Innovation is Better When It is Open

7 min readJun 27, 2023

Have you come across one of those competitions that companies put up today? You know the one, where they invite people to develop a better code/algo, build a better version of a product, or even come up with an exciting idea/direction for the company to go in. These contests usually attract substantial prizes, and glory, of course, to the winners. And for the company? It gives it a large pool of ideas, opportunities, and possibly breakthroughs.

This is an example of what open innovation looks like.

What is Open Innovation?

Innovation is a common term, one that you are likely to run into in most professional/business environments. However, the task of improving how things are done, has largely been a closed process in most organizations. It is a very tidy procedure, perhaps cordoned off in particular offices, left in the charge of someone whose job title shows they are the Innovation Baddie. Again, it is closed, and because of that, limited.

Open Innovation then says “perhaps, we would be much better off if we opened up a bit, and looked outside of ourselves for innovation”. Here are two definitions of the term that can help you better understand what it means;

A business management model for innovation that promotes collaboration with people and organizations outside the company.
A business practice to source ideas and solutions from a broad diversity of individuals and organizations to drive innovation. — Enmotive

Why is Open Innovation Important?

One of the things you learn in business is that no organization possesses all the resources it requires to make production/value creation possible. That is why businesses have partners who perform various roles such as supplying key materials, or performing certain functions that are outsourced to them.

In the way that businesses cannot possess all resources in-house, the nature of the 21st century economy means that any business looking to innovate and multiply the value it creates limits itself by looking only within when it works to do so. This is why opening up innovation is important; because it allows organizations to tap into value they might not have in-house, and create better products and services, that are essentially co-created, and which inevitably meet the needs of the market they are serving.

On the other hand, for “Outside Innovators”, it gives them an opportunity to contribute to making products and services in industries/sectors that are interested in working better for them and others. It also gives them valuable experience (depending on their level of involvement), and a sense of ownership, which is essential for building a community around the organization and its value.

Collaboration is extremely important today, and our understanding of it must expand to include the various kinds of collaborators that are available, and the values, insights and perspectives they can bring to the table, if only they are offered a seat.

More on why OI is Beneficial

Speaking of Open, Wikipedia is one of the hallmarks of collaboration in today’s world, and it shows how knowledge can be produced by creating a platform where individuals can contribute their own piece of the puzzle to create an enlightening picture. Wiki’s article on Open Innovation, lists these as the key benefits of the process/model of doing innovation:

Reduced cost of conducting research and development
Potential for improvement in development productivity
Incorporation of customers early in the development process
Increase in accuracy for market research and customer targeting
Improve the performance in planning and delivering projects[10]
Potential for synergism between internal and external innovations
Potential for viral marketing
Enhanced digital transformation
Potential for completely new business models
Leveraging of innovation ecosystems

How You Can Open up Innovation in Your Organization

Open Innovation does not take innovation away from the organization. It instead means that internal efforts focus on producing knowledge that cannot be found outside the firm and finding/making use of what exists externally, integrating both the internally and externally sourced into innovation efforts. There are a number of models and approaches that organizations can employ to open up innovation, from as basic as looking outwards for knowledge (requiring minimal interaction with outside sources) to building platforms that bring together and connect them with individuals and organizations (academia, industry scientists, companies etc.) who can contribute their knowledge and capabilities to its efforts.

One company seen as a model of how OI can be done is Procter and Gamble. P&G established “Connect and Develop”, a platform which it uses to “partner with the world’s most innovative minds — from individual inventors and small businesses, to Fortune 500 companies — to deliver on the company’s most challenging opportunities.”

C&D is the company’s way of connecting with external innovators and patent-holders across areas like products, technology, and e-commerce. It has recorded notable successes from it, including 50% of its innovations coming from outside and a 60% increase in the productivity of its R&D efforts. The C&D website publishes areas of current needs at the company, inviting submissions for those who want to take them on.

An organization’s approach to OI depends on its needs, capacity, and the availability of knowledge/talent in the external environment. Some might simply require Knowledge Transfer Partnerships with specific organizations because of their relevance to its work, some might see idea competitions as the best approach (especially when they are seeking to solve a time-sensitive problem, and boost engagement with the external community), and others might call on customers to become a part of the product development process in order to integrate their insights. There are therefore a number of approaches/avenues that companies can either establish or take advantage of existing ones to meet their goals;

Idea competitions
Customer Immersions
Innovation Networks
Knowledge Transfer Partnerships

An important dimension of OI that is emerging is that of intermediating the process. This refers to organizations or individuals that serve to connect innovators to each/one another. Think of it in the way that there are job matching platforms where demand for talent and the supply of it are linked to each other. Innovation intermediaries serve as brokers, who understand the environment in which they are operating (emphasis on players, their capabilities and needs), use this knowledge and their position to match supply and demand.

Learning from Exponential Organizations

Michael Malone, Salim Ismail, and Yuri van Gees’ study of exponential organizations highlights key elements that they identify as being responsible for the companies’ growth and impact: SCALE and IDEAs.

Some of these elements can be adapted to directing OI efforts, even for companies that are not aiming to be exponential. They are Community and Crowd, Engagement, and IDEAS.

ExO: an organization whose impact or output is disproportionately large — at least 10 times larger — compared to its peers because of new organizational techniques that leverage accelerating technologies

This is because OI requires that organizations engage an external community, whether it is just a few organizations, or a large group of technical experts (e.g. data scientists). However, this is just a beginning point, because a key part of the process is being able to manage the contributions coming from the external environment, filter through them, and apply what is most relevant to creating better and viable products, as well as improving the organization’s processes.

Interfaces are the aspect of the system that will enable filtering
Dashboards are technologies that allow us to track the progress of the process, and make the data/information available to internal stakeholders
Experiments are the embodiment of what we do with the inputs (knowledge et al), we receive. This means trying out the most relevant to see what works, and constantly improving as we go along
Autonomy refers to the nature of OI, in the sense that those who are closest to the process of innovation internally are not rendered inflexible by the organization’s structure or culture, and instead are enabled by one which gives them some form of autonomy over the process
Finally, social technologies are the vehicles of engagement. They allow us to connect with people and organizations around the world, to invite them into the process, and to keep lines of communication open.

Outside-In, Inside-Out

Henry Chedbrough is a professor at UC Berkeley, who is also credited with originating the concept of OI. He explains two models at work; Outside-In, and Inside-Out. His definition of what OI points towards these models: the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.

OI is therefore not just about information coming into the organization, it is also about the organization sending out information to boost innovation outside itself, in the external environment. In the latter case, what the organization sends out is referred to as un- and under-utilized ideas and technologies. These are the things which might not be very valuable to the organization, or central to its business model/operations, but which can be so to others. It is therefore to be seen as a process where organizations are not only benefiting from the environment, but are also contributing to it.

Open innovation is therefore a concept that encompasses both the inflow and outflow of ideas and knowledge. It involves the sharing and collaboration of ideas and technologies between organizations and individuals, both from external sources coming in and from internal sources going out. It is about leveraging external knowledge and resources to enhance an organization’s innovation capabilities while also allowing the organization to contribute its own ideas and technologies to external partners or the broader innovation ecosystem.