Organizations innovate better by embracing outside knowledge

A change in organizational mindset is required to integrate external knowledge successfully.

Open innovation (OI) is an organizational strategy that integrates external knowledge to promote innovation. But organizations can find it hard to keep up momentum after the introduction of an initial OI initiative. In a new study, researchers found that fostering certain routines and structures can encourage the systematic use of OI post pilot-stage.

We spoke to one of the study’s authors, Frank Piller of Aachen University, about the work.

ResearchGate: How do you define open innovation?

Frank Piller: Open innovation (OI) is a strategy in innovation management for integrating external knowledge into the innovation process. In our understanding, we especially focus on the inputs of "unobvious others" – input from people and organizations normally not in the awareness set of the company. This also is what makes OI different to conventional forms of collaboration for innovation, like contract research or R&D alliances, which normally involve people or organizations from your close network or industry.

The challenge, then, of course is how to find these "unobvious others" who have relevant knowledge for your innovation process but who are not known to you.? For this, crowdsourcing on dedicated OI platforms has come up as an efficient mechanism. These platforms match companies with R&D challenges with a large network of potential solution providers.

 

“Firms could solve problems in a couple of weeks that they previously tried to solve internally for years.”


 

RG: What motivated this study?

Piller: We have broad evidence that this kind of open innovation creates large value for the firm, that is, if the right problem is selected and positioned on the right OI platform. Often, via this crowdsourcing process, firms could solve problems in a couple of weeks that they previously tried to solve internally for years. There has been lots of research providing evidence for this. The core reason for this efficiency is that you – instead of seeing the solution – are sharing the problem as wide as possible, so that people who already have a solution can self-identify themselves and share (sell, out-license) their solution.

However, we also realized that there is more to successful implementation of OI in an established company than just sharing your innovation problem on an OI platform: How to select the right challenges? How to handle IP? How to set incentives for the external contributors? And so on … Hence, the motivation of our study was to provide a full picture of what innovating companies have to do to implement OI into their R&D process.

RG: Can you explain the preconditions and phases of change that companies need to go through for open innovation to happen successfully?

Piller: By investigating 756 organizations that used the services of the largest OI platform for technical challenges (NineSigma, based in Cleveland, OH), we found that companies that are successful in this area go through three stages from being an "OI novice" to becoming an "OI Pro":

First, they have to acknowledge that "not all the smart people work for us". This means, they have to get into the mindset of reaching out for outside help. Often, this comes about as a ?bottom-up initiative from a desperate researcher seeking a novel way to solve a given problem, not a top down process

Second, our findings indicate that companies then, after one initial comment, start to rely on support from OI intermediaries to reduce the cost of searching for new external partners. These brokers allow clients to access their experience and use their networks without the need for larger organizational changes. This can allow a company to see the benefits of OI before it embarks on the hard process of transformation.

 

“Companies need to build informal structures that support the development of an open culture free from “not invented here” syndrome”


 

Finally, companies build more formalized structures to utilize OI in a systematic way. They establish OI departments that make the OI process part of their standard research infrastructure. Some then also establish their own OI platforms to have full control of the process.

Along the entire process, it is critical to build trust in openness within the organization. Companies need to build informal structures that support the development of an open culture free from “not invented here” syndrome! And this, perhaps, is often the hardest part.

RG: Do you have an example of a company that mastered open innovation, what was their key to success?

Piller: There are many examples of large-scale successful open innovation in the pharma industry. Bayer, for example, has gone through exactly the process I described before, starting with a few initiatives on platforms like InnoCentive, Yet2Com, and NineSigma, to establishing their own platforms,seeking for innovative inputs at the early stages of the drug development process. They recently even started crowdsourcing for process innovation in their manufacturing system.

RG: What are your key recommendations for managers on the journey to open innovation?

Piller: I would ask them to consider three things:

First, don’t see OI as a cure for every one of your innovation problems. There are also different forms of OI, so you should know the differences – and especially know which are the problems that you should really solve internally. Akzo Nobel, the chemical company, is a great example here. They have a dedicated decision tree to allocate technical challenges to different governance forms of problem solving.

Second, develop an internal culture of openness. OI also means to bridge between different functions and divisions. Siemens, with its so-called TechnoWeb, has one of the best internal OI platforms, where developers help each other with challenges across divisions. At the same time, develop your incentive structure further. When you only reward your developers for their own patent portfolio, they will not reach out to external organizations to implement their developments!

Third, implement structures and responsibilities. OI does not happen and especially does not scale as a side project. If you want to take this seriously, you need a budget and the organizational capacity for this!

RG: What’s next for open innovation research?

Piller: We need to focus more on the solution providers. Up to now, we and our colleagues have primarily studied the "seekers", i.e. the companies seeking external input.

But we also need understand the motives and value drivers of the "solvers" better, i.e. contributors of the solutions. OI is in fact the underlying principle of many digital business models. Consider the App store of your smart phone. In the end, this is a huge OI platform orchestrated by the app store provider. There is therefore a large upcoming stream of research aiming to better design these digital platforms which are currently evolving for all kinds of products in many industries.

Photo by?Fabrizio Verrecchia?on?Unsplash.
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