With the advancement of technology and network opportunities, everyone is witnessing a momentous transformation in the competitive paradigms of enterprises. It is an open innovation which has dragged most of the small to medium-sized companies towards success.
Open innovation is a business concept coined by Henry W. Chesbrough to upgrade the business venture into the market through innovation processes. It is the purposive outflows and inflows of knowledge to expand the market for external use of innovation and accelerate internal innovation.
Once an open innovation strategy is adopted, the organization’s boundaries become permeable and allow combining the company resources with the external co-operators. It requires an opening up of the innovation process in order to use the talents, creatives, and experts outside the businesses and their technologies, competencies, and ideas. One of the most famous examples of this kind of strategy is Google, which allows its employees to spend 20% of their work time innovating projects.
What is the difference between “Closed innovation” and “Open innovation” ?
– Closed innovation
A closed innovation is primarily based on the concept that business entities are solely responsible for developing innovations for the success of their business. From generating excellent ideas to development and marketing, the innovation process takes place exclusively within the startups.
To successfully implement a closed innovation in the company, you need to consider certain factors such as professional team members, best products, and services. To be precise, closed innovation depends on the performance of the employees of the company. Hence, it is better to hire highly qualified employees, including maybe a Growth Hacker, and protect one’s own intellectual property accordingly to stand out of the crowd.
– Open innovation
On the other hand, Chesbrough’s open innovation is a business model which opens up the innovation process beyond the boundaries of the company. It helps to increase the potential of one’s innovation through the active strategic environment. External partners such as customers, universities, research institutes, suppliers, or startups are involved in the process of developing ideas and new products and services.
Why do you require Open innovation ?
The innovation process is a transition from closed to open innovation and is becoming the fourth industrial revolution. It helps business owners and employees push themselves and the company to evolve. Many individual companies have proudly proclaimed their success with their version of open innovation. Here are some of the reasons that all aspiring entrepreneurs and business professionals are required to know :
- Time savings
The first and foremost benefit of adopting open innovation in the business entity is to reduce the development time by handling various activities to the innovation partners in the sense of a division of labor. As a matter of fact, the product development period is the important thing while launching products in the business world. With the help of open innovation, professional business owners can shorten life cycles and increased market competition.
For instance, Procter & Gamble has introduced an innovative toothbrush in cooperation with a Japanese company and reduced the development time by half compared to an internal project. In the earliest period of the business, the company had issues with developing and finding their innovations and were suffering from a lack of customer loyalty.
So, their new CEO, A.G. Lafley, expressed the idea to drive employee productivity, customer loyalty, and better innovation. No matter how excellent the employee staff was at Procter & Gamble and how many brilliant ideas they had for the success of their business, it was only a fraction of the total intellectual pool available worldwide.
Lafley’s new way of thinking led to P&D’s Connect & Develop program to utilize the strength and ideas of the external for their organization to make improvements in the internal processes or products. With this program, the company has created an “open innovation” trend, which was followed by many others in some form.
- Updating old products and services
Sometimes, the business owners don’t need to create new products and services for capturing loyal customers. The older service can also play a better role in attracting clients. This is when you need to get a creative team together to improve your idea. It is one of the main benefits of open innovation model, because this process is never be going to end.
- Reduction of cost-to-market
With the globalized markets and associated dumping of the prices, business entities are striving to deduct the costs of the innovation process from the starting period to market launch.
When you work with external partners for the success of your business entity, you can easily split the costs of the production. Furthermore, you become more efficient because each company and each member works on what he is good at.
- Developing a stronger community
LEGO is an excellent example of how a company can engage their supporters on a wide scale by using open innovation. It has established a task force with the aim of assessing the needs, benefits, and opportunities for introducing new practices of open innovation across the LEGO Group.
The company created a new open innovation strategy which was known as the LEGO’s Shared Vision. This strategy focused on the consumer by linking both the creativity level and business opportunity. In this online website, LEGO consumers can design their own LEGO sets either using LEGO bricks or computer 3D applications.
This model contributes to putting the consumer in the middle of the innovation process and helps the team members to set the target that can achieve success based on the votes and comments of LEGO ideas. The co-create platform can also contribute to reducing the risk of innovation, as feedback from the website can provide business analysts with an idea about the viability of the new product.
Irrespective of the size of your company, open innovation models play a significant role to get in touch with your fellow supporters, new talents, and new organizations. You will get to know what your community wants and then give it to them. In this process, you can figure out the enthusiastic community members who are willing to dedicate their time and ideas to help you create something better.
- Reduce risk factor
Another central advantage of open innovation is risk minimization factor. By integrating innovative customers into the open innovation process, it helps in reducing the risk factor of failure. More importantly, if you get feedback from your target on a regular basis through numerous external and internal sources of ideas and knowledge, it will help you in managing things into a new level.
- Staying ahead of the crowd
Last but not the least is the advantage of staying ahead of the competition in the business world. By keeping your community and team members engaged and on the lookout for new ideas, you can make sure that your organization stays helpful and relevant to your community.
A Case Study of Open Innovation : Coca-Cola
Although the Coca-Cola company’s drink offerings grew from sparkling to waters, juices, sports drinks, and much more, the choices in its fountains were limited. In order to provide a significant number of the beverages choices from a fountain dispenser, Coca-Cola was challenged to reinvent the fountain business.
Scientist and engineers have brought microtechnology (which is used to obtain precise amounts of medication) that might be able to dispense “recipes” of different beverages to increase the number of choices in a single machine. Thus, the company had presented a Freestyle dispenser machine as the open innovation model.
This machine allows users to mix their own flavors and suggest a new flavor for Coca-Cola products from all over the world. This new product will record the flavor of the consumers in order to get it from other Freestyle machines using the Coca-Cola mobile application.
This open innovation model put the users in the center of the production process and uses the suggested flavors of the users. It would be a part of the external ideas that can be evaluated and processed as a new product line.
As stated earlier, open innovation was a trend for some people, and mobs are using it for the purpose to stand out from the crowd. But nowadays, it is a revolution, because it offers a variety of opportunity for any business entity and innovation projects. It is not limited to the big corporations with million dollar budgets for innovation.
