What is Open Innovation? For any entrepreneur innovation is crucial to success, but if innovations are developed in isolation, the benefits can be limited in comparison to the effort.
At a recent event in Norwich, our speaker Stephen Clulow, kicked off the discussion (See photos) with a brief introduction about the meaning and importance of innovation. Innovation is the commercial application and successful exploitation of an idea. Innovation means introducing something new into your business. This could be a single major breakthrough – eg a totally new product or service – or it can be a series of small, incremental changes.
The outcomes of successful innovation can be measured by an increase in profit margin and more shareholder value. As a general observation, having a significant spend in R&D doesn’t automatically mean that a business is innovating or that the innovation will be successfull. In addition, companies need to embrace two key concepts. The first is that not all the smart people in the world work for you and the second is that breakthroughs will only happen by collaboration. As proof of the importance of the above, research has shown that the 20% of companies that belive they already have all the ideas (and people) they need, are actually ranked in the bottom 20% for profits.
To succeed with an Open Innovation approach, the best innovators need to have 3 key capabilities:
- Idea management
- Involvement of staff & collaborators
- Create innovative climate
IS OI FOR STARTUPS?
OI is essential to start-ups and start-ups are essential to OI. That’s because the OI is the smartest way for SMEs to provide innovative products to larger companies. Open innovation is being open: it’s not only about improving your technology but also “using other people’s wheels”. There are a lot of buzzwords that we can use to explain what OI means but the most effective is: collaboration. By explaining the famous Chesbrough Funnel (see below), Stephen showed us that collaborating, and then being open to innovation with third parties, creates more value than trying to innovate on your own.
It’s proven that big companies running open innovation challenges improve significantly their profits generating up to $1bn/year of added value or savings. Such challenges are probably the simplest way for early-stage companies to engage in the OI process.
Today everyone can innovate, even starting from free and already existing data such as GPS, mobile device, etc. Increasingly, the whole Open Data movement is also creating new opportunities for Open Innovation (eg. Rewired State). Alternatively, organisations are using data from user searches to predict world-wide phenomena, such as the prediction of world-wide flu trends by Google.org.
If you want to fund your initiative, don’t forget the Crowdfunding options. By pooling financial resources you can obtain funding for your project from the wider community, where a common desire and trust are the most important driving force for participation.
Participating in OI initiatives can provide valuable business intelligence and very quick feedback loops to early-stage companies whose strength is their ability to be agile and create disruptive innovations. But OI can also have negative repercussion on your business. Partecipating in OI means taking risks and working with limited resources. OI can open a lot of doors, but never forget the aims, strategy and goals from which you started.