Open Innovation
Can innovation be open and closed at the same time? There was a time when companies used to keep their discoveries as a secret and made sure that their discoveries do not leave their R&D laboratories. However, today in this truly global market, skills and talents are not restricted to a country, state, or any specific geographical location. People travel far and wide and so does their knowledge. Henry Chesbrough coined the term "open innovation". It means using both internal knowledge within your company, and, that available outside or externally, to your advantage. The key idea or force behind open innovation is that in today's global market there is vast and varied knowledge which is distributed across geographical boundaries. It is not possible for a company to rely on their internal innovations. It becomes imperative for them to buy technologies from outside and commercialize it to their advantage. Open innovation is not only looking outside for innovation, but it could also mean extending your internal innovations to the outside world through mergers, licensing, spin-offs, etc. Since the resources have become extremely mobile and flexible, companies have started looking outside for knowledge inflows. Companies are also looking for ideas from suppliers and / or competitors to add value to their business model and processes. Today companies such as Procter & Gamble, IBM, and many more are promoting open innovation in a big way. The concept has become almost a religion for these companies. Log on to http://www.openinnovation.eu/ and get to know interesting success stories on open innovation.
P&G had been known for reaching tremendous growth by innovating through its in-house research facilities. The story was different then... P&G was a $25 billion strong company. Now, the company is $70 billion strong. The company avoided the strategy "not invented here... not sold here" and launched an innovation model called "Connect & Develop". Why? With New technologies coming in the market, pressures on internal research budgets, stagnated sales, and reduced market share forced P&G to think outside the box. The idea was not to replace the existing research staff but to leverage from the resources available outside. The model was a success and the figures say that over 35% of P&G's new products / ideas came from outside the company. Company's R&D investment as a % of sale also reduced drastically. Today the company boasts of a brands' portfolio of $22 billion.
Principles of Open Innovation are:
* It is not necessary that every talented resource is employed by an organization. An organization might have to look outside for resources.
* The phrase "not invented here, not sold here" has been long used. The time has come to believe that it is not necessary that to profit from a research you need to develop it in-house.
* Open innovation uses both internal and external creativity.
* It is nothing but rational to reap profits from others' reserach in case the intellectual property rights do not come in way.
While talking about Open Innovation, Crowdsourcing, a term coined by Jeff Howe is often referred to. Crowdsourcing is a process through which power of the crowd is leveraged to accomplish tasks which could be earlier executed by a few experts. It is best to use the ideas and creativity of minds than let others reap the benefit from them.
About the Author
Devinder Rawat is author of this article on Open Innovation. Find more information about Innovation here.
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