Open Innovation: Definition and Future Trends

Open Innovation: Definition and Future Trends

By Taylor Ryan

In today’s digitized world, information is spread vastly across the web. Due to the quantity of information and how far it has spread, it is impossible to know what to look for, let alone find it. Open innovation aims to change that.

What Is Open Innovation?

Henry Chesbrough, a professor at UC Berkley’s Business School, suggests that open innovation is a concept that falls somewhere in between ‘business and academe’. Business models, according to him, regulate and control the information that they receive and internalize it, making it difficult to find elsewhere.

Open innovation is using information that might be with a select few (say a company) along with any other relevant data to improve internal innovation that will lead to external innovations as markets will grow to accommodate it.

This means that there are two sides of open innovation:

  1. External data is brought into companies to be utilized and innovated upon.
  2. Internal tech or data goes out to other companies to be improved.

Many firms contest to the idea of their data leaving the company for fear of being compromised or left vulnerable. Within business, the open innovation method would be efficient and more profitable than previous systems.

The time to reach markets for products and services will reduce, cutting down the cost and adding to the revenue of a company. When searching for data or letting it go, Chesbrough suggests that the answers to these questions will come from the business models. They determine what is needed and what isn’t for a particular project.

Examples of Open Innovation

Open innovation can be implemented in businesses of all sizes. Here are some examples of companies and enterprises incorporating open innovation:

General Electric

General Electric or GE, one of the biggest American conglomerates of the world, has adopted open innovation and has claimed that its role in solving the world’s problems will be done via “crowdsourcing innovation.” Its project “First Build” is bringing together designers, entrepreneurs and engineers to bring forth their ideas that will be sold off. GE will also provide for their manufacture.

NASA

NASA is another enterprise that has taken up open innovation. It worked with Harvard and London Business School to develop a mathematical algorithm that’s capable of determining the most needed content in a medical kit. It sounds bizarre, but these kinds of innovation gather people from around the globe. Upon completion, the students who participated will get cash prizes among other rewards.

Coca-Cola

Coca-Cola is yet another company which has opted for open innovation. It is currently working with entrepreneurs and other company members before introducing their startups all across the globe to market the Coca-Cola brand.

Another innovation project is the vending machine that allows customers to make their own cola and suggest flavors to the company. This way, the consumer is brought closer to the product they will be consuming, giving them more of a say in what happens to the product.

LEGO

LEGO suffered tough times in the 1990s but picked itself back up again and is slowly making changes to finally move toward a more innovative approach. Its LEGO Ideas initiative was based on the open innovation model, a place for customers to share their ideas on possible new products, enter contests and vote for the ideas that are most liked.

Samsung

Another giant to adopt the innovative model is Samsung. Unlike its contender Apple that is already going the closed innovation route, Samsung has introduced its accelerator program that is based on the open innovation model. It invites the collaboration of people from various fields to work on creative solutions and is currently active in New York, San Francisco, and Palo Alto.

Local Motors

Local Motors has launched its co-creator program, in which cars are designed using 3D printing which makes this an open innovative. Even its innovation challenges are created via open innovation. This is very rare in the automobile industry.

Some might say that this jeopardizes its future prospects, but the fact that it has embraced open innovation makes it stand out from its competition. Also, its message of strength in openness is also a great branding and marketing tool.

Science Exchange

Science Exchange is an example of an open innovation platform operating as a market place for research services for organizations. They are able to outsource their research and development to academic institutions and research organizations.

This approach is dramatically altering the way we look at and approach scientific research. Science Exchange is giving everyone the possibility to access information instead of it being withheld. This open approach is replacing a traditional practice with an altered and connected path.

Mozilla

Mozilla is another example of an organization that has adopted open innovation. Although open-source management seems closely linked to open innovation, this has not been done before. Upon including open innovation into its model, Mozilla has decided to assign representatives that are encouraging the community. The community responds positively because they can learn a lot from this experience. Thus, Mozilla believes in openness and its power to bring people together for greatness.

Future Trends

Based on research and data collection, certain trends have been identified for the future of open innovation. Due to the significant impact that open innovation has had on the field of medicine, the service sector and beyond, it is predicted that it will grow into other sectors and bring about more positive changes. The following are the sectors where statistics show open innovation will enter in the upcoming years.

  • Innovation hubs and accelerators – Silicon Valley is a good example to illustrate the changes in the education system brought by open innovation. Tech advances are making labs more efficient. Open innovation itself is being taught and encouraged there, including places like Singapore and Israel.

Outsourcing might grow more with corporations, moving away from internal management to third-party managed accelerators.

  • Investments – The trends indicate that there will be more off-balance investments rather than the utilization of corporate venture capital (CVC) funding.
  • Trend SpottingInnovation will become more flexible with antennas set up in all the main hubs (such as London, Singapore, and Israel) along with innovation outposts.
  • Procurement/Co-Development – Interaction with startups is on the rise, so co-development programs might be introduced that may eventually lead to procurements.
  • Acquisitions – Trends indicate a move away from US startups and a move toward EU startups.

Possible Issues

While the benefits of open innovation and collaborations are obvious to the eye, predicting changes with certainty is difficult, especially in terms of what companies will need to implement or adapt to. This certainty will only come with time, but some hurdles with open innovation have already been identified.

  • Financial assistance, although not necessary with open innovation, it can be a major contributor, speeding up the process and providing what is needed for a project to move forward or be completed.
  • Another issue that could present itself and can be problematic especially when there is no financial assistance is the lack of co-creators. For companies adopting open innovation, they must gather enough people to work with them on these ideas as well as deal with issues relating to participation and regulation to suit the company’s requirements.
  • Within co-creative setups, it is vital that problems be broken down for contributors to work with. If not, open innovation will all fall apart.
  • Such initiatives need to be led for the sake of clarity, leadership and conflict resolution. It is also needed to ensure that contributors do not use these resources for their personal development. For instance, Mozilla Firefox was made by two developers from the software community who were working with the Mozilla Foundation.
  • There might be certain challenges when dealing with distributed co-creation. While some data has indicated that certain open-source software can be and has been better in quality than commercial projects, there is some data that suggests otherwise.

Conclusion

An interesting finding suggests that co-creators are aware that the product they create will not be their own. Even so, they are ready to participate in these projects.

Trends suggest that this is due to the trust they have in the brands they work for and have a genuine desire to contribute. This is evident from the rise of startups and major companies adopting open innovation across the world.

On the other hand, if companies want higher consumer participation, they will have to offer the public some incentives to get them to co-create.

After the publishing of the book Startup Communities, Brad Feld had the idea of “give before you get”, as a must for building startup ecosystems globally. Recently, startups have become among the largest creators of jobs and stand as catalysts for innovation.

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