Open innovation: The good, the bad and the ugly

Open innovation: The good, the bad and the ugly

While attending the International Society of Professional Innovation Management (ISPIM) conference in Budapest a few weeks ago, I noticed that open innovation was the hottest topic. As I listened to the various presentations, it dawned on me why I have always felt lukewarm about this innovation approach: open innovation has a good, a bad and a truly ugly side that is a well-kept secret.

What is open innovation?

In a nutshell, open innovation is a collaborative approach to innovation where internal ideas are supported by external ideas from outside innovation partners: scientists and research labs, consultants and think tanks, students and academics, or anyone else who takes a liking to a particular innovation challenge. Henry Chesbrough, a professor who popularised open innovation roughly a decade ago in a best-selling book of the same name, summarises the concept as follows: "Open innovation means that valuable ideas can come from inside or outside the company and can go to market from inside or outside the company as well."

How does open innovation work?

One of the more popular ways to practise open innovation is an organisation poses an open innovation competition via the internet to the general public. The host organisation may engage the services of an open innovation service or platform provider to facilitate the process and connects it to external innovation resources. Then, the external collaborators work out and submit their solutions for review before a winner is chosen and implemented.

What's good about open innovation?

Nowadays, more and more large corporations rely on open innovation as an important pillar of their overall innovation strategy and for a good reason: it is a comparatively cheap way to reach out to external collaborators and to widen their overall idea pool. In particular, open innovation offers organisations a promising way to break out of the narrow tunnel of expertise and conventional thinking in which most internal ideas typically reside, and to tap into a wider external idea pool that tends to include more unusual, interesting and even "wild" ideas that uninhibited outsiders are more prone to come up with.

What's bad about open innovation?

For one, open innovation lacks intimate human interaction, fun and energy because it largely relies on a technology-driven and technocratically managed process. While this approach may well suit the more introverted and geeky thinkers, open innovation tends to quickly lose its appeal to all those creative types whose personality is more outgoing, interpersonal and human-centred.

Second, the technocratic nature of open innovation works well for scientific and technological innovation challenges. But it seems to be less of a fit when an organisation wants to pursue human-centred and consumer-focused innovation projects, where it's important to empathise with consumers and to uncover unmet — and maybe even unnoticed — consumer wants and needs.

Third, internal innovation resources typically have to implement a winning solution of an external open innovation partner — and they may not always wholeheartedly believe in and support the idea.

What's the ugly, well-kept secret of open innovation?

Open innovation seems like a win-win-win proposition:

For comparatively small money and efforts, open innovation lets large corporations win big by insourcing a large pool of external ideas for an innovation challenge that they have put forth, and to then exploit all these ideas for their profit.

Open innovation intermediaries (service- or platform-providers) win nicely from the practice too, by generating profitable fee income that builds up the valuation of their firm.

Finally, open innovation is a small win for one or a few external idea contributors who receive a monetary reward for the winning idea entries.

So who are the losers? All those contributors who submit non-winning entries for an open innovation challenge and never get fairly compensated for their solution development efforts. Open innovation seems to knowingly play on a survivorship bias, concentrating on those people who "survived" the process.

Conclusion

Open innovation is a viable channel for corporations to source external ideas for their innovation challenges, and seems to be particularly suited for resolving tough technical or scientific challenges. Idea-seeking organisations can cheaply insource meaningful, profit-margin-boosting solutions while sharing only a tiny fraction of the upside of a winning idea entry with one or a few "survivors" of the open innovation selection process. But unless its ugly side is addressed and collaborators with "non-winning" idea entries also get an adequate compensation for their work efforts, open innovation is likely to run out of steam as a popular management fads that busied managers and made a few consultants and service providers rich.


Dr Detlef Reis is the founding director and chief ideator of Thinkergy Ltd (Thinkegy.com), an ideation and innovation company in Asia, a lecturer in business creativity and innovation leadership at Mahidol University's College of Management (www.cmmu.mahidol.ac.th) and an adjunct associate professor at Hong Kong Baptist University. He can be reached at dr.d@thinkergy.com


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