The concept of ‘open innovation’ is making a significant impact on the ability of organisations and individuals to develop new products and services and create competitive advantages.
Naturally enough, open innovation is usually described by comparison with its opposite - closed innovation. Closed innovation describes the practice of keeping innovation efforts confined within the four walls of an organisation. It is usually described by referring to an industrial company that introduces only those new products developed by employees within its R&D department. In contrast, open innovation is about introducing ‘virtual’ or ‘outsourced’ aspects to how innovation is managed.
Open innovation practices have been promoted by economic trends such as the increased cost of R&D, escalating technological complexity, the increased tendancy for valuable inventive steps to occur at the interface between fields of knowledge (eg bio-informatics, materials-electronics etc etc) and enhanced communication via telecommunications, travel and internet.
Open innovation refers to the practice of drawing together the components of a new product or service from a number of sources, including sources external to the innovating organisation. One of the most memorable statements used when describing open innovation is “not all the smart guys work for us”. That is, it is possible to take advantage of the opportunity to access ’smart guys’ (not employed by you) to help build your business.
There are many and varied means to access the other smart guys. Alternative transaction types you might consider include:
- consultancy
- contract R&D
- technology licensing
- alliance
- joint venture
- acquisition or merger with a business
The result of the transaction is that you have defined rights to make use of some knowledge or intellectual property or capability that you did not have before.
