Companies that want to innovate are finding it harder to do this alone. The technology is ever more expensive and complex, the time to innovate is ever shorter and a product or service can often only be sold to a customer when various companies have worked on it together. The golden path to open innovation?
This situation gave birth to open or partnership-driven innovation, the growing trend of businesses collaborating with various partners, start-ups, technological partners, universities, etc. to innovate in ecosystems. It is in the interest of mainly small businesses to collaborate to develop innovation successfully and to market the results.
“All companies, even the largest, are currently innovating through partnerships and ever more often in significant ecosystems.”
The benefits of partnership-driven innovation are easy to perceive. You can drastically shorten the development time by working with partners with expertise that is not available at your company. A company can also limit the costs by using technology already available at another organization. Collaboration often results in the discovery of completely new concepts, ideas and technologies. I would go as far as to say that going out of your core business is worth the effort. Why? Contact with organizations that are mainly outside your own industry results in completely innovative ideas. Digital transformation is often a driving force because digital technologies not only make processes more efficient and make new types of relationships with customers possible but it also allows businesses to develop completely new business models.
“Contact with organizations that are mainly outside your own industry results in completely innovative ideas.”
“Is innovation without partnerships no longer possible?”, you may ask yourself. Of course it is. Even when people collaborate, a company will always have to perform Research and Development internally. You can only understand the technology of your partners when you have enough technical knowledge yourself. Open innovation can, therefore, only be effective when companies have developed in-house technological competences. Innovation without partners is still prevalent in a number of large companies for what concerns their core business or within industries where collaboration is not feasible due to safety reasons (for example, in the field of nuclear energy). But all companies, even the largest, are currently innovating through partnerships and ever more often in larger ecosystems.
The question is, is there a good reason why companies should not prefer open innovation?”
The question should, therefore, be: Is there a good reason why companies should not prefer open innovation? The answer to that questions is a wholehearted “NO!”. Companies applying open innovation are better equipped than their competitors to launch new products and services or to take up various competitive challenges brought about by digital technologies.
“A company can only innovate with partners when the company organization is ready for this.”
On the other hand, open innovation includes certain risks. It includes various management challenges. There must be a good relationship between all partners, IP management and access will be more complex and partners from other areas of expertise usually have a different approach, logic and company processes. Various psychological factors also play their part such as the “Not invented here syndrome”. By collaborating with external partners, employees see their jobs change and have to work with external, i.e. strange, technology. It goes even further; organizational structures, processes and activities often need to be adapted as well. Change is not always easy and our brain often resists change, as you know. The good news is that all these risks can be counteracted by a single solution: strong management that stands its ground. This is the reason for the high demand for top managers that can guide companies through strategic transformations. Another issue is that partners cannot be controlled. Building up mutual trust and coming to clear agreements is therefore essential. This is a skill many managers need to learn.
“Open innovation can only be effective when companies have developed in-house technological competences.”
I would like to conclude with some advice for our readers: Your company can only innovate with partners when the company organization is ready for this. Your organization, processes, management tools and, most important of all, your people have to be ready. This is called “open innovation readiness” or “open innovation maturity”. Are you ready?
Who is Wim Vanhaverbeke?
Wim Vanhaverbeke is a professor in Innovation Management & Strategy at Hasselt University and guest lecturer at ESADE Law & Business School and the National University of Singapore. Vanhaverbeke is a speaker, the author of four books on open innovation and a consultant who specializes in the organization and management of open innovation and innovation ecosystems.