Introduction to Open Innovation Model

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Innovation,

POSTED

December 10, 2021

The open innovation model first came into light in 2003 when Henry Chesbrough introduced it to the world. Chesbrough felt the need to diversify knowledge and perspectives within a firm and use this to help innovate new dynamics. This model brought a unique stir in firms and companies, and the vibrations of the stir still reside in the worldwide market.

What is an Open Innovation Model?

An open innovation model is a model for the company's business management that promotes innovation and collaboration with other companies and individuals. This collaboration helps to break the fixed mindset of the employees in that company and invites talented individuals there.

A company can implement open innovation practices through communication methods like collaborating with two or more companies, organizing research chairs in universities and colleges, exhibiting crowdsourcing competitions and innovation ecosystems.

Companies like Samsung, Lego, Quirky, Mozilla, Facebook, and many more have already laid down amazing examples of open innovations that companies and firms can refer to for inspiration.

Types of Open Innovations

Globally, there are two types of open innovations:

Inbound Open Innovation

Inbound open innovation is when a company uses external sources and expertise to create, select, acquire, and internalize ideas. The company analyzes ideas and perspectives from its external environment and modifies them as per their requirements.

Outbound Open Innovation

Outbound open innovation is when a company uses joint ventures and spin-offs to publicize its internal ideas for external sources to analyze and use. When a company feels that its internal ideas may be of no use to them, it practices outbound open innovation.

Advantages of Open Innovation Models over Closed Innovation Models

Before understanding the advantages of open innovation, you should know the structure of a closed innovation model and the issues they face.

A closed innovation model does not allow the interference of external ideology and perspectives while developing products and services. The companies that follow closed innovation models prioritize the number of projects they initiated, the volume of resources they own and have generated, and how much they have invested in innovation. Such companies own big research departments to generate more internal ideas.

Companies following the closed innovation models often face repetitive issues like incomplete internal technical knowledge, ideas not reaching the market, and not changing resources and budgets. The speed of innovation is quite low as the ideas need a lot of rework internally, which, in turn, creates a low productivity rate. All these factors lead to a low success rate of 20-30%.

Advantages

The basic advantage of open innovation is that the companies practicing this model get in touch with external sources, which help them understand the technical inventions and trends from a different perspective. Such companies may have smaller research departments, but the quality of ideas generated in them is far better.

Since companies following the open innovation model use both internal and external knowledge, the innovation and productivity rates increase exponentially, making the success rate soar. Stats show that 50.4% of companies have realized that technology disruption has a positive impact on them.

However, companies should ensure that they have control over what information to share and publicize. Revealing crucial information may lead to losses. Also, there should be a proper way to utilize external information, or else there may be problems with the internal perspectives.

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