Building The Future Of Business with Open Innovation

As a small drop in the enormous sea of brands, a lot of companies create similar products and address the same problems. Consumers are overwhelmed with ads, developing a mechanism to ignore them and trust only well-known brands. In the future, the number of brands will just keep growing. 

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So, how can a company do something to stand out in the future of business?

The answer is yes – innovation. To innovate means to come up with new ideas, create new products, or modify existing ones in order to make them better. 

However, many companies fail to innovate. Why is this? Because they are closed. When it comes to innovation, they believe all the work has to be done in-house, by their employees. This is a traditional way that most companies still pursue, called closed innovation. Yes, if you have the world’s best creative minds, you’ll probably come up with something great. But you probably don’t. And you need an alternative that will give you some fresh, new ideas. This alternative is called open innovation

Open innovation means making your company open to share and receive new ideas. The term was coined by Dr Henry Chesbrough. He was an adjunct professor and faculty director of the Center for Open Innovation of the Haas School of Business at the University of California. He defines it 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”.

Open innovation is used by companies who want to boost their innovation process by simply asking customers or partners about their ideas. These ideas are later used in the product design phase, aiming to reduce costs, time, and create products that can truly find their market fit. This model disrupts the secrecy of traditional corporations and drives the innovation process to an information-based mindset. 

Open innovation drives to a world of widely distributed knowledge. It’s a place where companies don’t just rely on their own research, but also turn to startups and ask for their inventions and include user innovators.

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What types of open innovation are there?

Open innovation could mean cooperating with other companies, experts, users, or a combination of these. It can be done with different purposes, including marketing, talent scouting, creating new products, modifying existing products, and collecting market information. 

When it comes to creating or modifying new products, co-creation is a model that puts companies and their users together with the goal to create an innovation. This model aims to include customers in the product design process, resulting in a product that will address their needs and offer an effective solution. 

Co-creation offers many benefits for you as a company. First, you’ll get a lot of valuable market information. There’s no better way of collecting feedback than talking directly to your customers. This way, you’ll learn the hot topics your buyer personas are interested in, as well as their opinions regarding them.

Second, you’ll save a lot of resources. You’ll reduce the product design duration because you’ll know exactly what features your product should have. You can have this insight only after talking to your customers. Moreover, you’ll save a lot of money you’d otherwise spend on unnecessary features your customers don’t even need.

Finally, the whole process will result in user-centric products that your customers will really like. By including your customers in the product design phase, you’ll gain their trust and their loyalty.

There are many types of co-creation you could use. Crowdsourcing and design thinking are two of the most effective ones

Crowdsourcing is a way to engage the crowd and ask them to give you fresh ideas through events like hackathons and makeathons.

Design thinking is an approach that puts users in a creative setting and leads them through the process of empathy, definition, creation, prototype, and testing. This method has users in the center of product design, building an end product that revolves around their needs.

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Examples of open innovation

Many companies that follow digitalization trends have started going the way of open innovation. 

General Electric is one of the open innovation leaders. The company created an Open Innovation Manifesto, explaining their way of crowdsourcing innovation that aims to solve world problems. Through this initiative, the giant cooperates with experts and entrepreneurs from all over the world. Experts who are passionate about problems that affect everyone on the planet. 

“We believe openness leads to inventiveness and usefulness. We also believe that it’s impossible for any organization to have all the best ideas. And we strive to collaborate with experts and entrepreneurs everywhere who share our passion to solve some of the world’s most pressing issues. We’re initiating a fundamental shift in the way we do business – this is what we’ll stand for in our open collaboration efforts and how we will operate,” the company states in its Manifesto. 

Netflix is another company that is an open innovation advocate. The media leader came up with an open competition called Netflix Prize, asking contestants to come up with a recommendation algorithm that was at least 10% more accurate than the one the company had been using by then. In return, the company offered a reward of $1 million. 

Over 40,000 teams from 186 countries entered the competition in a period of one year. Three years later, the company rewarded the best solution. However, this was too expensive to execute. So Netflix used another solution from the contest that improved the existing algorithm with a rate of 8.43%.

Open innovation is for sure a great way to bring in fresh ideas into your company’s innovation processes. However, before starting a project like this, make sure you carefully review all your options. Not all open innovation types work for all kinds of products. What is certain is that, if used right, open innovation can significantly boost your company’s creativity and bring your products much closer to your customers. 

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