This means innovating in partnership with people outside your organisation, sharing with them the risks and rewards.
Open Innovation usually starts either with:
- a company challenge or brief, around which a marketplace of competitors is developed; or
- a partner network, without a particular need, which is developed into a productive community of collaborators.
Creative solutions, ideas and/or technologies, are typically generated by small suppliers. However, any stakeholder can be a source of innovation: eg universities, investors or customers. These partners then co-develop pilots and the most promising are brought to market through a variety of collaborative business models, such as joint ventures, licensing deals or acquisitions.
Why share risk?
Innovation is risky: fewer than 1% of financed ideas ever make a return.
Innovation is expensive: it can represent 15% of a company’s turnover.
Sharing risk is a good idea because of the cost and the odds against success.
Why share rewards?
A business contract, prize or other reward will encourage more experienced contributors to share their best ideas.
They probably have other good ideas too, so it makes sense to build long-term relationships.
A mature and open innovation strategy can never be about getting something for nothing. Businesses want to keep their reputation so they need to treat people fairly and look for systemic wins.