Four good reasons to embrace open innovation
When it comes to innovation, two heads are better than one. Here are four key benefits of engaging with external partners to co-create value and accelerate solutions to market.
From Thomas Edison to Nikola Tesla, stories abound of lone inventors changing the world. But times have changed—the pace of disruption is much faster in our technology-laden age. To keep up, working alone or in silos is no longer enough.
Today, new technologies, products and services are created by multidisciplinary groups of thinkers and doers. While companies have traditionally relied on internal expertise to achieve their innovation goals, many are beginning to recognise the value of looking beyond their four walls for talent and fresh perspectives.
Open innovation is thus becoming a favoured mode of operations in corporations big and small, whereby collaboration with external partners is the norm. By bringing people and ideas together, companies have the potential to leapfrog the competition and sustain growth in the long term. We feature here four rewards of open innovation that any business can reap.
1. Share the load, divide the spoils
Different companies have different appetites for risk. The amount of resources at their disposal may also vary widely. Because innovation often involves an experimental phase where the chance of failure and the cost of trial and error is high, business owners may be hesitant to even initiate the process of innovation.
Fortunately, the challenges of risks and cost are not insurmountable—they only represent the internal constraints of a company. Rather than bear the risks of innovation alone, enterprises can seek out industry players that share their pain points to cooperate on exploratory projects aimed at addressing specific problems.
Not only does collaboration divide the risk of experimentation among participating stakeholders, it also opens up more financing options for carrying out research and development. This in turn provides a longer runway for the development of robust and relevant solutions. In this context, open innovation among companies can be viewed as co-investment in the future.
2. Tap into the hive mind
Businesses may have all the expertise they need to run day-to-day operations, but they tend to struggle when it comes to generating ideas and tackling emerging problems. Often, the lack of knowledge and skills in specific technical domains is a major hindrance to a company’s efforts at improving processes or creating new products and services.
To overcome this problem, a company may choose to hire individuals with the necessary skillsets. However, this method can be costly and time-consuming. Taking an open innovation approach, a more efficient strategy would be for the company to enlist the help of a separate firm that has prior experience and know-how in the desired fields.
Knowledge transfer from an external source can be immensely useful in implementing solutions that augment an existing value chain. Often, this will entail brainstorming and iteration with input from the various parties involved. The mutual learning that takes place also goes a long way in keeping employees engaged, which makes for a more productive environment and may result in the creation of new intellectual property (IP).
3. Address the need for speed
Time is of the essence in a competitive business landscape. Companies are locked in a relentless race to regularly put out new products or services—or improve on existing ones—to retain or grow their market share. Under such circumstances, innovation is an existential element and a key differentiator.
Nonetheless, the gestation period from concept to invention can take months or even years, depending on the industry and the complexity of the end-product. Rather than innovate from scratch, a company can shorten the time-to-market for novel offerings by seeking out technologies developed at other firms that synergise with its capabilities and are aligned with its innovation goals.
This approach usually entails working out licensing agreements for patents or other forms of IP. Compared to de novo research and development, the in-licensing of IP is much more rapid and flexible.
4. Build strong networks
New and better products and services are just the easily-quantifiable outcomes of open innovation. Another less tangible but significant upside of innovating with external partners is access to their business networks.
In the process of collaboration, opportunities may arise to interact with other entrepreneurs and business owners, either locally or abroad. Leveraging these connections, companies may find it easier to venture into new markets. Additionally, any IP that was co-developed could become strategic assets when they are out-licensed to other firms in the extended network.
Open innovation thus creates a domino effect, paving the way for further partnerships and future revenue streams. If you are a business owner seeking innovation partners to unlock these rewards of open innovation, reach out to IPI today.