There are three reasons why Open Innovation works. First, in the traditional approach, the reliance is on deep vertical integration and internal R&D networks for innovative success. In the open innovation approach, there is much greater reliance on connection, collaboration, and partnerships for innovative success. Second, in the closed model, the working assumption was that the best people in the field work for you. And you worked hard to recruit and retain those people. In the open innovation context, not all the smart people work for you. You still need smart people, but part of their job now is to identify, connect, and leverage the knowledge of the many more smart people outside your organization. A third contrast is in the management of intellectual property (IP). That used to be something done for purely defensive reasons to preserve the freedom to invent and operate. Now IP becomes a critical enabler to access external ideas, and/or to profit from letting your ideas go out to others.
One subtle yet powerful implication of open innovation is that, in a world of widely diffuse useful knowledge, much of the real value can be gained not from developing yet another piece of knowledge, but rather from creating systems and architectures that combine these disparate pieces of knowledge together in useful ways that solve real problems. This “systems integration” or systems architecture capability is of particular value in an open innovation environment.
What evidence is there that open innovation actually works? Many individual companies such as Procter & Gamble have proudly proclaimed their success with their version of open innovation called Connect and Develop. Another consumer products firm, General Mills, analyzed 60 new product introductions in a 12 month period. They found that those which had a substantial open innovation component outsold the ones that did not by more than 100%. In the industrial sector, a recent study of 489 projects inside a large European manufacturer found that projects involving significant open innovation collaboration achieved a better financial return for the company than projects that did not.
At the level of the economy, a number of studies employing the Community Innovation Survey have found that organizations with more external sources of knowledge achieve better innovation performance than those with fewer sources, controlling for other factors. A recent survey of 125 large firms also found that firms that employed open innovation were getting better innovation results.
Inside cities, Open Cities activities are strengthening the civic life of major urban areas through greater sharing of data. As cities compare their activities, they are learning how best to engage citizens, application developers, and other third parties in the quest to empower citizens with the knowledge they need to live better.
In health care, Open Data is starting to liberate patient data for more open investigation of, among other things, rare diseases and alternative therapeutic uses of abandoned compounds. Public-private collaborations are providing researchers access to more data than ever before, with the promise of new treatments to follow.
Public governments are making greater use of Open Innovation as well. Many agencies are employing crowdsourcing techniques to invite broader public participation in innovating government tasks, and often getting good results! Platforms are arising to organize and connect previously unconnected parties. Governments are also embracing more collaborative approaches to innovating their own work.
Recent work shows that small firms can be very successful with open innovation. In Europe, SMEs are crucial for the dynamics of the economy and, therefore, it is important to examining how open innovation can be applied to increase their competitive strength.
With all that’s going on, it is clear that Open Innovation is for real, and it is here to stay. We are excited to see what new developments emerge going forward!!
Faculty Director, Garwood Center for Corporate Innovation
on sabbatical this academic year at Esade Business School
Recognized as #24 on the Thinkers50 list of Most Influential Management Scholars for 2015
Director Center for Innovation in Cities at ESADE
Professor Innovation, Smart Cities & Data Science
Professor at Hasselt University;
Visiting Professor at ESADE Business School and National University of Singapo