbox, sign up for the Daily Alert newsletter.

Amidst the gloom and doom of the early months of the Covid-19 crisis, something surprisingly uplifting started to happen: Companies began to come together to work openly at an unprecedented level, putting the ability to create value before the opportunity to make a buck. The German multinational Siemens, for instance, opened up its Additive Manufacturing Network to anyone who needs help in medical device design. Heavy truck maker Scania and the Karolinska University Hospital have partnered, too: Scania is not only converting trailers into mobile testing stations, but also directed some 20 highly skilled purchasing and logistics experts to locate, acquire, and deliver personal protective equipment to health care workers. Similarly, Ford is working together with the United Auto Workers, GE Healthcare, and 3M to build ventilators in Michigan using F-150 seat fans, portable battery packs, and 3D printed parts.

• LD Linus Dahlander (@linusdahlander) is a professor at ESMT Berlin and the holder of the Lufthansa Group Chair in Innovation. His research focuses on networks, communities, and innovation.
• MW Martin Wallin ( @mwallin ) is a professor of innovation management at Chalmers University of Technology. He focuses on innovation, strategy and digitalization.

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The Ultimate Guide to Open Innovation

In this guide, you will find everything you need to know about open innovation - what it is, its benefits, and best practices to apply it successfully.

Open innovation is an evolving business paradigm that embraces the exchange and collaboration of ideas beyond the traditional boundaries of an organization.

With a myriad of methods and tools to foster collaborations, open innovation empowers companies to access external ideas, technologies, and market strategies, thereby enhancing their innovative capacity and competitive edge.

This guide will delve into the fundamental concepts and mechanisms of open innovation and provide practical guidance on integrating those into your innovation process.

What is open innovation?

Open innovation is a collaborative problem-solving approach that taps into the collective intelligence of a wide range of individuals. This includes partnerships with third-party stakeholders (e.g. vendors, suppliers, customers, startups, individuals, etc.) and is contrary to traditional innovation approaches that emphasize secrecy and a silo mentality. The primary objective of open innovation is to access a wider range of ideas, expertise, and resources than would be possible with internal R&D alone, thereby increasing the likelihood of developing successful innovations and improving the overall competitiveness of the company. Idea submissions can be about specific challenges or opportunities, proposals from startups and inventors, and direct input from customers.

Open innovation has gained significant popularity as a technique due to its ability to generate ideas from diverse perspectives. Leveraging external sources of innovation in addition to internal resources helps to improve a company's innovation capabilities. When implemented effectively, open innovation cultivates strong relationships with expert and problem-solver communities. Additionally, it creates effective channels for startups to submit competitive solutions through outside-in startup scouting.

Open vs. closed innovation

Closed innovation , also known as the traditional or traditional closed model, is characterized by a primarily internal focus on R&D and a closed system for innovation. In this approach, companies rely on their internal resources, expertise, and capabilities to generate, develop, and commercialize innovations. The closed innovation model assumes that the organization has the necessary knowledge and capabilities to solve all its innovation challenges internally.

Open innovation   represents a paradigm shift from closed innovation by actively seeking external ideas, knowledge, and technologies to complement internal capabilities. In the open innovation model, companies collaborate and engage with external partners, such as customers, suppliers, research institutions, startups, and even competitors, to co-create and commercialize innovations. Open innovation acknowledges the value of external sources and aims to leverage the collective intelligence and resources of a broader network.

History of open innovation

The concept of open innovation traces its origins back to economist Joseph Schumpeter, who introduced the idea of "creative destruction" as a catalyst for economic growth in the early 20th century. Schumpeter argued that innovation arises from the process of entrepreneurs challenging established companies with new products, services, or business models. However, it was not until the late 1990s that the term "open innovation" was coined by Henry Chesbrough, a professor at the Haas School of Business at the University of California, Berkeley. Chesbrough argued that companies should embrace external sources of innovation in order to complement their internal R&D efforts. Since then, the concept of open innovation has gained widespread recognition and has been adopted by companies across a range of industries as a strategy to enhance innovation and maintain competitiveness in a rapidly changing business environment.

One of the first companies that have successfully used open innovation for problem solving is Netflix. In the early 2000s, the company faced significant challenges in its DVD rental business, including high postage costs and a limited selection of titles. To overcome these challenges, Netflix launched the   Netflix Prize , a competition that offered a $1 million prize to anyone who could improve the company's recommendation algorithm by at least 10%. The competition attracted thousands of participants from around the world, and after several years, a team of researchers from AT&T Labs won the prize by developing an algorithm that improved Netflix's recommendations by 10.05%. The Netflix Prize demonstrated the power of open innovation to tap into external sources of expertise and generate breakthrough innovations. 

Today, Netflix continues to use open innovation to drive its success, partnering with content creators and using data analytics to inform its programming decisions. Many other large companies have also recognized the power of open innovation and established this approach in their innovation processes, such as   BMW Group ,  Porsche ,   KTM , or   Bosch .

Why is open innovation important?

With open innovation companies can tap into a wider range of resources and expertise than they have internally. By collaborating with external partners such as customers, suppliers, universities, or startups, companies can leverage their collective knowledge and capabilities to create new products, services, and business models.

Open innovation also helps companies to reduce costs, increase speed to market, and manage risk by sharing resources and spreading investments across multiple partners. Moreover, open innovation can lead to greater customer satisfaction and loyalty by involving customers in the innovation process and co-creating products that better meet their needs. In today's fast-paced and rapidly changing business environment, open innovation has become an essential tool for firms seeking to stay competitive and drive innovation.

Four key benefits of open innovation

Open Innovation offers multiple advantages, ranging from a better understanding of market developments to investment or collaboration opportunities.

1. Understanding market developments

Understand the direction in which markets are developing and identify potential disruptions, new technologies, and growth areas of investors firsthand. 

2. Innovative ideas

Be inspired by startups regarding new customer experiences, products, services, or channels. Understanding why certain startups are successful and how they are serving their customers can stimulate innovation processes within organizations.

3. Investment opportunities

Invest in opportunities to achieve a financial ROI, to be prepared for various future scenarios, or to gain access to strategically relevant technologies.

4. Collaboration

Collaborate with companies to improve your business and take advantage of know-how and access to innovative technologies, business models, and competencies.

Also see: How Open Innovation Can Unlock Growth in Times of Crisis

What are the challenges in open innovation?

In addition to the numerous opportunities it presents, open innovation also brings forth several distinct challenges that must be addressed to ensure its success. Common challenges organizations face in open innovation are:

1. Lack of clear goals

Clearly defined goals are essential for open innovation projects to measure success and establish trust within the organization. Without clear goals, it becomes challenging to set direction and motivate others in the company to participate. You have to define objectives (what do you want to achieve?), ownership (who is responsible for digesting promising idea submissions further?), problem statements (what problem do you want to solve?), as well as timeline and milestones.

2. Organizational culture

Organizational culture can be a significant barrier to open innovation, particularly in organizations with a traditional closed innovation approach. A culture that values secrecy, hierarchy, and internal control may discourage employees from engaging in open innovation initiatives. Moreover, organizations may face the so-called “not invented here” syndrome, where ideas or solutions from external sources are less accepted or viewed critically.

Conversely, a culture that values collaboration, openness, and experimentation can foster open innovation and create a more dynamic and adaptive organization. Therefore, creating a culture that supports open innovation requires a deliberate effort to change the organization's values, norms, and behaviors.

3. Coordination and communication

Effective coordination and communication among various internal and external stakeholders are crucial for successful open innovation. However, coordination and communication can be challenging, particularly when different stakeholders have conflicting goals, priorities, or incentives. Employing effective communication and collaboration platforms is necessary to ensure transparent and efficient communication among all parties involved. Additionally, clear and well-defined roles and responsibilities are essential to ensure that all stakeholders understand their contributions and obligations.

4. Risks and uncertainties

Open innovation is inherently risky, as it involves sharing knowledge and resources with external partners, potentially exposing the organization to intellectual property theft, reputational damage, or other risks. Additionally, external factors such as technological disruption, regulatory changes, or market volatility can create significant uncertainty and risk. Managing these risks requires a robust open innovation strategy that balances short-term and long-term goals, aligns with the organization's mission and values, and anticipates potential risks and uncertainties. It also requires a willingness to experiment, learn from failures, and pivot when necessary.

5. Evaluation of submissions and identification of relevant ideas

Externally submitted ideas run the risk of being of poor quality or not matching the defined goals. To filter out such submissions in the first step, regular quality checks must be made using clearly defined criteria, such as language, precision, and richness of explanations. This task should be performed by a dedicated team or a responsible person to facilitate the subsequent selection process. While these are primarily internal teams or individuals, some organizations assign the task of evaluating ideas to a third-party research firm to eliminate bias in the process. Moreover, you have to define clear evaluation criteria to ensure that the most relevant ideas are chosen for further development or partnerships.

6. Intellectual property rights

Intellectual property rights (IPR) are a critical concern in open innovation, as they determine ownership and control over the intellectual property resulting from collaborative efforts. Collaborating with external partners, including suppliers, customers, and competitors, can create complex IPR issues that must be carefully managed. Organizations must ensure that IPR ownership and usage rights are clearly defined and agreed upon by all parties involved in the collaboration.

Also see: Challenges in Open Innovation and How to Overcome Them

What are the four types of open innovation?

Open innovation can take many forms, and companies need to choose the right type of open innovation that suits their business needs and objectives. The following are four types of open innovation that companies can adopt:

1. Outside-in open innovation

Outside-in open innovation refers to the practice of sourcing ideas, technologies, and knowledge from external sources. This can include customers, suppliers, universities, research institutes, and other organizations. The goal of outside-in open innovation is to bring new perspectives and ideas into the company and leverage the expertise and resources of external partners to solve business challenges.

2. Inside-out open innovation

Inside-out open innovation focuses on commercializing internal ideas and technologies by licensing, selling, or spinning them off to external partners. This approach can help companies to monetize their intellectual property and generate new revenue streams. Inside-out open innovation can also help companies to focus on their core competencies while leveraging external partners' expertise to bring new products and services to market.

3. Coupled open innovation

Coupled open innovation involves combining internal and external ideas and technologies to create new products, services, or business models. This approach can help companies to create disruptive innovations that combine the best of both worlds – internal and external expertise. Coupled open innovation can also help companies to overcome internal resistance to change and accelerate their innovation process.

4. Collaborative open innovation

Collaborative open innovation entails partnering with external parties, such as competitors, startups, and other organizations, to jointly develop and commercialize ideas, technologies, and knowledge. Collaborative open innovation can help companies to access new markets, share risks and costs, and combine complementary capabilities. Collaborative open innovation can also help companies to create new business models and disrupt existing industries.

What is the open innovation process?

The open innovation process is a systematic approach that organizations follow to engage in open innovation activities effectively. It involves identifying, acquiring, integrating, and commercializing external ideas, technologies, and knowledge. We define the open innovation process with seven key steps:

1. Define strategic objectives

• What do you want to achieve? Do you want to identify disruptive solutions for specific search fields or new ideas to improve existing offerings?
• Who are key stakeholders in the process?
• Is the initiative always-on (constantly offering externals the opportunity to submit proposals) or time-bound (your campaign has an end date by which you would like to receive as many proposals as possible)?

By clearly defining strategic objectives, organizations can align their open innovation efforts with their overall business strategy.

2. Identify external collaboration partners

Once the strategic objectives are set, the next step is to identify potential external partners you want to target. This involves choosing the right channels to connect with potential partners, such as own or external open innovation platforms, industry networks, conferences, or online communities.

3. Define the framework for collaboration

As a next step, you have to define the structure and framework for collaboration, including intellectual property rights, contractual agreements, and communication channels. Part of this is considering what information you need to provide to point idea submitters in the right direction and what incentives you want to offer.

Clear and effective collaboration mechanisms are crucial for building trust, managing expectations, and ensuring a smooth flow of ideas, knowledge, and technologies between the partners.

4. Engage in knowledge exchange

Knowledge exchange is a fundamental aspect of the open innovation process. It involves sharing and exchanging ideas, insights, and expertise between the company and its external partners. This can take various forms, such as joint research projects, technology transfer, co-development, and co-creation initiatives. Effective knowledge exchange requires open communication, mutual learning, and a willingness to share resources and information.

5. Evaluate and select ideas/ solution proposals

A vital step in the open innovation process is to evaluate and select the most promising ideas, solutions, and technologies for further development. This step involves assessing the potential value, feasibility, and alignment with strategic objectives. Evaluation criteria may include market potential, Business Relevance, Strategic Fit, Internal Capabilities, Time to Market, or Cost of Implementation. Companies can use a combination of internal assessments and external expert opinions to make informed decisions.

6. Integrate and develop

Once the most promising proposals are selected, the next step is to integrate them into the organization's existing innovation processes and develop them further. This may involve combining internal and external resources, conducting further R&D, prototyping, and testing. The integration and development phase requires effective project management, coordination, and collaboration between the company and its external partners.

7. Commercialize and implement

The final step in the open innovation process is the commercialization and implementation of the developed ideas or technologies. This involves bringing the innovation to market, launching new products or services, and creating value for customers. Companies need to carefully plan the commercialization strategy, including marketing, distribution, and intellectual property protection, to maximize the return on investment and capture the value created through open innovation.

Open innovation stakeholders and their roles

Open innovation is a collaborative approach that involves engaging with external stakeholders to drive innovation and create value. Stakeholders play a crucial role in the open innovation process, contributing their expertise, resources, and knowledge to co-create innovative solutions. Let’s explore the different stakeholders involved in open innovation and their specific roles and contributions.

1. Customers

Customers’ needs, preferences, and insights provide valuable input for identifying innovation opportunities and developing customer-centric solutions. In the context of open innovation, customers can contribute in several ways:

• Idea generation: Customers provide innovative ideas, suggestions, and feedback on existing products or services, leading to improvements or new product concepts.
• Co-creation: Through co-creation initiatives, customers collaborate with companies to design and develop customized solutions that meet their specific needs and preferences.
• Feedback and validation: Customers participate in product testing, provide feedback on prototypes, and validate new concepts, helping to refine and improve innovations.

2. Suppliers

Suppliers contribute to open innovation in the following ways:

• Technology and knowledge transfer: Suppliers share their technological advancements, industry insights, and specialized knowledge, enabling companies to access new ideas and technologies.
• Co-development: Through collaborative partnerships, suppliers work together with companies to develop new products, processes, or materials, combining their respective expertise.
• Supply chain innovation: Suppliers offer innovative solutions within the supply chain, such as improved logistics, sustainable practices, or cost-saving initiatives, benefiting the entire ecosystem.

3. Universities and research institutes

Their contributions of academic institutions and research institutes in open innovation include:

• Research collaboration: Companies collaborate with universities and research institutes to jointly conduct research projects, exploring new technologies, and solving complex challenges.
• Technology licensing: Academic institutions often hold intellectual property rights resulting from their research activities. Licensing agreements allow companies to access and utilize these technologies for commercial purposes.
• Talent exchange: Collaborations with universities facilitate the exchange of talent, such as internships, joint appointments, or academic-industry partnerships, fostering knowledge exchange and skill development.

4. Startups

Startups bring agility, disruptive ideas, and novel business models to the open innovation landscape. Their involvement includes:

• Technology and innovation scouting: Established companies partner with startups to identify emerging technologies and innovative business concepts, leveraging the startup ecosystem's dynamism and creativity.
• Incubation and acceleration programs: Companies provide support to startups through incubation or acceleration programs, offering resources, mentorship, and funding to nurture their growth and innovation potential.
• Co-creation and collaboration: Startups collaborate with established companies to co-create and develop new products, services, or solutions, leveraging their innovative capabilities and market insights.

5. Competitors

Although it may seem counterintuitive, competitors can also play a role in open innovation. Collaborating with competitors can lead to mutually beneficial outcomes, such as:

• Precompetitive collaboration: Competitors collaborate on precompetitive research and development projects, pooling resources and expertise to solve industry-wide challenges or explore new technologies.
• Standards development: Companies collaborate with competitors and industry associations to develop industry standards, ensuring interoperability and promoting innovation across the ecosystem.
• Licensing and cross-licensing: Competitors enter into licensing agreements, exchanging intellectual property rights and technologies to access new markets or enhance product offerings.

While caution must be exercised to protect proprietary information and maintain a fair competitive environment, strategic collaborations with competitors can unlock new opportunities and drive industry-wide innovation.

How to implement an open innovation strategy?

At ITONICS, we consider open innovation an integral part of the end-to-end innovation framework that can be conducted at different stages of the process. From scanning the environment for new potential partnerships (Where to Play) over to the solution search for concrete opportunities to find ways of ‘How to Win’.

Depending on the stage of your innovation process, you have different possibilities to approach open innovation:

• Leverage inside-out open innovation by identifying market developments and customer needs with broad scouting activities. ( Where to play )
• Identify potential partners and solution providers for defined innovation opportunities ( inside-out open innovation ) with focused scouting activities. ( How to win )
• Use outside-in open innovation to scout broadly for innovative ideas through an open submission portal, also known as crowdsourcing. ( Where to play )
• Apply the outside-in approach to receive solution proposals for a defined search field, e.g. from startups. ( How to win )

What are examples of open innovation best practices?

Open innovation has gained widespread recognition as a powerful approach to driving innovation and achieving business success. In recent years, we have observed a growing interest in open innovation strategies among our customers and community.

In the following section, we will present best practice examples of organizations that have successfully leveraged external sources of knowledge, expertise, and resources to enhance their innovation capabilities. 

Co-creation with partners at Bosch

Bosch, one of the largest German engineering and technology companies, has launched the Bosch Open Innovation Partnerships platform . This platform allows them to easily access and coordinate idea submissions for defined search fields and co-create with startups, universities, and other experts. It serves as a gateway for Bosch to gain outside-in perspectives.

The platform also facilitates better-informed decision-making through market insights, coming from different integrated external data sources. Promising candidates, ideas, and partners are funneled through a defined process, ultimately leading to the conversion of these opportunities into “innovation projects”.

Identifying partnerships at KTM

Another example is KTM, the Austrian motorcycle, bicycle, and sports car manufacturer. With their Become a Partner Gateway , the PIERER Mobility Group provides a platform for startups and partners to submit their solutions and ideas and to initiate collaborations.

Driving sustainability in the supply chain with collaborations at Körber Supply Chain

In our Innovation Rockstars Podcast , Dr. Kerstin Höfle, Vice President R&D and Product Management at Körber Supply Chain, shared insights on how they address the hot topic of sustainability in the supply chain. Here, she highlighted that collaborations with partners and suppliers are the way forward to successfully drive innovation and sustainability. Because they cannot have all the expertise and capabilities in-house, they scan the market for new players, identify the most promising ones, and partner up. 

Tools and resources for open innovation

To establish open innovation as an integral part of the business strategy, you will need the buy-in and support of stakeholders. To create a shared understanding of how open innovation can benefit your innovation efforts from start to finish, you should consider the following aspects:

• Define what open innovation means for your organization. What are your goals? What processes will you use? Who will be involved?
• Explain the objectives of performing open innovation and how this would help meet business goals. Are you attempting to enter new markets, enhance service or product portfolios, drive outside-in startup scouting, reduce the risk and cost of existing innovation, or initiate a diversity of perspectives and ideas?
• Detail how you will garner engagement. How will you reach external partners simply and securely? How will you communicate and incentivize engagement?
• Share examples of successful open innovation projects. Showcase a few of these examples to demonstrate what's possible with open innovation.
• Outline a step-by-step plan for implementing open innovation. How will you solicit ideas from employees, customers, partners, and other stakeholders? How will you evaluate ideas and manage the process? Will your open innovation campaigns be time-bound or always-on? How will your team manage rejected proposals?

In addition to your implementation plan, it will be crucial to have your efforts supported by robust phase-gate management capabilities.

Manage open innovation initiatives with ITONICS

ITONICS supports innovation leaders around the globe in their open innovation endeavors. With ITONICS Open Innovation , our software offers several features to orchestrate open innovation:

External gateway

The External Gateway enables you to leverage crowd knowledge and expertise from external parties. It’s an external application form that is directly linked to the ITONICS platform. Information that is entered by externals via the application form will be transmitted to the platform, where it can be edited, enriched, and processed for further usage. 

The form can be integrated into other web pages as desired, such as your company homepage. The design of the External Gateway can be fully customized using HTML, CSS, and inline JavaScript to match your corporate design.

Always-on or time-bound open innovation initiatives

You have the flexibility to choose between always-on or time-bound open innovation campaigns based on your specific needs and objectives.

Simple submission evaluation

Once you receive submissions, evaluating and managing them becomes effortless. Utilize the configurable Rating feature to assess the submissions. You can also request specific experts to rate particular submissions, ensuring a comprehensive evaluation process.

Integrated innovation

Seamlessly integrate open innovation into your end-to-end innovation process with the ITONICS Innovation OS:

• Scan, scout, and monitor trends, technologies, startups, etc. and let the ITONICS Radar help you determine which drivers of change to act on. With ITONICS Radar you get a 360° view of possibilities for growth based on collective ratings. Analyze information with clear visualizations to inform open innovation campaigns. Shape a shared vision of the future, define "Where to Play", and build the foundations for knowing "How to Win". Incorporate these insights to create open innovation campaigns that answer strategic questions. 
• Collect idea submissions internally from your intrapreneurs around the globe as well as external submitters. A reliable phase-gate process allows you to move idea submissions through phases and select the best ones for further development. Get experts to help you rate ideas to ensure that you back the winners.
• Enable outside-in startup scouting by creating effective channels for startups to contribute towards your next-generation products, services, and business models. Gather submissions on one digital platform and establish your startup ecosystem fast and simply. With the ITONICS Crunchbase and Tracxn integrations, you can create and enrich startup profiles instantly. Actively manage your startup portfolio and identify opportunities faster.
• Once you have results from open innovation, move the best ideas to prioritization phases using ITONICS Portfolio . Use customizable ITONICS Matrix visualizations to assess ideas and projects and prioritize the most relevant initiatives and activities. Organize and structure project information to provide quick views on objectives, risks, workflows, budgets, and KPIs.
• After confirming specific projects, use ITONICS Roadmap to steer projects and move an idea to implementation. Ensure that multiple stakeholders act together, connect projects to trends, technologies, startups, risks, and more, and drive the innovation portfolios toward sustainable growth.

ITONICS Open Innovation

GenAI Innovation Challenge at KPMG

Final recommendations on open innovation.

Open innovation is not merely a buzzword; it is a vital approach that organizations must embrace to thrive in today's dynamic and competitive landscape. In conclusion, we summarize the most important key takeaways from this guide:

• By adopting open innovation practices, organizations can tap into a wider range of ideas, expertise, and resources, accelerating the pace of innovation and driving sustainable growth. 
• Open innovation facilitates collaboration, fosters creativity, and enables organizations to adapt and respond to market changes effectively.
• Embracing open innovation requires a mindset shift, a willingness to collaborate, and a commitment to creating an innovation-friendly environment. 
• By leveraging external knowledge, forming strategic partnerships, and embracing a culture of openness and experimentation, organizations can position themselves at the forefront of innovation and achieve long-term success.
• Keep in mind that open innovation is not a one-time endeavor; it is an ongoing process that requires continuous learning, adaptation, and improvement. As technology advances and new opportunities emerge, organizations must remain agile and open to new possibilities. 

Want to learn more about the features and functionalities of the ITONICS Innovation OS to unlock open innovation in your organization? 

See the ITONICS Innovation OS in action

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Open Innovation: Comprehensive Guide and Examples

Innovation and creativity are essential factors to achieve competitive advantages in the market. Innovative companies adopt strategies that aim to improve both the input and output sides of the innovation equation by reducing the input costs or increasing the production volume. All types of innovation , including both open innovation and closed innovation, can be applied on four primary levels inside the company: business model innovation, product & service innovation, process innovation, and technology innovation. However, the innovation process is faced with obstacles on those four levels. For example, the product development process faces hindrances such as a short product lifecycle, high innovation costs and increasing product complexity through a different release. The R&D team inside the company should overcome these obstacles.

What is Open Innovation?

Many companies recognise open innovation  as overcoming obstacles during the design process. Chesbrough (2003a, p.XXIV) defined open innovation as a paradigm that assumes that firms can and should use external ideas as well as internal ideas and internal and external paths to market as firms look to advance their technology.” Figure 2 represents the diagram of an open innovation model. At the same time, the innovation process is divided into two main stages: research and development. The research phase includes inputs from outside the boundaries of the company. Many companies provide a successful example of one innovation model to solve problems, such as IBM ( IBM Design Thinking Model: A Shift Toward Big Enterprises ), which patterned with other companies to develop semiconductor technologies. Apple and P&G implemented open innovation to create new products. Other companies used the open innovation model to build new business models, such as Facebook, Salesforce.com, IBM, and Linux.

Note: A PDF copy of this report can be downloaded  here .

What is open innovation? And Why is it important?

The Closed versus Open Innovation model

In the traditional closed innovation model, the R&D process depends on internal laboratories and resources, while new ideas and technologies are investigated and presented by internal resources. The closed innovation model in Figure 1 represents the flow of creative ideas inside the R&D process. The dashed line represents the company’s boundaries, where all the creative ideas are produced inside the company body. Creative ideas flow to the research stage, where selected ideas are filtered and selected during the research process. Selected ideas are moved to the next development stage. Winning ideas are presented to the market through new innovative products or services.

On the other side, the open innovation model aims to combine both internal and external use of innovation and technologies to provide a larger or possibly more efficient flow of ideas to the research stage compared with the close innovation model. Figure 1 presents the open innovation model and shows that creative ideas are drawn from inside and outside the company’s boundaries (Simic, 2013). The closed and open innovation models indicate a strong correlation between research and development. Open innovation is also introduced to combine short-term financial interest and long-term innovation requirements inside the firm. The profit gained from external knowledge can reduce the internal investment in the long-term research process ( The Double Diamond Design Thinking Process and How to Use it ).

Benefits of the Open Innovation Model

Henry Chesbrough developed the open innovation model to enable companies to combine internal and external ideas from external parties or partners to achieve  product innovation and consumer satisfaction . In contrast to the closed innovation model, six characteristics can be identified:

• While the closed innovation model assumes that the resources and employees who can reach innovative ideas are located inside the organisation, open innovation indicates that innovative ideas are not locked inside the company’s boundaries. The ideas can be driven from outside sources in addition to internal sources.
• The closed innovation model assumes that in achieving the targeted profit from innovation, internal employees should discover and manage the ideas. However, the open innovation model values external ideas and is open to the values that can lead to the target’s profit and market advantages.
• While the traditional innovation model is based on the expertise that internal resources should discover and manage to achieve the market lead, open innovation aims to merge external innovative ideas and internal management.
• While the closed innovation model depends on priority in leading the market with new ideas, open innovation indicates that a company should be involved in basic research to benefit from it.
• The closed innovation model assumes that internal resources are needed to produce the most innovative ideas to lead the market. On the other hand, open innovation depends on utilising internal and external ideas and merging them.
• The closed innovation model aims to limit the innovation profit to the company by having full control over the innovation process. On the other hand, open innovation aims to utilise all available resources that can lead to an efficient process.

The open innovation model provides a non-traditional model for a company to utilise creativity from internal and external resources. This model drives researchers to believe that this model can lead to more creativity inside organisations. However, the open innovation model faces several challenges that could inhibit creativity inside the organisation as a reversed impact of these challenges. Therefore, a clear understanding of the company’s boundaries and identity must be considered to evaluate the creative potential inside the organisation’s strategic thinking .

Creativity Levels in Open Innovation

While many companies adopt  innovative strategies  to compete in the market, few can succeed, especially in startups. Companies with fewer resources were able to achieve success compared with others with a higher resource profile. Many concepts and types of innovation have been introduced and resulted in a broader understanding of the innovation concept (Strazdas & Cernevicuite, 2015). The R&D team should have a clear vision of the innovation strategy inside the company to improve the design process to achieve the business target. In the early development process, the R&D team faces several questions about “what should be innovated?” and “how to innovate it?”. Answers to similar questions can be provided by understanding the different creativity levels inside the open innovation model that can be classified into inbound, outbound, and coupled perspectives, as shown in Figure 3.

Inbound creativity

When the company does not know  what to innovate , inbound creativity can inspire the internal R&D department with answers based on researching external resources such as customer feedback and needs. This external knowledge is used to guide the innovation process inside the organisation to develop innovative products and services that meet end consumer expectations. Deutsche Telekom, for example, uses insights collected about the consumer in their environment to develop innovation inside the company. Procter & Gamble developed innovation models such as (connect and develop), and every year, the company identify the top ten of its consumer requirements and needs. The R&D department used this collected information in the research and innovation process. Inbound creativity improves innovation inside the firm by monitoring the operating environment and collecting information from its partners.

Outbound creativity

Many innovative products or technologies developed by the R&D departments  fail to succeed . or fit into the existing business model of the company. The failed products are replaced with new ones and considered a loss in the innovation budget. Chersbrough (2010) indicated that projects that fail inside the company’s business model could find their way to success outside the company by marketing them through an innovative business model differently than the currently implemented model inside the company of origin. For example, the Ethernet network protocol developed at Palo Alto Research Center from Xerox is an example. To reduce the costs, Xerox leased the technology to a former employee, whose spin-off was named 3Com. Although the initial technology usage was limited to serve the company’s business scope, the spin-off achieved more success based on the new marketing strategy.

Coupled creativity 

Coupled creativity works similarly to the inbound creativity model. The difference is that coupled creativity aims to build a partnership to collect information from the operating environment. This partnership can be either formal or informal. One of the examples of applying this model is the (Ecomagination Challenge) presented by General Electric in 2010. The community of organisations, research institutes, universities, NGOs and individuals were invited to present their ideas to create smart and efficient grid technologies. A committee evaluated ideas, and the winner received a prize, investments or commercial relationship. The example provided by GE indicates that the company used external knowledge in building an innovative product that met the market needs.

Tom Hulme, Founder and Managing Director of OpenIDEO, speaks about innovation collaboration at London Business School’s Global Leadership Summit about open innovation and collaboration.

The closed innovation model limits the ability to reach new innovative ideas ( What is the 8D Problem Solving? And How to use the 8D Report? ) as it only depends on the company’s resources (Panduwawala et al., 2009). In contrast, open innovation maximises the opportunity to develop innovative ideas by expanding the company’s creative capability through internal and external resources and knowledge (Simic, 2013). As a result, the open innovation model leads to a better creative environment and maximises the chances to reach innovative products that can succeed in the market.

Applying Open Innovation in Different Business Models

Both innovation and business models applied within the company are connected. While the R&D department contributes to the research and innovation related to product development, the business model completes the production process to deliver the final product or service. Business models are classified as either open or closed business models. The open innovation and open business models are closely related and presented by Chesbrough (2007). However, there is no clear definition of the “open business model”. Scholars have tried to provide a solid definition for the term, such as Teece (2010, p. 191), who defined the open business model as: “A business model describes the design or architecture of the value creation, delivery and capture mechanisms employed by a particular business.” Chesbrough and Vanhaverbeke (2014) highlighted the relationship between the open business model and the value of creating, capturing, and delivering new products and services to the market. In contrast, in the closed business model, firms depend on their assets and chain partners through marketing transactions (Chesbrough & Vanhaverbeke, 2014).

Innovation links to closed and open business models based on the creativity level described earlier in the Innovation section of this report: inbound creativity and outbound creativity. Coupled creativity can be considered a type of inbound creativity.

Inbound open innovation

Using inbound innovation to combine external knowledge with the closed business model is commonly applied by different companies. P&G is one of the companies with successful innovative ideas created by external partners and brought to market by P&G, such as Swiffer Dusters, TidePods, and Olay Regenerist. In open business models, inbound innovation can be turned into a new business model. Apple iPhone provides an example of a product mainly developed in-house and released in June 2007. Opening the device to third-party applications in March 2008 enabled developers to use the Apple Store to sell their mobile applications, turning the product into a new developing platform and adding more value to the product with each provided application.

Outbound open innovation

In the closed business model, unused knowledge is transferred to others. This model is used in most licensing agreements and spin-offs. The technology is transferred from the original manufacturers to the recipient, who completes the production process and introduces it to the market. The original innovator is not involved in the product development after the technology is transferred to the new company. Outbound open innovation can also be combined with open business models to make internal knowledge accessible to others to develop new business models. For example, IBM has supported Linux OS with patents and invested $100 million a year to support its competition with the Microsoft operating system ( How Inclusive Design Reshaped Microsoft Products ).

Combining the different open innovation types with both closed and open business models can maximise the potential of the innovation and creativity process. Innovation cost becomes less risky as the innovative product or technology can be implemented in different channels based on the business model and how open innovation is used in the R&D process. For example, the Apple iPhone gained more value in the market by turning from an innovative product to a platform for developing third-party applications. On the other hand, investing in a partner’s innovation process, similar to the IBM investment in Linux OS development, improves the competitive position in the market against existing strong competitors such as Microsoft .

Case Study: Lego

LEGO is one of the leading companies in the toy-making industry that led the market through innovation and creativity. The company was founded in 1932 by Danish carpenter Ole Kirk Christiansen in the Danish village of Billund. The company started by manufacturing furniture and small objects such as stepladders, ironing boards, and wood toys. The word “LEGO” is constructed from the Danish word “leg godt”, which means “play well”. Also, “LEGO” means “I put together” in Latin. The current innovation model in LEGO was established in 2004 as the company started a seven-year strategy called the Shared Vision. This strategy aims to rebuild the company’s brand identity as a creative toy manufacturing enterprise. Part of the strategy in LEGO is to ensure that a business plan supports the innovation process and design activities. To achieve this goal, a business model was applied known as the LEGO Design for Business (D4B) model (Council, 2007). The D4B plan is based on designing innovative related tools and actions such as:

• Facilitating LEGO-wide discussions about innovation,
• Creating a foundation document to build communication between the creative lead, marketing lead, and project leader,
• Hold challenge sessions to sharpen the core team objectives, and
• Create a roadmap document to align objectives, tasks, and deliveries.

The LEGO innovation model aims to help the company achieve three main targets: participate in discussions during the early stage of production, understand the knowledge and resources required to succeed, and assess the results against the company objectives in different project stages. Based on these goals, LEGO’s approach was that instead of changing their current process and product, the company needed to apply minor changes and optimisation of the known issues in the products and process, reconfigure the existing parameters to meet the consumer needs and redefine new approaches to the product’s level while modifying the existing process and products.

The Innovation in Lego

The open innovation strategy has been implemented in  LEGO  on both the process and production levels. Erik Hansen, LEGO’s Senior Director of Open Innovation, adopted open innovation and crowdsourcing strategies to achieve company success. Erik’s plan is based on assessing the existing opportunities, needs, and benefits for implementing open innovation in the company. LEGO’s open innovation strategy focused on three main elements:

• Learning from external companies through interviewing twelve of the leading open innovation firms.
• Learning from internal practitioners through feedback and interview methods.
• Building micro pilots to test the company’s capabilities, consumer culture, and needs.

The innovation process is organised in  LEGO  by splitting it into eight types: product development and business model innovation. The responsibility for the innovation process is shared between four function groups: the Concept Lab, the Product and Marketing Development, and the Communication, Education and Direct Unit.

In addition to the process level, LEGO implemented the open innovation model to improve its products through new and fresh ideas from external resources. These resources can be linked to their existing clients or other companies with experience in open innovation. In 2008, LEGO launched LEGO Ideas, a platform open for anyone to submit innovative ideas. LEGO received proposals from 10,000 users. These ideas have been reviewed, and the winning idea is moved to the production process. The original owner of the idea receives 1% of the selling royalties. LEGO Ideas was the reason for innovating new sets such as Big Bang Theory, Ghostbusters, and Back to the Future (Wilkins, 2015). LEGO IDEAS can be accessed through the domain name https://ideas.lego.com.

Co-creation is another tool for an inbound open innovation model to innovative products through collaboration with external organisations. LEGO’s executive team built a partnership between the company and MIT Media Lab to deliver programmable bricks, which was introduced as LEGO Windstorm. The new product was initially introduced as an education method to teach children robotics as they can build LEGO models that could move. Its software was closed in an early product version and could only be edited by unauthorised modifications to do more functions. Later, LEGO opened the software to expand the innovation space among consumers. Another innovation dimension can be observed in LEGO’s partnership with MIT Media Lab, which is turning from closed to open software. Someone was able to hack through the LEGO software that comes with the motors to apply more functions. While this was considered illegible by many, LEGO opened the software in a way anyone can modify to observe what the end consumers can create. This open innovation approach has a positive impact on the company and the curriculum developed in the United States to teach students robotics. Although the product was initially introduced as an educational tool, it gained popularity and acceptance among both adults and children.

LEGO provides a practical example of applying two levels of the open innovation model: inbound innovation through listening to ideas from external consumers and companies and coupled innovation through its partnership with external organisations such as the MIT Media Labs. Both the inbound and coupled open innovation models helped the company to improve the internal process and reach a solid linkage between creative and business targets inside the company on the one hand, and present new products to the market that was not their original intention, such as the programmable bricks on the other.

Both closed, and open innovation models have been implemented into company business models to achieve competitive advantages in the market. While the closed innovation model depends on internal resources and assets to reach new ideas and technologies, the open innovation model extends the ability to create and innovate through the use of external resources and the partnership capability of the company.

The open innovation model can be applied on different levels: the inbound creativity level, the outbound creativity level, and the coupled creativity level. The inbound creativity model identifies that the R&D department can inspire ideas and technologies from external resources to reach answers for early innovation stage questions such as “What should be innovated?” and “How to innovate it?”. Outbound creativity assumes that products that fail inside the company can find their way to success outside through marketing using a different business model. Coupled creativity is similar to the inbound model. The difference is that coupled creativity aims to build partnerships with other companies in order to achieve market advantages.

The article finds that while both closed and open innovation models aim to improve a company’s innovation process, the open innovation model extends the company’s ability to innovate through the usage of external resources and assets in the R&D process. On the other hand, the closed innovation model limited the company’s ability to reach more creative ideas and subsequently lowered its ability to compete in the market.

The open innovation model is closely connected with the company’s business model. Inbound creativity is used within the closed business model to research new product ideas. In the open business models, open innovation can be used to create new business models. On the other hand, outbound creativity works with the closed business model to transfer the knowledge to other companies, while it combines with the open business model to make the internal knowledge accessible to others.

The report finds that the open innovation model can be combined with both closed and open business models in order to reach a wide range of output. The different results of combining inbound creativity and outbound creativity on the one hand and the closed and open business models on the other can fuel the innovation process with more ideas and applications that work within and outside the company.

LEGO was presented as a case example to investigate the practical implementation of the open innovation model. This report finds that LEGO was able to implicate open innovation successfully. However, LEGO applied both inbound and coupled creativity with no evidence to apply outbound creativity. LEGO Ideas presents an example of inbound creativity by driving consumers to suggest new ideas. This type of innovation results in new products such as Big Bang Theory, Ghostbusters, and Back to the Future. LEGO’s co-creation is an example of coupled creativity through its partnership with MIT Media Labs (Strazdas & Cernevicuite, 2015). This type of innovation resulted in the release of LEGO programmable bricks.

This report concludes that implementing an open innovation model can drive innovation and creativity within the organisation on both the process and production levels. Each type of creativity level inside the open innovation model has different characteristics and outputs when combined with the different business models.

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Note: A PDF copy of this report can be downloaded  here .

Article Citation:  Elmansy, R. (2015)  Report: Implementing Open Innovation to Drive Creativity Inside Companies . [Online] Available from: https://www.designorate.com/open-innovation-to-drive-creativity. [Accessed: October 2015]

Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as firms look to advance their technology.

LEGO’s partnership with MIT Media Lab is a good example of open innovation, which is turning from closed to open software. Someone was able to hack through the LEGO software that comes with the motors in order to apply more functions.  While this was considered illegible by many, LEGO opened the software in a way that anyone can modify to observe what the end consumers can create. This open innovation approach has a positive impact not only on the company but also on the curriculum developed in the United States to teach student robotics. Although the product was initially introduced as an educational tool, it gained popularity and acceptance between both adults and children.

Inbound Open Innovation: When the company does not know what to innovate, inbound creativity can inspire the R&D department with answers based on researching external resources such as customer feedback and needs. Outbound open innovation: Many innovative products or technologies developed by the R&D departments fail to achieve success in the market or fit into the existing business model of the company. The projects that fail inside the company’s business model could find their way to success outside the company by marketing them through an innovative business model.

Article cover image copyrights: Image by macrovector on Freepik.

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As an academic and author, I've had the privilege of shaping the design landscape. I teach design at the University of Leeds and am the Programme Leader for the MA Design, focusing on design thinking, design for health, and behavioural design. I've developed and taught several innovative programmes at Wrexham Glyndwr University, Northumbria University, and The American University in Cairo. I'm also a published book author and the proud founder of Designorate.com, a platform that has been instrumental in fostering design innovation. My expertise in design has been recognised by prestigious organizations. I'm a fellow of the Higher Education Academy (HEA), the Design Research Society (FDRS), and an Adobe Education Leader. Over the course of 20 years, I've had the privilege of working with esteemed clients such as the UN, World Bank, Adobe, and Schneider, contributing to their design strategies. For more than 12 years, I collaborated closely with the Adobe team, playing a key role in the development of many Adobe applications.

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Open Innovation Examples, Definition, and Challenges

Published: 27 December, 2023

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In business and technology, open innovation is a type of innovation that has emerged not merely as a trend but as a transformative force reshaping the very landscape of how organizations innovate. It represents a departure from traditional, closed-door innovation practices. It’s a paradigm that acknowledges the boundless well of creativity that exists beyond an organization’s internal boundaries. Crucial to the success of open innovation is the integration of a well-crafted innovation strategy . This strategy ensures that the organization’s creative endeavours are purposeful, strategic, and aligned with long-term success with a strong innovation culture within the innovation process.

In this article, we delve into the definition, examples, and challenges associated with open innovation , shedding light on its significance for entrepreneurs seeking to drive innovation in their organizations. As we navigate through the intricacies of open innovation, innovation entrepreneurs will gain valuable insights that can guide them in steering their organizations towards a future where collaboration, ingenuity, and adaptability reign supreme – aided by the expert services of Digital Leadership.

What is Innovation?

Before we delve into open innovation , let’s first understand the broader concept of innovation . Innovation is the process of creating and implementing new ideas, products, or processes that bring about positive change. It is the lifeblood of progress and a key driver of success in the business world.

What is Open Innovation ?

Open innovation takes innovation a step further by emphasizing collaboration, idea-sharing, and partnerships with external entities, it is a concept I introduced, strategically positioned at the intersection of business and academia. Unlike traditional closed innovation models, where all innovation is done in-house, it recognizes that valuable ideas can come from anywhere. It encourages organizations to tap into external sources, including customers, suppliers, and even competitors, to co-create and leverage collective intelligence.

How Important is Open Innovation ?

Open innovation stands as a linchpin for organizations seeking to navigate and thrive in the intricacies of the business environment. Beyond its fundamental role in ensuring competitiveness and agility, it serves as a catalyst for addressing multifaceted challenges and enhancing opportunities Identification for growth. The global knowledge access it provides allows companies to tap into a vast reservoir of expertise, accelerating their ability to innovate and stay at the forefront of industry trends.

The collaborative nature of open innovation facilitates an accelerated time-to-market, a crucial advantage in industries where swift adaptation is paramount. Importantly, it acts as a strategic risk mitigation tool, enabling organizations to distribute and share the inherent uncertainties of the innovation process through collaborative endeavours. By embracing open innovation , businesses not only enhance their customer-centricity but also actively contribute to the cultivation of innovation ecosystems, fostering continuous learning and enhancing idea generation .

Implementing an Innovation Approach Model within an open innovation framework provides a structured and strategic guide for organizations to effectively channel the collaborative and diverse inputs obtained through open innovation. It ensures that the innovative endeavours align with overarching business goals , making the entire process more purposeful, strategic, and attuned to long-term success.

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Open innovation examples.

To illustrate the impact of open innovation , let’s explore innovation examples from leading companies that have embraced this approach:

Samsung , a global technology giant, is renowned for its open innovation initiatives. The company actively collaborates with external partners, startups, and research institutions to fuel its product development. By engaging in open innovation , Samsung taps into a vast pool of ideas and expertise, ensuring that its products stay at the forefront of technology.

General Electric (GE)

General Electric is another exemplar of open innovation . GE has embraced the idea that great ideas can come from anywhere, and through initiatives like GE Ventures , the company collaborates with startups and entrepreneurs to co-create innovative solutions. This approach allows GE to stay agile and responsive to emerging market trends.

Procter & Gamble (P&G)

Consumer goods giant Procter & Gamble has a rich history of open innovation . P&G actively seeks external input through partnerships, joint ventures, and collaboration with academic institutions. This strategy has led to breakthrough innovations in product development and marketing, reinforcing P&G ‘s position as an industry leader.

The iconic toy company LEGO has embraced open innovation to enhance its product offerings. Through initiatives like the LEGO Ideas platform, the company invites its community of enthusiasts to submit and vote on new product ideas. This co-creation model not only generates innovative product concepts but also fosters a passionate and engaged customer community.

Even space exploration isn’t immune to the benefits of open innovation . NASA has leveraged crowdsourcing and open innovation challenges to solve complex problems. By tapping into the collective intelligence of scientists, engineers, and enthusiasts worldwide, NASA has found innovative solutions for space exploration challenges.

IBM ‘s commitment to open innovation is evident in its collaborations with startups, developers, and clients. Through initiatives like the IBM Global Entrepreneur program, the company provides resources and support to startups working on innovative solutions. This collaborative approach helps IBM stay at the forefront of emerging technologies.

Types of Open Innovation Models

Open innovation can take various forms. Understanding these models is essential for organizations looking to adopt an open innovation strategy . Here are four key types of open innovation models:

1. Outside-in Open Innovation

In the outside-in model, organizations actively seek external ideas and technologies to incorporate into their innovation processes. This may involve collaborations with startups, partnerships with research institutions, or participation in innovation ecosystems.

2. Inside-out Open Innovation

Conversely, the inside-out model involves organizations sharing their internal ideas, technologies, or assets with external partners. This could include licensing intellectual property, forming joint ventures, or collaborating with external entities to bring innovations to market.

3. Coupled Open Innovation

It combines elements of both outside-in and inside-out approaches. Organizations engage in reciprocal relationships with external partners, exchanging ideas and technologies for mutual benefit. This collaborative model often leads to synergies and accelerated innovation.

4. Collaborative Open Innovation

It emphasizes partnerships and joint ventures between organizations with complementary capabilities. By pooling resources and expertise, collaborators can tackle complex challenges and co-create innovative solutions.

How to Apply Open Innovation in Business Innovation Process

Implementing open innovation in the innovation process requires a strategic approach. Here are seven steps organizations can take to integrate open innovation into their business innovation process:

1. Define Strategic Objectives

Clearly define the strategic objectives that open innovation aims to address. Whether it’s accelerating product development, entering new markets, or solving specific challenges, align open innovation goals with overall business objectives.

2. Identify External Collaboration Partners

Identify potential external collaboration partners, including startups, research institutions, and industry experts. Building a network of diverse collaborators enhances the breadth and depth of external insights.

3. Define the Framework for Collaboration

Establish a framework for collaboration that outlines how information, resources, and ideas will be shared. Clearly communicate expectations and create a collaborative environment that fosters creativity and innovation.

4. Tailoring Open Innovation Methods

Select open innovation methods that align with the organization’s goals and challenges. This may involve crowdsourcing, hackathons, joint ventures, or other collaborative approaches tailored to specific contexts.

5. Engage in Knowledge Exchange

Facilitate knowledge exchange between internal teams and external collaborators. Encourage open communication, idea sharing, and the free flow of information to maximize the benefits of collaboration.

6. Evaluate and Select Ideas/Solution Proposals

Implement a robust evaluation process to assess the feasibility and potential impact of ideas or solution proposals. This may involve cross-functional teams, expert reviews, and iterative feedback loops.

7. Integrate and Develop

Integrate successful ideas into the organization’s innovation pipeline and initiate the development process. Ensure a seamless transition from ideation to implementation, leveraging both internal and external resources.

8. Leverage Open Innovation Platform

Integrate an open innovation platfor m into the process to streamline collaboration. This platform acts as a central hub for idea submission, evaluation, and collaboration, enhancing the overall efficiency and effectiveness of the open innovation initiative.

It has become a pivotal force for driving collaborative innovation. This platform serves as a structured space where organizations can break free from internal boundaries, inviting a diverse range of contributors to participate in the ideation and innovation process . With transparent evaluation processes and robust communication channels, the platform accelerates innovation cycles and expands the idea pool, fostering breakthrough innovations. Beyond individual projects, it contributes to ecosystem building, cultivating continuous learning, cross-industry partnerships, and a culture of sustained innovation . By actively engaging internal and external stakeholders, setting clear guidelines, and promoting diversity, organizations can harness the full potential of an open innovation platform to navigate the complexities of the modern business environment.

To add a comprehensive strategic dimension to this process, consider leveraging the Business Model Canvas , a powerful tool that helps organizations visualize, design, and reinvent their business models. Understanding the intricacies of the extended Business Model Canvas becomes particularly important in the context of applying open innovation in business. This model offers a holistic view of how different elements of a business interconnect and provides insights into optimizing the business model to accommodate collaborative and innovative approaches. Learn more about the extended Business Model Canvas here.

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Advantages of open innovation.

The adoption of open innovation brings forth a myriad of advantages for businesses:

1. Access a Broader Relevance Audience and Involve Them in Product Development

It allows businesses to tap into a diverse pool of talent, perspectives, and expertise. By involving external stakeholders in the innovation process, companies can create products and services that resonate with a broader audience.

2. Lowering Innovation Costs

Traditional R&D can be costly and time-consuming. It offers a cost-effective alternative by leveraging external resources, reducing the burden on internal teams, and accelerating the innovation cycle.

3. Improves Brand Image and Builds Strong Connections

Engaging in open innovation sends a positive message to the market. It demonstrates a commitment to collaboration, innovation, and a willingness to embrace diverse ideas. This, in turn, enhances brand image and fosters strong connections with customers and partners.

4. Ensuring Sustainable Innovation and Reducing Innovation Risks

By diversifying the sources of innovation, organizations can reduce the risk of relying solely on internal capabilities. It ensures a continuous influx of fresh ideas, mitigating the risk of stagnation and promoting sustainable innovation.

5. Diversifying Revenue Streams

Collaborations and partnerships resulting from open innovation can lead to the development of new products, services, or revenue streams. Businesses can explore untapped markets and capitalize on opportunities that align with their core competencies.

6. Keeping Employees Engaged and Enhancing Innovation Culture

Involving employees in open innovation initiatives fosters a culture of continuous learning and adaptability. It keeps internal teams engaged, encourages creativity, and instils a sense of pride in contributing to the organization’s success.

7. Gaining a Competitive Edge

In today’s competitive business landscape, staying ahead requires constant innovation. It provides a competitive edge by tapping into external expertise and market trends, ensuring organizations remain at the forefront of their industries.

Open Innovation Challenges

While the open innovation benefits are substantial, it comes with its set of challenges. Addressing these challenges is essential for successful implementation:

Legal Challenges

Navigating intellectual property (IP) rights and legal agreements can be complex in open innovation collaborations. Clear contractual frameworks and IP management strategies are crucial to avoid legal disputes.

Operational Hurdles Challenges

Implementing open innovation may require adjustments to existing operational processes. Organizations must be prepared for changes in workflow, communication, and project management to accommodate external collaborators.

Strategic Obstacles Challenges

Aligning open innovation strategies with overall business strategies is a common challenge. Ensuring that external collaborations align with the organization’s long-term goals is essential for sustained success.

Cultural Barriers to Successful Open Innovation

Organizational culture plays a significant role in the success of open innovation initiatives. Overcoming resistance to change, fostering a collaborative mindset, and building a culture that values external input are critical.

Lack of Setting Clear Goals for Open Innovation Initiatives

Without clearly defined goals, open innovation initiatives may lack focus and direction. Setting specific, measurable, and achievable objectives is vital for guiding the innovation process effectively.

Open Innovation vs Closed Innovation : How to Choose the Right Model for Your Business?

Open and closed innovation primarily differ in the way innovation is generated. Closed innovation companies operate within a self-contained innovative environment, whereas open innovation companies actively source external knowledge as a core element of their innovation management strategies.

Closed Innovation

Closed innovation, also known as traditional or internal innovation, involves keeping the entire innovation process within the confines of the organization. This model relies on internal R&D teams and proprietary research to drive innovation.

Open Innovation

Open innovation , as discussed earlier, emphasizes collaboration with external partners and stakeholders. It embraces the idea that valuable ideas can come from anywhere and encourages organizations to tap into external expertise.

The Difference Between Closed Innovation and Open Innovation

The primary difference lies in the approach to idea generation and development. Closed innovation relies on internal resources, while open innovation leverages external input to drive the innovation process.

Steps of Choosing Open Innovation or Closed Innovation for Your Business

Making the right choice between open innovation and closed innovation involves a thoughtful evaluation of organizational goals, industry dynamics, and the desired pace of innovation. Consider the following steps:

1. Get Clear About Your Objectives

Define the specific objectives you aim to achieve through open innovation . Whether it’s accelerating time-to-market, accessing external expertise, or fostering a culture of collaboration, clarity about your goals is essential.

2. Link Those Objectives With Your Corporate Strategy

Ensure that the objectives of open innovation align with your overall corporate strategy. Consider how external collaborations fit into your long-term vision and contribute to the organization’s growth.

3. Select the Right People in Your Organization

Building a successful open innovation strategy requires the right talent. Identify individuals within your organization who are passionate about innovation, adaptable to change, and capable of facilitating external collaborations.

4. Balance Open and Closed Activities According to Your Strategy and Culture

Find the right balance between open and closed innovation activities. Some organizations may benefit from a hybrid approach, combining internal R&D with external collaborations. Tailor the approach to align with your organizational culture.

As you navigate this decision-making process, consider leveraging the Value Proposition Canvas , a strategic tool designed to help businesses articulate, test, and optimize their value propositions. Understanding the nuances of the Value Proposition Canvas becomes particularly crucial when applying open innovation in business . This model aids in identifying and refining the value your organization offers to external collaborators and ensures alignment with the broader business strategy . Explore the Value Proposition Canvas in-depth here.

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Home PowerPoint Templates Diagrams Open Innovation Funnel Template for PowerPoint

Open Innovation Funnel Template for PowerPoint

Open Innovation Funnel Template for PowerPoint is a presentation template design including a nice 3D Funnel diagram illustration that you can use in your Microsoft PowerPoint presentations.

This innovation funnel is inspired by Open Innovation model , a term promoted by Henry Chesbrough and it is defined Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.  Chesbrough, Henry William (1 March 2003).

This PPT template contains four slides with funnel variants that you can use to present an innovation topic to an audience. The slides contains small variants that let you explain the different concepts behind the Open Innovation model and we have used creative illustrations like darts and target goals as metaphors. The colorful spheres and paths used for the funnel can help to clarify the concepts while presenting.

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Chapter 10 Open innovation and technology transfer

Sep 15, 2014

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Chapter 10 Open innovation and technology transfer. Open innovation and technology transfer. Introduction Open innovation Background to technology transfer Introducing technology transfer Models of technology transfer Limitations of different approaches used

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• technology transfer
• developed technology
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• introducing technology transfer
• existing science technology base

Presentation Transcript

Open innovation and technology transfer • Introduction • Open innovation • Background to technology transfer • Introducing technology transfer • Models of technology transfer • Limitations of different approaches used • Framework for technology transfer • Case study: Sony Ericsson

Open innovation New product development Basic research Internal research projects Current market and business model Technology acquisition Technology in-licensing Venture investing External research project

Background to technology transfer • The concept of technology transfer is not new . . . • In the thirteenth century, Marco Polo helped introduce to the Western world, Chinese inventions such as the compass, papermaking, printing and the use of coalfor fuel. • Many argue that it was a change in the US law thatled to the surge of interest in the subject. The passage of the landmark National Cooperative Research Act (NCRA) of 1984 officially made cooperation onpre-competitive research legal.

Introducing technology transfer • Much written about the subject; became extremely popular in the late 1980s. • Governments believed it could solve problemsof national budget deficits! • Collaboration on technology development encouraged. • Large companies established technologytransfer units. • Universities also established industrial liaison units and technology transfer units. • The panacea for industry’s problems did not materialise.

Transfer to industry and private enterprise Existing R&D projects and developed technology Technology transfer The attraction of technology transfer was that companies and industries could benefit from technology that had already been paid for. It has already been paid for!

Technology transfer (Continued) Technology Transfer is the application of technology to a new use or user. It is the process by which technology developed for one purpose is employed either in a different application or by a new user. The activity principally involves the increased utilisation of the existing science/technology base in new areas of application as opposed to its expansion by means of further research and development. (Wealth from knowledge, Langrish et al., 1982).

Technology transfer (Continued) The process of promoting technical innovation through the transfer of ideas, knowledge, devicesand artefacts from leading edge companies, R&D organisations and academic research into more general and effective application in industry and commerce.  (Seaton and Cordey-Hayes, 1993).

Models of technology transfer(see Dorf, 1988) • Licensing • The chemical industry has a long and successful history of licensing. • Ferret model • Experts called “ferrets" were used to search for technology in defence labs. • Intermediary agency model • Range from RTCs to university technology transfer managers. • Science parks • The idea is to develop an industrial area close to an established centre of excellence, often a university.

Limitations of models of technology transfer • They fail to understand the recipient organisation's needs • Technology viewed in terms of technical attributes • Underestimate the extent of interaction required • Assume an ability on the part of organisations to communicate their problem in the form of a technical requirement

A framework for technology transfer Accessibility Receptivity Mobility Much more emphasis required here

Case study: Sony-Ericsson • A joint venture dependent on technology transfer • Two loss-making handset businesses • 2001 – formed a JV in mobile phone handsets • Sony's consumer products expertise with • Ericsson's extensive knowledge of cell phone networks. • To compete with Nokia and Motorola • Disappointing results in 2003 • Problems with alliance • Good news at last in 2004

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What is innovation?

When you think of innovation, what springs to mind? Maybe it’s a flashy new gadget—but don’t be mistaken. There’s much more to the world of innovation, which extends far beyond new products and things you’ll find on a store shelf.

Get to know and directly engage with senior McKinsey experts on innovation.

Marc de Jong is a senior partner in McKinsey’s Amsterdam office, Laura Furstenthal is a senior partner in the Bay Area office, and Erik Roth is a senior partner in the Stamford office.

If products alone aren’t the full story, what is innovation? In a business context, innovation is the ability to conceive, develop, deliver, and scale new products, services, processes, and business models for customers.

Successful innovation delivers net new growth that is substantial. As McKinsey senior partner Laura Furstenthal  notes in an episode of the Inside the Strategy Room podcast , “However you measure it, innovation has to increase value and drive growth.”

As important as innovation is, getting it right can be challenging. Over 80 percent of executives surveyed  say that innovation is among their top three priorities, yet less than 10 percent report being satisfied with their organizations’ innovation performance. Many established companies are better operators than innovators , producing few new and creative game changers. Most succeed by optimizing existing core businesses.

Why is innovation important in business?

Some companies do succeed at innovation. Our research considered how proficient 183 companies were at innovation, and compared that assessment against a proprietary database of economic profit  (the total profit minus the cost of capital). We found that companies that harness the essentials of innovation see a substantial performance edge that separates them from others—with evidence that mastering innovation can generate economic profit that is 2.4 times higher than that of other players .

Learn more about our Strategy & Corporate Finance  practice.

How can leaders decide what innovations to prioritize?

Successful innovation has historically occurred at the intersection of several elements, which can guide prioritization efforts. The three most important elements are the who, the what, and the how :

• An unmet customer need (the ‘who’): Who is the customer and what problem do they need to solve? Are macrotrends such as automation driving changes in customer needs?
• A solution (the ‘what’): Is the solution compelling and can it be executed?
• A business model that allows for the solution to be monetized (the ‘how’): How will the solution create value? What is the business model?

Successful innovation requires answers to each of these questions.

An example from inventor and businessman Thomas Edison helps illustrate the concept. “In every case, he did not just invent the what, he also invented a how,” says Furstenthal in a conversation on innovation . “In the case of the light bulb, he created the filament and the vacuum tube that allowed it to turn on and off, and he developed the production process that enabled mass production.”

Introducing McKinsey Explainers : Direct answers to complex questions

How do organizations become better innovators.

McKinsey conducted research into the attributes and behaviors behind superior innovation performance , which were validated in action at hundreds of companies. This research yielded eight critical elements  for organizations to master:

• Aspire: Do you regard innovation-led growth as critical, and have you put in place cascaded targets that reflect this?
• Choose: Do you invest in a coherent, time- and risk-balanced portfolio of initiatives, and do you devote sufficient resources to it?
• Discover: Are your business, market, and technology R&D efforts actionable and capable of being translated into winning value propositions?
• Evolve: Do you create new business models that provide defensible, robust, and scalable profit sources?
• Accelerate: Do you develop and launch innovations quickly and effectively?
• Scale: Do you launch innovations at the right scale in the relevant markets and segments?
• Extend: Do you create and capitalize on external networks?
• Mobilize: Are your people motivated, rewarded, and organized to innovate repeatedly?

Of these eight essentials, two merit particular attention : aspire and choose . Without these two elements, efforts may be too scattershot to make a lasting difference. It’s particularly crucial to ensure that leaders are setting bold aspirations and making tough choices when it comes to resource allocation and portfolio moves. To do so successfully, many leaders will need to shift their mindsets or management approaches.

What are examples of successful innovators?

Real-world examples of successful innovation, related to some of the eight essentials listed , can highlight the benefits of pursuing innovation systematically :

• Mercedes-Benz Group invested extensively in digitizing its product development system. That allowed the company to shorten its innovation cycles significantly , and its capabilities for personalizing cars have improved, even as assembly efficiency rose by 25 percent.
• Gavi, a public–private partnership founded to save children’s lives and protect their health by broadening access to immunization, used nonfinancial targets to help drive its innovation efforts —and this helped the organization broaden its aspiration for impact in a way that was bold, specific, measurable, and time bound.
• Lantmännen, a large Nordic agricultural cooperative, faced flat organic growth. Leadership created a vision and strategic plan  connected to financial targets cascaded down to business units and product groups. Doing so allowed the organization to move from 4 percent annual growth to 13 percent, on the back of successfully launching several new brands.
• The information services organization RELX Group brought discipline to choosing its innovation portfolio  by running ten to 15 experiments in each customer segment in its pipeline every year. It selects one or two of the most successful ideas from the portfolio to continue.
• International insurance company Discovery Group mobilized the organization around innovation  by creating incentives for a thousand of the company’s leaders using semiannual divisional scorecards. Innovation isn’t a choice; it’s a requirement and a part of the organization’s culture.

These examples aren’t necessarily what you may think of when you imagine disruptive innovation—which calls to mind moves that shake up an entire industry, and might be more associated with top tech trends  such as the Bio Revolution . Yet these examples show how committing to innovation can make a sizable difference.

How can my organization improve the volume and quality of new ideas?

Steps to help aspiring innovators  get started include the following:

• Hold collision sessions: Cross-functional groups gather in a structured process to think through the intersection of unmet customer needs, technology trends, and business models, bringing creativity and specificity to the process of idea generation. Then, a venture panel considers these ideas and iterates on them, prioritizing what to do.
• Challenge orthodoxies: Participants gather and describe beliefs that are common but that prevent the organization from innovating for customers. Examples of these orthodoxies include statements such as “budgets are limited” or “we don’t have the digital capabilities to pull it off.” Once the orthodoxies are laid out, teams brainstorm after being prompted to consider if the opposite of the statement were true.
• Make analogies to other industries: A team might create a list of companies with unique value propositions. Then, they systematically apply these value propositions to their ideas to see if the analogy can create new sources of value or fresh opportunities.
• Apply constraints: Rather than searching for blue-sky ideas, tighten the constraints on an idea’s business or operating model and explore potential new solutions. What if you served only one type of customer? What if the only channel you could access was online?

In the words of chemist Linus Pauling, “The way to get to good ideas is to get lots of ideas and throw the bad ones away.”

What is an innovation portfolio?

An innovation portfolio  is a thoughtfully curated bundle of potentially innovative initiatives, with clear aspirations and required resources defined for each. Managing the portfolio this way helps find new opportunities and determine the appropriate number and mix of initiatives, including the following:

• confirming the total value of the portfolio needed
• evaluating existing innovation projects based on incremental value delivered, risk, and alignment with strategic priorities
• getting comfortable saying “no” to stop projects that are dilutive, and resisting the siren song of incremental initiatives that are unlikely to pay for themselves
• reallocating resources—including competencies and skills—to new initiatives or to current ones that additional support can accelerate or amplify
• identifying portfolio gaps and defining new initiatives to close them

How to measure innovation?

One way to measure innovation is to look at innovation-driven net new growth, which we call the “green box.”  This phrase refers to how you quantify the growth in revenue or earnings that an innovation needs to provide within a defined timeframe. This concept can help clarify aspirations and influence choices on the innovation journey.

While many imagine that innovation is solely about creativity and generating ideas, at its core, innovation is a matter of resource allocation . To put it another way: it’s one thing to frame innovation as a catalyst for growth, and another to act upon it by refocusing people, assets, and management attention on the organization’s best ideas.

The green box can help to solidify a tangible commitment  by defining the value that a company creates from breakthrough and incremental innovation, on a defined timeline (say, five years), with quantifiable metrics such as net new revenue or earnings growth. Crucially, the green box looks at growth from innovation alone, setting aside other possible sources such as market momentum, M&A, and so forth. And once defined, the growth aspiration can be cascaded into a set of objectives and metrics that the company’s various operating units can incorporate into its individual innovation portfolios.

It’s useful to note that some organizations may find that measures not solely financial in nature are more appropriate or relevant. For instance, metrics such as the number of subscribers or patients—or customer satisfaction—can resonate. What’s critical is selecting a metric that is a proxy for value creation. A large US healthcare payer , for example, looked to spur innovation that would improve patient satisfaction and the quality of care.

Separate from the concept of the green box, two simple metrics  can also offer surprising insight about innovation vis-à-vis the effectiveness of an organization’s R&D spending. Both of these lend themselves to benchmarking, since they can be gauged from the outside in, and they offer insight at the level of a company’s full innovation portfolio. The two R&D conversion metrics are as follows:

• R&D-to-product conversion: This metric is calculated by looking at the ratio of R&D spending (as a portion of sales) to sales from new products. It can show how well your R&D dollars convert to actual sales of new products—and it might reveal that spending more doesn’t necessarily translate into stronger performance.
• New-products-to-margin conversion: This metric considers the ratio of gross margin percentage to sales from new products. It can indicate how new-product sales contribute to lifting margins.

While no metric is perfect, these may offer perspective that keeps the focus squarely on returns from innovation and the value it creates—often more meaningful than looking inward at measures of activity, such as the number of patents secured.

How do you create a high-performing innovation team?

Innovation is a team sport. Experience working with strong innovators and start-ups has helped identify ten traits of successful innovation teams . Those fall into four big categories: vision , or the ability to spot opportunities and inspire others to go after them; collaboration , which relates to fostering effective teamwork and change management (for instance, by telling a good innovation story ); learning or absorbing new ideas; and execution , with traits that facilitate snappy decision making even when uncertainty arises.

Being strategic about the composition of an innovation team can help minimize failures and bring discipline to the process.

What innovation advice can help business leaders?

One broad piece of advice centers on creating a culture that accounts for the human side of innovation . When people worry about failure, criticism, or the career impact of a wrong move, it can keep them from embracing innovation. In a recent poll, 85 percent of executives say fear holds back their organization’s innovation efforts often or always—but there are ways to overcome these barriers .

Additionally, the Committed Innovator podcast and related articles share perspectives from leading experts who have helped their organizations tackle inertia and unlock bold strategic moves. If you are looking for words of wisdom, their insights can help spark inspiration to innovate:

• Naomi Kelman, CEO, Willow . “Creating a safe environment for innovation is really what you need to do to get the greatness out of the people who work with you, which is ultimately what drives growth.”
• Safi Bahcall, author, Loonshots . “Most of the important breakthroughs failed many times before they succeeded. That is where ‘fail fast’ goes wrong. Most companies are too impatient.”
• Amy Brooks, chief innovation officer, National Basketball Association . “You can use data or examples to convince people about what is working in the market or what other industries are doing. We like to share best practices within our own leagues and within sports, but we also pay attention to every other industry that sells to consumers.”
• Tanya Baker, global leader, Goldman Sachs Accelerate . “If someone knowledgeable thinks what you are doing is a bad idea, make sure they have a seat at the table. Put them on your board; make them one of your advisers so you don’t have any blind spots.”
• Neal Gutterson, former chief technology officer, Corteva . “[A] key skill is being able to hold two divergent thoughts and approaches in your brain and in your team at the same time. The great companies will be ambidextrous innovators, able to disrupt themselves in the future while serving the core [business] today.”
• Anjali Sud, CEO, Vimeo . “What keeps me up at night is execution and, within that, focus. Because when you are in a market like ours, at a time like now, the opportunity is huge. We are this nimble, fast-growing, fast-moving company, and everywhere I look I see opportunity. But am I providing enough focus for my teams so that we can truly be great at something? You don’t want to miss a big boat, and it’s hard sometimes to say no to valid, exciting ideas that could be transformative.”

For more in-depth exploration of these topics, see McKinsey’s insights on Strategy & Corporate Finance . Learn more about McKinsey’s Growth & Innovation  work—and check out innovation-related job opportunities if you’re interested in working at McKinsey.

Articles referenced include:

• “ Fear factor: Overcoming human barriers to innovation ,” June 3, 2022, Laura Furstenthal , Alex Morris, and Erik Roth
• “ Innovation—the launchpad out of crisis ,” September 15, 2021, Laura Furstenthal  and Erik Roth
• “ The innovation commitment ,” October 24, 2019, Daniel Cohen, Brian Quinn, and Erik Roth
• “ Fielding high-performing innovation teams ,” January 17, 2019, Matt Banholzer , Fabian Metzeler, and Erik Roth
• “ Taking the measure of innovation ,” April 20, 2018, Guttorm Aase, Erik Roth , and Sri Swaminathan
• “ The eight essentials of innovation ,” April 1, 2015, Marc de Jong , Nathan Marston, and Erik Roth

Want to know more about innovation?

Related articles.

Fear factor: Overcoming human barriers to innovation

The innovation commitment

The eight essentials of innovation

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Heroes and villains: the presentation of the outlaw in early twentieth-century American folk music

This article will consider how the figure of the outlaw is presented in early twentieth-century American folk music. What is constant, and what changes? What lies behind these strands of imitation and innovation?

Find out about The Open University's Languages, cultures and communication courses .

Folk music is music that is rarely written for profit, music that has endured, often passed down by oral tradition, investing a sense of identity in artist and listener alike. Folk music has imitation at its core. Its narratives and characters are usually already known to listeners, and they often refer to real-life people and events. The content is often based on the experiences that form an ongoing part of the everyday life of the performer and their audience. 

Yet, at the same time, folk music is extremely open to innovation. Because there is no definitive set version of a song, it can be interpreted and adapted to suit the character and concerns of the performer and listeners. The form this innovation takes may depend on the nature of the community within which the song is performed, or may be affected by changes in social circumstances and attitudes. Such innovative variation may, therefore, be synchronous or diachronous. 

Firstly, the ‘simple criminal’ – someone who refuses to abide by the norms of their own community. Such a figure is considered a ‘bad man’ by performer and listeners alike.

Secondly, what Eric Hobsbawm (1981) calls the ‘social bandit’ – regarded as a criminal by the ruling class and its agencies, but who remains within the moral order of their own community and frequently acts in the collective interest.

Thirdly, the outlaw as ‘everyman’ – an ordinary person who through circumstance (i.e., being in the wrong place at the wrong time) performs an act that places them outside the law.

The outlaws

With one exception, all of the outlaws considered in this article were real people in American society during the late nineteenth and early twentieth century. John Hardy (?–1894) was a black railroad worker who killed a co-worker in a dispute over a game of cards in 1893 (Cox, 1919). Lee Shelton, aka Stack O’Lee, aka Staggerlee (1865–1912) was a Saint Louis pimp who killed a man in an argument about a hat in 1895 (Brown, 2004). Charles Arthur “Pretty Boy” Floyd (1904–1934) was an Oklahoman bank robber in the late 1920s and early 1930s, often portrayed as a ‘social bandit’ (Fisher, 1998). The exception is Tom Joad, a fictional character in John Steinbeck’s novel The Grapes of Wrath (1939) who begins the story released on parole from prison, and ends the novel as a fugitive social activist.

The performers

Each performer introduces their song’s main character in keeping with their own social views.

Stack O'Lee

Mississippi John Hurt, a respectable, hard-working, law-abiding member of a settled rural community wants to know why the police do not arrest the criminal Stack O’Lee:

Police officer, how can it be You can arrest everybody But cruel Stack O’Lee? That bad man, cruel Stack O’Lee.

For Professor Longhair, the initial focus is a dice game between Staggerlee and his victim, Billy Lyon:

It was early, early one morning, When I heard my bulldog bark. She was barking at the two men Who were gambling in the dark.

Hurt sees the killing as the simple result of Stack O’Lee’s ‘badness’, the only motive being Billy’s theft of his hat:

What do I care ‘bout your two little babes And your darling loving wife? You done stole my Stetson hat, So I’m bound to take your life.

In Longhair’s version, Staggerlee suspects that Billy has cheated him out of his money and his car: perhaps not an acceptable reason to kill a man, but certainly more acceptable to the drinking club clientele for whom Longhair would have been performing the song.

Staggerlee lost all his money And he lost his Cadillac He said ‘I believe you’ve been cheating, Billy, Don’t move, I’ll be back.’

Lead Belly’s accordion introduction to John Hardy and Woody Guthrie’s guitar and harmonica introduction to Tom Joad are virtually identical in their chord changes and melody. When it comes to the lyrics, however, there is complete innovation. Where Lead Belly sings:

John Hardy was a desperate little man He carried two guns every day. He killed a man on a West Virginia line, But they seen John Hardy getting away.

Guthrie begins:

Tom Joad got out of the old Macalester pen There he got his parole After four long years on a man killing charge Tom Joad came walking down the road.

Outlaws end their days in different ways too. John Hardy is in many ways an ‘everyman’ outlaw, who recognises his crime, is baptised and meets his death a changed man. Due to his very ‘ordinariness’ (‘John Hardy had a mother and a father too’; ‘John Hardy had a pretty little wife, the dress she wore was blue’) the listener may well identify with him.

I’ve been to the East and I’ve been to the West, I’ve been this whole wide world round. I’ve been to the river and I’ve been baptised, Now take me to my hanging ground.

On the other hand, Stack O’Lee, in the Mississippi John Hurt version of the song, shows no repentance. Instead, he throws defiance in the face of society, which returns the mistrust.

Standing on the gallows,  Head held high, At twelve o’clock they killed him, We was all glad to see him die.

While the real John Hardy was hanged, the real Lee Shelton was not executed but sentenced to jail. In the Longhair version, Staggerlee’s trial is not even mentioned.

Pretty Boy Floyd

This creative reinterpretation of history is evident in Woody Guthrie’s explanation of how Pretty Boy Floyd became an outlaw. According to Guthrie, Floyd accidentally killed a deputy sheriff after the latter swore in front of his wife.

Well, a deputy sheriff approached him  In a manner rather rude, Using vulgar words of language And his wife she overheard. Pretty Boy grabbed a log chain And the deputy grabbed his gun, And in the fight that followed He laid that deputy down.

In fact, Floyd’s criminal career had begun at the age of 18, when he robbed a post office of $3.50 in small change. However, for Guthrie, the key issue is that an outlaw like Floyd is less of a threat to the poor than are the bankers and businessmen, whose legal economic and social power causes homelessness and human misery.

Well, as through this life I’ve rambled, I’ve met lots of funny men, Some will rob you with a six-gun And some with a fountain pen. Well, as through your life you travel, As through your life you roam,  You won’t never see an outlaw Drive a family from their home.

Wherever little children are hungry and cry, Wherever people ain’t free, Wherever men are fighting for their rights, That’s where I’m gonna be.

This account of the presentation of criminals in twentieth-century American folk music has revealed a strong thread of imitation in the presentation of the outlaw figure. On other occasions, characters and narratives are transformed in response to performer and audience concerns and changing social realities.

One of the most important musical changes in the twentieth century was the move from folk music (defined by its use-value to a community) to popular music (essentially a commodity, produced for its monetary exchange-value). The second half of the century saw numerous attempts to reappropriate the revolt represented by outlaws and transform this into a business proposition – ‘Turning rebellion into money,’ as British group The Clash would lament. Indeed, many ‘gangsta’ rappers would wholeheartedly collaborate with this project, establishing clothing lines and other business operations. Given these changes, the portrayal of the outlaw as ‘bad man’, ‘social bandit’ or ‘everyman’ would inevitably be subject to new influences in the music of the late twentieth and early twenty-first century. 

Brown, C. (2004) Stagolee Shot Billy . Boston, MA: Harvard University Press.

Cox, J.H. (1919) ‘John Hardy’,  The Journal of American Folklore , 32(126), pp. 505–520. Available at:  https://www.jstor.org/stable/535190?origin=crossref  (Accessed: 15 April 2024).

Fisher, J. (1998) The Life and Death of Pretty Boy Floyd . Kent, OH: Kent State University Press.

Hobsbawm, E. (1981) Bandits . London: Pantheon Books.

Klein, J. (1980) Woody Guthrie: a life . 2023, London: Faber and Faber.

Santelli, R. (1994) The Big Book of Blues: a biographical encyclopedia . London: Pavilion Books.

Steinbeck, J. (1939) The Grapes of Wrath . 1975, London: Pan Books.

Lyric extracts

Mississippi John Hurt: Stack O'Lee (traditional).

Henry Roeland Bird, aka Professor Longhair:  Staggerlee (traditional).

Woody Guthrie: Pretty Boy Floyd, Tom Joad .

Huddie Ledbetter, aka Lead Belly: John Hardy (traditional).

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• Originally published: Thursday, 30 May 2024
• Image 'Woody Guthrie playing the guitar.' - Copyright free: Al Aumuller/New York World-Telegram and the Sun
• Image 'Leadbelly with Accordion.' - Copyright free: Charles L. Todd and Robert Sonkin migrant workers collection (AFC 1985/001), American Folklife Center, Library of Congress.
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Published on 29 May 2024

Orange at VivaTech: where innovation and responsible tech are key

As a founding partner of VivaTech, Orange was out in force once again for its 8th annual event, attracting 165,000 visitors from more than 160 countries. Orange invited 60 start-ups from its open innovation ecosystem to its stand, successfully showcasing a range of demos and contributing to the discussion via conferences and speeches ranging from AI to cybersecurity, customer experience, networking, green tech, and responsible digital. Here are just a few highlights.

“Bring the start. We’ll bring the up”

Displayed prominently on our VivaTech stand, this message highlights our commitment to the start-up ecosystem in France and abroad. We’re proactive in boosting both their service and business development via:

• Orange Innovation, which helps accelerate start-ups by integrating them into our tech ecosystem
• Orange Ventures, which offers early-stage financing through a €350 million envelope directly targeting innovative start-ups
• Orange Business, which collaborates with start-ups to enrich our own enterprise offers while providing broader market access to increase their scale and scope.

Through our resources, training, and funding opportunities, we aim to create an environment where start-ups can thrive, leveraging our infrastructure, network of contacts, and local and international expertise. Jérôme Hénique , EVP and CEO of Orange MEA

Accelerating start-ups through network and AI solutions

Through our network, start-ups, developers, and companies of all sizes can design and deploy a range of innovative services. These strategic activities for current and future business opportunities rely on business-grade performance and cybersecurity and cover everything from “Network for AI” to “Network for mobility” and “Network for quantum”. ».

AI opens up a field of technological opportunities for Orange in three strategic areas of expertise:

• In cybersecurity, as both the problem and the solution
• In networks, as we continue to optimize our capabilities and services to maximize the potential of new uses.
• In customer experience, enabling greater personalization through the latest features including context analysis.

Orange CTIO Bruno Zerbib moderated the roundtable on 24 May, which discussed the relationship between the telecoms industry and AI. He was speaking alongside Bassem Asseh, CEO of the start-up Hugging Face, an Orange partner, and Frédéric Werner, Chief of Strategy and Operations for AI for Good, ITU, the UN’s agency for ICT.

This panel explored the era of ubiquitous AI, which we’re entering at an unprecedented pace, and how it is profoundly transforming industry and society, and the way we interact with technology. As an operator, it raises many challenges, notably in terms of network capacity to enable instant and massive access to these AI solutions as part of a responsible and sustainable approach. We believe open innovation with all players in the ecosystem is the key to a successful transformation and unlocking the full potential of AI. The speakers shared tangible examples of an open and collaborative approach, based on a common vision of ethical and responsible AI in addition to new tools and models such as open source.

Watch Christel Heydemann’s keynote

Catch up on a whole range of presentations from our Orange stand

On the road to Paris 2024: highlighting our latest innovations at VivaTech

On display at our stand was an impressive Lego model designed to highlight the our upcoming solutions deployed during the Paris 2024 Olympic and Paralympic Games .

The Lego model of a competition venue is built from 41,375 pieces and took 68 hours to assemble, helping to illustrate our upcoming sporting challenges such as providing “real-time services, speed adapted to each use, availability, and energy efficiency.”

Raising awareness of responsible digital uses

VivaTech served as a great platform for us to raise awareness among young people about the risks of digital technology, with the ultimate aim of creating a safer digital world, especially for marginalized women, knowing that 85% of women fall victim to online abuse – especially in the world of gaming and its associated misogyny and sexism.

To address this alarming reality, Orange and the Women in Games association have launched a large-scale initiative called Wall of Change in the streets of GTA RP, to highlight the challenges faced by female players. These collages are a springboard for the association to host an upcoming educational live Twitch with gamers.

We also demonstrated our latest solutions such as Safe Zone and Orange Proof of Age, which have been codeveloped with Orange Business to prevent underage children from accessing inappropriate content.

As the leading telecommunications provider in France, and a major player in Europe, Africa, and the Middle East, where digital uses are booming, we have a major role to play in protecting the younger and future generations against the inherent risks of digital. In February 2024, we strengthened our commitment to protecting young people against cyberbullying, online abuse, and screen addiction, as part of our ‘For Good Connections’ initiative Caroline Guillaumin , Executive Vice President of Communication for the Group