Open Innovation: The Key to Competitiveness
Author: Andrea Hidalgo
Open Innovation Expert @Kruger
We must face the challenges that the current health crisis has left to organizations, which have identified it as a threat to their business models due to the abrupt change in consumer's behavior and needs. Being paralyzed in this new reality will cause organizations to have a lack of competitiveness and therefore a lower market share, which will provoke large economic losses in the short and medium-term, the only tool that will allow better adaptability today and in the future is innovation.
Nowadays, organizations not only have the opportunity to innovate, they are forced to do it. Although no one could foresee the challenges of the actual crisis, it is possible to get ahead of the changes that will be generated from it.
In business, innovation is the change that modifies existing elements of the organization in order to improve them or create new ones.
So, what is Open Innovation and why is it necessary?
The term “Open Innovation” is attributed to Henry Chesbrough (2003), who defined it as a concept of the Innovation process where organizations bring in ideas from external agents into their innovation process and they extract internal ideas so that others in the market can make use of them. This concept has become very popular due to the fact that it allows interaction between multidisciplinary teams made up by different hierarchical levels and ecosystem actors such as: providers, research institutions, governmental institutions, clients and academy, in order to satisfy the needs of the organization and its Stakeholders.
Figure 1. Model of Open Innovation. Source: https://www.sieca.int/index.php/programa-de-innovacion-abierta/innovacion-abierta-apuesta-estrategica
Open Innovation Strategy
The first step to applying open innovation inside organizations is to face these challenges:
• Strategic: define the scope of the project, alliances and opportunity costs. • Structural & Operational: build an effective process for execution, development and implementation of ideas, use the right tools. • Legal: consider legal aspects such as intellectual property rights and terms and conditions. • Cultural: resistance to change, lack of commitment and participation, inability to work between areas, reward those who actively participate in the process.
Additionally, to implement an open innovation strategy, it is important to identify the organization's current status and prepare it for change, which is why it is recommended to follow the next steps:
1. Evaluate the business: make an internal and external analysis of the organization or SWOT (1) analysis to define clear strategic objectives. What R&D&I (2) resources do we currently have? 2. Understand new trends in our market, its needs, consumers, end-users, stakeholders and even competitors. 3. Define the statement of vision and the statement of mission. What is our target market? 4. Make a detailed implementation plan. To accomplish objectives it is important to define which the key ecosystem actors are and strategic alliances that can help us enhance them.
Benefits of Open Innovation
Once finished with open innovation process the organization will be able to obtain the following benefits: cost reduction, less resource waste, major operational efficiency, new opportunities identification, better interaction with the ecosystem, strengthen the company's productive sector, launch new and innovative products and services, make the most out of market data, Robotic Process Automation, Artificial Intelligence, improve customer experience, among others.
A clear success example in, for example, the food and beverage industry is Nestlé’s Open Innovation Platform, HENRi, where the program publishes different business challenges related to product innovation, sustainability, brand campaigns and others, with the aim of requesting ambitious and innovative proposals from startups. HENRi helps to connect internal knowledge in business, expertise and market insights with eager innovators, allowing interaction between both ecosystem actors in order to boost the innovation process.
Innovation is an essential requirement for organizations that want to maintain competitive over time.
References: 1 Strengths, Weakness, Opportunities and Threats 2 Research, Development and Innovation • CREA (2017, June 8). Interview with Henry Chesbrough. • EAE Business School. (2014, September 24). The benefits of Open Innovation (Spanish). Harvard Deusto.
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