Open Innovation on the Rise

Open Innovation on the Rise

By Keith Foote

This article is based on the survey report titled ‘Managing Open Innovation in Large Firms’, by Henry Chesbrough.


Defining Open Innovation

Open Innovation is a business practice developed by Henry Chesbrough. The goal of open innovation is to accelerate the creation of new product ideas and improvements. It works by using people outside the company to generate creative new ideas and innovations. To this end, businesses can access a larger pool of resources when attempting to improve their product or advance their technology.

The Survey

In the ten years since the publication of Henry Chesbrough’s book, ‘Open Innovation: The New Imperative for Creating and Profiting From Technology’, a growing number of individual companies have adopted the practice. There is, however, little ‘hard’ supporting evidence this new process is useful or profitable, and some are concerned open innovation may be a short-lived fad.

The study, ‘Managing Open Innovation In Large Firms Survey Report’, surveys open innovation in large corporations. This is the first effort to study a large number of corporations and businesses regarding business practice. Surveys were emailed to senior executives at the headquarters of more than 2,840 large and stock market listed corporations. The survey focused on large companies with profits in excess of $250 million and with more than 1,000 employees. Of the 2,840 businesses who were sent surveys, 125 returned usable survey responses.

The survey was sent to the Chief Executive Officer, and if contact details were available, to the Chief Technology Officer or another senior executive. Of the 125 surveys returned, a little more than 10 were filled in by the CEO. The majority were filled in by someone who worked for the CEO.

The Survey Results

    • Seventy-eight percent of corporations who returned the surveys reported practicing open innovation.
    • The survey showed open innovation is increasing, and no corporation reported abandoning open innovation.
    • Eighty-two percent of the corporations reported open innovation was being practiced more intensely then 3 years ago, 15 % reported no change in intensity, and  3 % reported a decrease in intensity.
    • Sadly, the survey showed ‘significant dissatisfaction’ with the practice of open innovation within the corporate culture. For example, the concept of sharing unused internal ideas and assets with other companies was generally seen as a negative, something that could hurt the company and should not be done.
    • Innovation communities and crowdsourcing were also rated as unimportant in the corporate survey.
    • While the surveys showed little enthusiasm for the process of seeking ideas from outsiders, no company stated it wanted to do away with the open innovation practice. *Firms which report practicing open innovation over a period of a few years do report somewhat higher satisfaction with their practices.

Henry Chesbrough’s Predictions

Henry Chesbrough, the author of this survey, believes because no company has plans to do away with open innovation, this is strong evidence open innovation is not a fad. Additionally, he believes since no businesses have claimed to have abandoned the practice of open innovation, they are still learning about the practice. The evolution of open innovation is still in its early stages.

While innovation communities and crowdsourcing attract a great deal of public attention, these were also rated as unimportant in the corporate survey. It seems probable, however, these idea generating resources will grow in importance over time.

The survey suggests open innovation is not easy to implement. It requires re-thinking many aspects of the business’ structure. Research and Development cannot implement an open innovation program without the support of other in-house departments. Departments such as marketing, in-business development, and human resource management, also have to change their behaviors.

The satisfaction of large corporations with open innovation depends on the support of upper management. If upper management shows steady, consistent support, the satisfaction level with the open innovation experience is higher. If upper management does not support the practice, or views it with some disdain, satisfaction is lower.

Increasing the intensity of the open innovation practice leads to greater satisfaction with the process. This is seen as a positive and significant observation. A higher satisfaction level with the open innovation experience has the effect of increasing a firm’s open innovation activities. Additionally, the satisfaction level increases as a business gains more experience with open innovation.

Growing a workplace culture which supports open innovation is crucial. It is clear a majority of firms are trying it, and management support will grow over time. Satisfaction with open innovation is somewhat positive, and continues to grow with experience and practice. This suggests the general principles of open innovation should remain important, while individual practices are likely to evolve to fit the individual business.

Image © Sunrise

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