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06.11.2017 Formation

Towards an Open Innovation Mindset

The rise of digital technology, the globalization of markets, and increase in pooled knowledge are driving companies towards innovation strategies. Until recently, companies looking for long-term financial sustainability, the perception was to rely on their own people, strengths, environment and internal knowledge.

Now, in this digital era, with the world getting smaller and innovation moving faster, companies now should benefit from an open innovation strategy. The reason why innovation is important is because at the end it produces wealth, and furthermore, concentrated innovation brings growth (i.e. Silicon Valley).

But what is open innovation? As Chesbrough, (2003) defined it ‘… the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively’. So, that means that in an open innovation mindset, the boundaries are undefined between internal and external environment. A company can choose to cooperate with another who has deeper knowledge on a specific market, or with people who are very experienced on a specific field, or share IP to increase revenues and knowledge.

The central idea behind open innovation is that companies cannot rely entirely on their own strengths, but should cooperate with other companies, institutions and universities and share resources. Also, lets admit, no company can have the most talented/skilled people so mobility of those employees call for an open innovation approach. Many companies spend big amounts in R&D in closed innovation models and very few products end up making it to the market. Through open innovation, companies can reduce budget spend on R&D with a better chance of an innovation breakthrough either major or incremental. They do this by combing all knowledge pools and transferring the project risks to the innovation partners.

Developing an innovation strategy model is very important because you can organize your innovation actions and have positive results. Innovation is a very important ingredient for companies to remain profitable and ‘alive’ at the market. By creating an open system and cooperating with other companies, startup, customers, universities companies can empower their innovation strategy very rapidly and less costly.

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References

1. Chesbrough, H.W. (2003A) Open Innovation: The New Imperative for Creating and Profiting from Technology. Cambridge, MA: Harvard Business School Publishing.

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