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Open Innovation: What’ s Behind the Buzzword?

Innovation has become a key competitive differentiator in today’ s crowded, globalized marketplaces. For that reason, it has crept to the top of the corporate agenda. In this context, the concept of open innovation has begun to attract considerable attention both in company boardrooms and business schools.

Open innovation involves collaboration between companies and individuals to generate new ideas for products and services. Open innovation also means allowing others to exploit unused ideas.

To learn more, Accenture and the Institute for Innovation and Competiveness, part of ESCP Europe, conducted primary research among 20 companies that are actively using open innovation to boost the overall effectiveness of their innovation.

The majority of the companies studied agree that they have been practicing many of the key elements of open innovation for years. Open innovation is particularly prevalent in companies where speed is of the essence’”these include consumer goods and high tech companies.

The research indicated that there has been a dramatic increase in the number of external sources into which a company can tap. Suppliers are the most-cited external source, while universities also contain many potential collaborators.

Defining an open innovation strategy is critical, and most of the interviewed companies have defined a precise innovation agenda and have a specific objective in mind when scouting for external partners. The more mature a company’ s open innovation process is, the less controlled it tends to be.

Other key elements include defining the right balance between deep and broad relationships with innovation partners. In the main, successful companies excel at partner management. Significantly, all the interviewed companies have invested in building dedicated organizational capabilities, skills, tools and governance structures to support innovation.

An important challenge is the need to develop better metrics for measuring innovation performance. It appears that key performance indicators will have a role to play in this regard.

Recomentations from the report

Based on this research, one may conclude that open innovation does yield results. The following specific points were noted:

  • It shortens the time to market and can protect against the negative impact of copycats.
  • It is not really cheaper than in-house innovation, but does allow companies to mitigate risk and save time.
  • It strengthens intellectual property rights because, in a collaborative relationship, parties have a real incentive to define their intellectual property.
  • It helps promote a sustainability agenda because it is easier to include a wider range of collaborators, often from sectors of the community that companies usually would not access.
  • It enhances a company’ s ability to innovate.

The researchers conclude that while open innovation is driving real change and allowing new ideas to be explored, the following principles should be borne in mind:

  • The business model is key to success.
  • Trust and the ability to absorb new ideas are vital in developing win-win partnerships.
  • Companies need to invest in specific capabilities to manage open innovation projects.
  • Open innovation should not be seen as a substitute for in-house innovation.
  • As companies become mature users of open innovation, they should move to make it part of their normal business practices.

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