Open innovation: overcoming the hurdles

Open innovation: overcoming the hurdles

  • 06/01/2013
  • Diederik Syoen
  • blog
  • Anticipate

We live in the era of open innovation. But while benefits of this type of innovation are obvious, little is said about the difficulties associated with the integration of external knowledge. Here we look deeper into these hurdles and present some useful tips to overcome them.

New communication technologies have revolutionized the economy and connected people around the globe. The world has become a village. Based on the new technological possibilities, companies more readily have access to external knowledge. To capture and valorize the diffusive knowledge spread over different organizations and people, companies have developed open innovation platforms.
We live in the era of open innovation. But while benefits of this type of innovation are obvious, little is said about the difficulties associated with the integration of external knowledge. Here we look deeper into these hurdles and present some useful tips to overcome them.

1. From “not invented here”, to “proudly found elsewhere”

Making use of external sourced ideas for innovation is not as straightforward as it may seem. External ideas risk to meet with resistance from within the company. Xenophobic instincts are an important reason for why external ideas never make it to the developing stage. To make external ideas more attractive for internal stakeholders, a company needs cultural changes. The mark “not invented here” should be turned from a stigma into a strength.

The mp3 format for music files was invented by engineers of several expert institutes such as Fraunhofer, AT&T Bell Labs and others. The first Walkmans of Sony, the market leader in portable music at that time, did not allow the playing of mp3 files, because the company chose to stick to their own ATRAC file format. By the time the company realized they could no longer ignore the mp3 format, they had already lost considerable market share to other music players that did allow playing of mp3 files, such as the iPod.

By embracing external inventions and adopting them, companies can prevent becoming obsolete. It’s not the origin of the invention that matters, it’s the invention itself.

2. Combine generalists & specialists

In the nineties, the dominant vision was to build profound & specific R&D capabilities. Due to the recent rise of open innovation compared to internal innovation, companies have to diversify their core competencies portfolio. Next to specialists, a company also needs generalists. While generalists lack the detailed knowledge of specialists, they also lack the blinders that specialism can bring. Generalists are able to look at new technologies without prejudices and restrictions. Compare it to a natural ecosystem, the higher the diversity in competencies, the better an ecosystem is able to adapt to changes in the environment.

Kaggle is an open source platform for predictive analytics. Companies who have big data analysis challenges can post their data online. Modelers and data scientists from around the world will tackle these challenges. In this way, insurance companies let molecular modeling scientists predict the accident rate for different car types.
In depth knowledge of a technology is not the only prerequisite for a useful contribution to the R&D process. Good innovations are built by generalists and specialists together.

3. Let a middleman do your filtering

When analyzing external knowledge sources, companies are confronted with a lot of ideas. Of course not all these ideas are useful and of high quality. Flooded by this noisy information stream, researchers often face a hard time separating the wheat from the chaff. Research shows that this difficulty limits the effectiveness of the innovation process. Use of an intermediate party can resolve the misconnections between internal and external stakeholders. By using a neutral middleman to link the specific capacities of a company with those of external players, information can be streamlined. The intermediate party acts like a filter and thereby increases the effectiveness of open innovation.

A food company who was looking for a solution to make lightweight foodstuffs through extrusion found its solution in the making of foamed plastics. However, the polymer engineers had difficulties in understanding the requirements of the food technologists. By employing a neutral middleman, the translation of the technology from the chemical domain to the food industry could be made.
A third neutral party can translate and filter external knowledge to your industry’s needs. By engaging a neutral partner the interests of both parties in open innovation projects can be met more easily.

4. Use IP as a lever

Intellectual property rights aim to protect corporate ideas and inventions. This seems to conflict with the concept of open innovation, where knowledge and ideas are shared freely over the network. One of the major hurdles for the development of vaccines for poverty-related diseases such as malaria is indeed the fact that crucial parts of the technology are owned by different big pharma players. The significant costs associated with licensing are a barrier towards the development of an economical vaccine. Intellectual properties thus seem to conflict with the concept of open innovation.

However, other industries have shown that open innovation networks can be compatible with intellectual property rights. Companies like Philips, IBM and Microsoft show how a transformation of their IP strategy has enabled effective open innovation. They use IP as a tool to enhance strategic alliances and to cross-license technologies, instead of using IP purely as a defense mechanism.

Intellectual property is not necessarily a barrier for open innovation. An intelligent IP strategy can act as a catalyst for open innovation through the leverage power of licensing.
When sharing knowledge, a balance has to be made.

Companies have to choose between innovating in isolation, and missing out on external knowledge, or open innovation, where knowledge is shared for the benefit of the corporation.

In view of the ever increasing amounts of external knowledge, we are convinced that despite the challenges, open innovation across industry boundaries will be the model of the future.

References

  • West, J., & Bogers, M. (2013). Leveraging External Sources of Innovation: A Review of Research on Open Innovation. Journal of Product Innovation Management
  • David Nichols, ‘Why innovation funnels don’t work and why rockets do’, Market Leader, Autumn 2007
  • Benassi, M., and Di Minin, A. 2009. Playing in between: Patent brokers in markets for technology. R&D Management 39 (1): 68-86.
  • Jacobides, M.G., and Billinger, S. 2006. Designing the boundaries of the firm: From “make, buy, or ally” to the dynamic benefits of vertical architecture. Organization Science 17 (2): 249-261.Sandmeier, P. 2009. Customer integration strategies for innovation projects: Anticipation and brokering. International Journal of Technology Management 48 (1): 1-23.
  • http://www.euvaccine.eu/sites/default/files/uploads/docs/2013_EVI_15th_Anniversary/
  • Hall, B. (2010). Open Innovation & Intellectual Property Rights: The Two-edged Sword.Economy, Culture and History Japan Spotlight, (January), 1–5.
  • Kowalski, S. P. (2009). SMES , Open Innovation and IP Management : Advancing Global Development. Concord, NH: Franklin Pierce Law Center.
Diederik Syoen Diederik Syoen

Diederik Syoen

Marketing Manager

In close cooperation with sales, business development and management, Diederik explores ways to expand the CREAX brand by improving the services, identifying target markets and developing strategies…