Innovation through collaboration

Open innovation is not a new phenomenon. During the first decades of the 20th century, industrial enterprises in the United States co-operated and sourced R&D services from dedicated, external R&D labs. Associative behaviour – from gentlemen agreements through cartels and co-ordination linked to trade associations – was common, and critical to the survival of what was then an industrial structure dominated by small firms

The years following the Second World War saw this landscape change dramatically; it not was until the 1990s that different innovation system approaches gained increasing influence with a high interest in the external organization of innovation, resulting in focus on extended enterprises and collaborative advantages across organizational boundaries

Since the start of the 21st century the economic globalization is forcing companies to go abroad to interact with the most demanding or competent customers, the cheapest or most competent suppliers, to seek ideas and knowledge within world leading research environments and seek new markets for their technologies. This “opening up” of firms, reflect a transition “from an internal knowledge base of firms to an open and globally distributed knowledge networks”

Dr. Henry Chesbrough is a co-founder of the Open Innovation Community and created the theory and coined the term “open Innovation” which is defined as “a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology”.

In this video he explains the basics of open innovation…

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The boundaries between a firm and its environment have become more permeable; the central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead work with external input to the innovation process just as naturally as it does with internal input.

Companies can take any number of approaches to open innovation, for instance by using tools and techniques such as crowdsourcing, user-driven innovation or co-creation since it is about connecting with others to find new ideas and, often, to co-develop and co-market them. No matter what form these open-innovation efforts take, they offer companies several important advantages over traditional innovation methods. The most obvious benefit is risk reduction —combinations like these share the financial underwriting and require less manpower from each organization than if they’d gone it alone. But there are also other less obvious benefits like higher levels of brainpower applied (as the old saying goes, “two heads are better than one”), quicker to scale or validity, mainly  in open-innovation situations that involve a potential provider and a customer, the team has access to field conditions where the essential issues lie. Solving the right problems is half the battle of innovation, primarily because working on the wrong problems is so costly.

Despite the advantages, open innovation is frequently a leap of faith; however, there are many examples of recent collaborative efforts that have been successful…

• In the Netflix/LG Electronics deal, LG gets ready customers (who it expects will buy millions of its new boxes), while Netflix gets a new media platform that makes it more competitive. This means access to something new to the world that could only have been co-created.
• One of the most ambitious projects around – Innovative Medicines Initiative – is a combination of open innovation, the use of a collaborative technology platform built around a novel new business model within such a highly competitive industry of Pharmaceuticals. It can point to significant changes in the impact and contribution of innovation management.

Nowadays, innovation has become a key factor for the economic success and a requisite for sustainable development. In a complex and highly competitive global market, companies have to innovate and develop commercially viable products and services faster than ever. In that context, open innovation should be understood as a philosophy that the company need to embrace within its organization so it can meet these new challenges.

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