Open Innovation is a theory of innovation coined by Henry Chesbrough in his 2003 book ‘Open Innovation’. He talked about innovation that is not vertically integrated, but that happens as a result of know how or technology coming in from outside the firm, or similarly resulting from the same flowing out from the firm. These two broad principles around how Open Innovation happens he calls ‘knowledge flows’…. and suggests they fall into two types, ‘outside in’ and ‘inside out’.
Since 2003 Chesbrough has written much on the topic of open innovation. With the development of increasingly sophisticated software for companies to take advantage of the wisdom of the crowd, and an estimated 80% of firms engaging in some form of open innovation activity… it is now time to ask what next for Open Innovation ?
Open Innovation has proliferated since 2003, a simple web search on the term today yields hundreds and thousands of examples. From simple collaboration with solo partners, firms are now able to source multiple inputs to challenges and problems. Collaboration outside the traditional boundaries of R&D and innovation inside the firm is easier, faster and more efficient than ever. There are few big name companies which do not have significant open innovation initiatives, from pharma to fmcg.
What this increase in collaboration means, (whether ‘inside out’ or ‘outside in’) is that organisations need to adapt to the behaviours and structures conducive to partnership and co creation. These requirements are necessarily different to those required for classic, more controlled innovation and R&D processes. Indeed Chesbrough in a recent article, outlines some of the challenges of open innovation and states ‘Open innovation efforts face a number of important challenges, two of which I’ll discuss here: managing its impact on internal innovation processes and transferring results to the business unit. Outside-in open innovation brings new ideas into the pipeline; that is one of its strengths. But if an outside-in effort brings many new ideas into a company’s innovation pipeline, and the company has not invested in downstream capacity to process these ideas, the influx can create bottlenecks that slow the overall innovation process. And Not Invented Here syndrome, which is prevalent in many strong technical organizations, further complicates the acceptance of external knowledge inputs by the organization.’
Another reminder that when it comes to innovation in particular, theory can be far removed from the challenges faced in practice.
Chesbrough is predictably optimistic about the future of open innovation, citing successes of the innovation challenges set by companies like GE, and showing examples at local community level of open innovation benefiting the community. He concludes:
‘a future [ of open innovation ] that will be more extensive, more collaborative, and more engaged with a wider variety of participants. It will extend beyond technology to business models, and it will embrace both product and services innovation. Just as no man is an island, no firm that restricts itself to the confines of its own R&D lab will be successful in an open innovation world. As one R&D manager observed to me, “Before open innovation, the lab was our world. With open innovation, the world has now become our lab.”