Using Chesbrough’s argument that “not all smart people work for us,” businesses are advised to be receptive to innovation from outside sources and to shift emphasis away from solely internal R&D activities. However, adopting a proper “open strategy” is necessary to leverage such a concept.
Studies show that firms that do not cooperate and exchange knowledge lose their competitive advantage, as they reduce their knowledge base and lose the ability to enter exchange relations with other firms and organizations in the long run.
Although the era of open innovation has begun for many firms, we still need a clearer understanding of the mechanisms, inside and outside of the organization, and when and how to fully benefit from the concept.
There are many successful cases of implementing open innovation concepts, for example Procter and Gamble, with a:
increase in their product success rate
increase in the efficiency of their R&D in 2010.*
However, companies investing in open innovation activities face risks and barriers that hinder them from profiting from their initiatives.
Loss of knowledge
Higher coordination costs
Loss of control
Higher complexity
The difficulty in finding the right partner
The imbalance between open innovation activities and daily business
Insufficient time and financial resources for open innovation activities
may result in an unpleasant open innovation experience for companies.
Creating and capturing value in today’s world cannot rely merely on pure open innovation but on simultaneous closed innovation activities led by a strategic approach to openness.
Too much openness can harm a company’s long-term innovation success by leading to a loss of control, added value, and core competencies. Furthermore, a closed innovation approach does not meet the growing demand for shorter innovation cycles and shorter time to market.
Adopting an appropriate openness approach requires having a strategic sense of innovation communities, ecosystems, networks, and their implications for competitive advantage—what is called “open strategy.”
Open strategy combines conventional business strategy principles with the potential of open innovation. It embraces the advantages of openness as a means of expanding organizations’ value creation and imposes certain restrictions on traditional business models when those restrictions are required to encourage the increased adoption of an innovation strategy.
Open strategy acknowledges the need to sustain open innovation approaches over time. To sustain a business model, capturing some of the value created by doing open innovation is necessary. An effective open strategy will balance value capture and value creation rather than neglecting value capture in pursuit of innovation.
Open strategy is crucial for innovators who wish to take the lead. Being in the heart of the Quebec innovation ecosystem and having experienced innovation advisors, Centech’s Collision Lab has expertise in helping companies define and implement their open strategies and is trusted by big names in various fields.
* Ozkan, N. N. (2015). An example of open innovation: P&G. Procedia-Social and Behavioral Sciences, 195, 1496–1502.