Professor Wim Vanhaverbeke
Open innovation — the ability of a company to source knowledge from other organisations and to find external routes to market its own unused knowledge — is rapidly expanding as a management practice around the globe.
The concept will further gain popularity, but has to date been mainly applied in the context of large manufacturing companies such as P&G, Xerox, Philips and Google. Open innovation is equally applicable to services: such as, the success of Amazon and Spanish bank BBVA. But its application range is much broader than originally thought: several companies, in the fast moving consumer goods sector, do not only collaborate on technology, but build profitable new businesses by combining their own assets with complementary assets of their partners including brands, access to suppliers and route to markets. This extended version of open innovation is still unexplored by most companies.
Finally, companies can apply open innovation, be it in an indirect way, to commodity markets: this requires a broadening of the scope, from technical knowledge to all possible strategic drivers in an industry.
Open innovation (OI) can be very rewarding in terms of increasing competitiveness and financial performance. Yet, while the benefits of open innovation are often well understood by managers, many companies fail to implement it. The root cause of this phenomenon is that firms are required to change their strategy and internal organisational structure and processes to co-operate successfully with innovation partners.
Many organisations are reaching out to external partners without the necessary changes in internal organisation and management. To date, the management problems companies face when implementing OI have been insufficiently documented and accounts remain few.
There is an urgent need to understand how companies can be optimally prepared to implement OI successfully. Critical elements that have to be better understood are:
– How to connect OI to a firm’s strategy?
– What is the role of organisational structure, processes and culture and of the top management?
– How to reconsider the role of the human resources and legal departments?
– How should intellectual property strategies be aligned with the needs of open innovation?
– How to make effective use of OI services providers and intermediaries?
– How to measure the impact of open innovation, and how to move from closed to open innovation?
In other words, a firm has to change a lot internally if it is to be successful in partnering with others.
Prof Wim Vanhaverbeke is a professor at the University of Hasselt. He is also visiting professor at ESADE Business School and the National University of Singapore