Open innovation
Open innovation is a way to innovate, create products and services, together with external parties and users – preferably with an unlimited number of actors in an ecosystem. This mode of innovation differs from the traditional one that mainly takes place within the own company, and is often run by a selected innovation group or within an internal innovation lab (garage). It is certainly not news to collaborate outside of one’s own company, and these benefits have been widely described in publications as early as the 1960s. But it is with the opportunity of the information age to connect parties around the world that this will be a real advantage. New digital services are being created at a brisk pace, and the ability to innovate quickly and continuously has become crucial for survival as a company.
Today, less than 10% of R&D projects become successful innovations on the market, so we need lots of ideas and new projects to succeed. In addition, we always need to think outside the box, and our company walls often hold us back from succeeding in both of these aspects. But producing large amounts of ideas is not enough. These must also be tested on real customers and end users. In open innovation, therefore, users are involved throughout the innovation journey so that you do not risk wasting resources, time and opportunities before you even launch the product. The different types of collaboration range from pure ideas to the ecosystem’s evaluation of the ideas to their further development.
The direct benefits of open innovation are many, but most are based on the cross-linking of knowledge and know-how from different industries and business areas, which in their turn opens up new perspectives.
9 advantages of open innovation:
- Among in-house products, most incremental innovations tend to be produced. However, development together with end users and external innovation partners opens up entirely new opportunities and functionalities, and creates new markets. All this increases the likelihood of succeeding in creating radical and disruptive innovations.
- Solutions already successfully used in other areas can be transferred to their own innovation projects. This makes it possible to develop ideas and opportunities that no one else would have thought of.
- Global networking and rapid technology development enable time savings and shorter time-to-market.
- Shared development costs lower cost-to-market.
- Since so many parties with common interests participate in the development, it will be easier and faster to agree on new standards, especially de-facto standards.
- Higher news flow: More innovators from different domains lead to more ideas for innovative products, new distribution channels as well as new business areas and business models.
- Risk minimization: The involvement of innovative customers creates better market-adapted products with greater accuracy, as well as greater and faster market acceptance. This, in turn, leads to simpler and faster market diversification, as the product concept is already known and used by several players – each of which contributes to continued distribution.
- Well-known versus home-made solutions: Consumers hate being locked into supplier dependencies, and nowadays you recognize this at an early stage. Involving customers and external partners throughout the innovation journey ensures that you do not happen to create your own special solutions as there are already well-functioning alternatives out there.
- Third-party solutions built by companies that flock around your innovation will strengthen it and make it more established. The faster you engage the external parties, the faster this effect will be.
Successful examples of open innovation initiatives can be found f.e. in Fiat that used the creative ideas of an open innovation community to develop the Fiat 500 before it was launched on the market. The 170,000 proposals submitted show just how much interest there is in such participation. Other examples include ÖBB Open Innovation Platform, Unilever, InnoCentive, Atizo, Quirky, Open Innovation Platform of the US Federal Government. Historically, the development of the Linux operating system, the encyclopedia Wikipedia, and the entire World Wide Web Consortium (W3C), were some of the first pioneers of very successful applied open innovation.
Despite all the advantages, open innovation is not always the best way forward, for example in projects with extremely high requirements for confidentiality around the technical recipes, manufacturing methods or business model. It can also be difficult to take the world with complete surprise at the time of product launch if you have already shared full transparency of the project during the innovation work. However, both of these opportunities are shrinking to almost zero in a digital world of information exchange, and the only thing that remains in practice is patent protection, before filing the application. Other objections that are often heard are that it costs a lot of time and money to adapt tools and processes, and to build an open society of partners and users who can help with the open innovation. In addition, it can be difficult to convince other companies that they will help your company to innovate, especially without financial compensation or contractual safety nets. Many small businesses are, often rightly, afraid of being engulfed or overrun by the big industry.
The Future Mobility Center (FMC) is a unique new concept tailored to attack all the negative sides and at the same time capture the positive sides of open innovation. The concept has been developed, and is still being refined, by Halmstad University. As the first educational institution in Sweden to make innovation their expertise, they have for decades developed innovation into a science that is also linked to masters education and industrial projects. FMC works on a principle that puts the product in the first place, focusing mainly on the innovation phases “ideation” and “conceptualization”, but can be extended all the way to marketing and operation if a developer group so wishes. The area “mobility” has been specially selected to test the concept together with all the transport-related companies that flock around the vehicle-intensive R&D region in Western Sweden.
Open innovation is the answer to constantly changing market conditions and customer needs. Therefore, in the age of digitalisation, only those companies that master open innovation will have quick access to the broad knowledge that can create better, faster and cheaper solutions than others.
Source: Richard Bunk, PhD Physics, MSc Engineering Physics
Innovation Director – Systems Engineering Combitech AB – SAAB Group
Director of Future Mobility Center – FMC at Halmstad University, Sweden
