“Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. [This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology.” (Henry Chesbrough, 2006)
Open innovation (OI) uses a mix of approaches, thereby affording higher responsiveness and flexibility while trying to grow beyond its core business. The free flow, in and out, of ideas and IP promotes innovative ecosystems. The confluence of diverse ideologies and technologies help build better business models that are sustainable in the long term. At lower risk and often lower costs, companies can use this strategic tool to explore new opportunities for growth.
Source: Henry Chesbrough, 2003
Why does open innovation work? It works because the concept relies on collaboration and mutually beneficial partnerships. When companies leverage the power of brilliant minds everywhere, success can’t be far behind.
Organizations world over have employed this innovation model fruitfully for years now. Let’s look at some companies who have driven immediate successes, engaging employees effectively, responding fast to cost pressures, shortening the time-to-market, and showing a significant rate of innovation.
The company recently launched Deloitte Pixel, a worldwide enterprise crowdsourcing offering. “Using Pixel, we have been able to take new ideas to the crowd in the form of challenges and then collaborate with clients to evaluate and incorporate those ideas to accelerate our effort and our clients’ results. And, our clients have been absolutely blown away by the speed and quality of what we’ve done,” says Richard Walker, Principal, Deloitte Consulting. Pixel will make full use of the power of crowdsourcing to solve a specific problem statement, which is broken down into “pixels,” faster and more efficiently. Deloitte, a business advisory firm, is working with top crowdsourcing vendors to ensure the approach delivers on its promise.
Also, Deloitte announced a partnership with McLaren Applied Technologies in mid-2017. The collaboration for data-driven products is expected to deliver over one billion euros in annual client benefits by 2022. Deloitte uses its expertise in various industries to connect the dots between innovative technologies or approaches and companies. For example, Deloitte has formed the Innovation Partnership Program, “a unique innovation initiative and community that helps business leaders harness the power of disruptive technology and the wisdom of crowds” with XPRIZE and Singularity University. Deloitte also has several Innovation Centers to tackle issues in various sectors.
The world’s largest networking company has Innovation Centers around the world which are open innovation hubs to help explore and develop new technologies by “bringing together communities of customers, partners, start-ups, accelerators, governments, universities and research groups.” In 2014, Cisco Entrepreneurs in Residence, a startup innovation program, was launched to embrace “openness” and transform the IoT/IoE and Big Data spaces.
Rick Tywoniak, senior director of Cisco's DevNet Community, believes collaboration with startups is the cornerstone of innovation strategy if Cisco must compete and thrive. DevNet contains APIs from Cisco’s many technologies, a sandbox, learning labs, and a community for sharing.
“The days of proprietary software or hardware are going by the wayside, and Cisco is part of that trend that sees the value in opening up your software to third-party companies because that's what going to keep your product line innovative to others. We can't do all that innovation ourselves – it's not possible. Having a vibrant ecosystem to develop the innovation on top of our platforms makes them that much more valuable," says Tywoniak. Cisco’s approach also relies on direct acquisitions and accelerators.
Cisco is also partnering with companies such as Apple and Ericsson to innovate better.
A frontrunner in the sphere of open innovation, GE’s many initiatives exemplify the importance of crowdsourcing and collaboration to create immense value. GENIUSLINK crowdsources breakthrough ideas from experts to solve the hardest of challenges across industries.
GE, a leading digital industrial company, has slowly but surely moved away from traditional closed innovation systems to collaborative open models. GE's FirstBuild (a maker community) is an online and physical community which brings together designers, engineers, builders, and selling the next generation of major home appliances.” This co-creation platform has met with much success with 15 products on the shelf and nearly 500 prototypes. (Check out the idea generation and project roadmaps here.)
We will discuss a few more companies that bet big on open innovation in our follow-up article.