Open Innovation Defined
What would you guess is the first position of management when you suggest you should license your patents to competitors, share your under-utilized ...
What would you guess is the first position of management when you suggest you should license your patents to competitors, share your under-utilized trade secrets with threatening startups, and investigate the possibilities of collaboration with your cousins in aligned segments?
The likely response is a swift “are you mad?” as the leadership looks at you with that funny expression you expect when you’ve done something which is not quite socially right.
There is, however, an emerging movement in the innovation space called Open Innovation which suggests you do just this.
The thinking is, if you have unused intellectual property or uniqueness, your best economic interests are served by licensing that to competitors who might make use of it, rather than let it sit idle. And, in reverse, if competitors have something of value you need, that you reach some accommodation with them that lets you make use of it .
Open Innovation is one of the ramifications of the Innovation Economy which is based on the premise that competitive advantage derives from how well you use know-how, not what know-how you have. Knowing how to use know-how well in a particular problem space is a hard to replicate capability that requires development, investment, and (more often than not) long and sustained effort. This is why it is a source of competitive advantage.
Open Innovation is currently a very fashionable business model for innovators working in many different sectors. It is especially popular in industries where products do not have very great levels of differentiation, like fast moving consumer goods. It is also well adopted in industries where the products are very differentiated, such as aerospace.
On the other hand, companies that have chosen not to pursue Open Innovation are tending to lag competitors. This is because they are forced to rely only on their own R&D efforts, rather than taking what’s best from industry around them. Failing to share is turning out to be a significant competitive dis-advantage.
Open Innovation is a methodology that innovators are regularly using to create new value in their businesses. To find out how you can use it it too, read James Gardner’s free, online innovation book.