Implementing open innovation in your business is not an easy task. It might be straightforward, but it is not easy.
Open innovation is a relatively new concept that’s only existed for around 20 years. As innovation leaders, we need to establish the foundations for open innovation, do the groundwork, learn from our own and others’ mistakes, and iterate along the way.
So, if you decide that open innovation is the way to go, be prepared for some challenges along the way.
Let's review the four most common challenges and assess how companies can overcome them.
The first perceived barrier to open innovation is the potential "threat" of IPR (intellectual property rights). This fear exists because collaboration with external stakeholders might seem to be at odds with the purpose of intellectual property (IP) management to protect and provide exclusive control over certain ideas.
This issue is commonly voiced as:
As it turns out, however, the strategic use of IP can enhance open innovation returns instead of crippling them. When companies let go of a reactive, protective perspective about IP and, instead, lower the barriers for external stakeholders to work with their IP, the returns can quickly outweigh the benefits of ownership.
And since innovation relates not just to products but also to services and business models, IP might not be an issue at all. Some companies will be more interested in developing relationships than acquiring IP and will therefore find a way to deal with it.
While engaging in open innovation can lead to some "spillovers”, notably knowledge and information being transmitted to unwanted channels, focusing too much on IP can impede valuable collaborations with startups or SMEs.
Recognizing the significant benefits of open innovation, more organizations are simplifying their IP agreements and setting basic rules for collaboration.
The IP "threat" is often linked to both the maturity of a company's IP department and the experience and expertise of its managers. In other words, companies whose IP departments and leaders do not understand the many types of disclosure and sharing that can be used in an open innovation project are more likely to block open innovation efforts from the outset.
To overcome this issue, companies can provide advice and training to the key personnel and departments involved in IP management. To minimize the risk of unwanted spillovers, they can also promote controlled and case-dependent IP sharing and involve IP specialists in new product development decisions early on.
Companies should also regularly train relevant stakeholders on the IP matters that arise during collaboration and take a long-term view on managing their IP portfolios.
Intellectual property still offers several benefits: IP provides plenty of details on new solutions, is easily transferable, and provides confidence that ideas will not be misappropriated.
Companies can successfully engage in open innovation by creating an IP strategy that is fully in line with their innovation strategy.
The IP strategy should consider the organization’s technological environment as well as its knowledge distribution.
This means that in turbulent times (when knowledge is dispersed), giving away IP is a good strategy.
When waters are calm (and knowledge is owned by only a few), straightforward agreements such as licensing or acquiring knowledge might be the best approach.
Key takeaways
The second challenge, and closely related to the first, is the fear that the open innovation process cannot be easily closed or is difficult to disassemble – from both an IP and partnership perspective.
This fear is typically voiced as:
Some management scholars call this the "IP disassembly problem" and define it as the process by which organizations decrease their overall openness in innovation. Instead of open innovation, organizations might choose to devote more resources to internal R&D. Operational concerns could also result in organizations leaving, terminating, or canceling existing open innovation initiatives.
Terminating in-house R&D projects is noticeably different from terminating R&D with many partners. The stakes are certainly higher and the ripple effects of ceasing to collaborate are stronger, especially in networks and ecosystems.
In other words, when resource integration between open innovation partners runs deep, allocating IP rights at the closure of an open innovation project, or when one or more of the vital players leave the project, can be problematic.
Even the most experienced companies should orchestrate only part of their innovation activities with outside stakeholders, and typically with preferred partners, in order to limit the threat of any disassembly problems.
Less-experienced companies should experiment with open innovation only on occasion and should typically do so in a highly controlled environment – for example, via a crowdsourcing exercise or a one-off ideas campaign. This approach should avoid any operational concerns related to open innovation.
Additionally, companies can also factor in some flexibility and orchestrate relationships by designing mutually beneficial IP agreements that partners can adhere to (or withdraw from) over time.
At IMEC, an international R&D and innovation hub specializing in nanoelectronics, the partners are given several options from the outset. For example, the orchestrator ensures that IMEC members receive maximal access or co-own the IP created within the innovation ecosystem. They also enable members to reap the full benefits of joint research, while only having to carry out and pay for part of it.
In addition, partners can carry out proprietary joint research with multiple parties in parallel. This flexibility ensures that there is never a true disassembly. Instead, the partners engage in continuous renegotiation of their boundaries and needs.
Key takeaways
Once organizations are engaged in open innovation campaigns with third parties and start to research potentially unknown communities of experts and users, some will find themselves unprepared or unable to analyze and process the information they obtain.
This experience might prevent them from further experimentation.
This issue is typically voiced as:
While chasing new products, services, or business model ideas, many organizations mistakenly believe they must survey or involve every stakeholder group. In reality, successful open innovation is a matter of being selective and focused, finding and motivating the right audience.
While some situations may come with a certain level of complexity, in most cases, companies can be selective about their audience and, through this, control the ideation process closely.
One of the most common mistakes companies make as they engage in open innovation is to assume that the process will be identical to a closed (internal) innovation project. However, the two require different skill sets, especially in terms of communication style, incentives, motivation, and analysis of the input and data received.
First, set your expectations — what's the desired outcome? How much of the required input can your team realistically manage?
Next, look at your experience with internal innovation management and adjust it according to the factors relevant to open innovation. Limit the audience to a group that likely holds the answers to the questions you want to ask. Make the group as diverse as possible, but don't over-invite.
When the audience and goal are adequately aligned, scale in the sense of "numbers of participants" and the resulting level of input will seem less daunting than it may have appeared at first.
UC San Diego is a great example of how to successfully engage 60,000 people across a large university campus through continuous experimentation and learning. You can read the full case study here.
When entirely inexperienced, organizations should build up their confidence and capacity by engaging well-known partners, like suppliers, for example. As a next step, they can move on to less well-known partners, such as start-ups, universities, and eventually even the public.
A great example is the collaboration between Baxi Heating and Coventry University to help to reduce energy poverty. By partnering with a trusted and culturally compatible collaborator, Baxi successfully generated a new business model and eventually engaged in co-creation.
Finally, utilize technology. A good open innovation platform helps to streamline most of the daunting processes. It helps organizations to easily manage their audience, become more transparent, coordinate the selection and evaluation of ideas.
Importantly, open innovation software also stores all the knowledge obtained through open innovation for future reference.
Key takeaways:
Miscommunication is another widespread challenge for companies, especially among networks and ecosystems.
Open innovation can (and often does) mean different things to different stakeholders and to different groups within the same organization. For example, in innovation ecosystems, each stakeholder will have their own role and incentive and contribute differently to open innovation and value creation.
Success also strongly depends on a company's innovation "engine." That could be sales and marketing, R&D, finance, legal, or procurement. Unless an orchestrator or a common code of conduct (i.e., the corporate culture) explains the benefits and scope of open innovation, different groups might refuse to collaborate.
For example, co-developing a new product with suppliers might seem like an excellent initiative for marketing but poses a potential threat to R&D or the legal department.
This barrier is typically voiced as:
Good communication around open innovation starts with leaders who both inspire and incentivize others to contribute, as well as a culture that promotes openness and collaboration. Open innovation requires leaders to identify the often-fragmented knowledge around it and to create a comprehensive framework.
By aggregating insights and communicating them broadly, all stakeholders will benefit. Additionally, open innovation leaders must find the right route to success. It doesn't always take an expensive open innovation lab. Instead, focusing on more straightforward concepts like training or inspirational keynote speakers may do the trick.
Finally, open innovation leaders must serve as role models. They should use their status to communicate with employees on open innovation topics, actively support them, and reassure employees that open innovation is here to stay.
In terms of culture, open innovation will thrive in a space where new ideas and collaborators are readily accepted and not regarded as a threat. Processes should be flexible enough to meet new conditions and solve new problems, and there should be routines in place to develop new ideas.
Additionally, a culture of open innovation should also give employees the physical space — and the necessary time to collaborate, so top management support is essential.
To avoid a potential identity crisis, it is critical to understand how employees feel by talking about open innovation. In a case study about experimenting with open innovation and crowdsourcing at NASA, Hila Lifshitz-Assaf (a Professor of Management at Warwick Business School and a visiting faculty at Harvard University, at the Lab for Innovation Science) found that NASA engineers who gave open innovation a chance expanded and even reconstructed their professional identity from "problem solvers" to "solutions seekers." Those who failed to dismantle their boundaries, however, remained skeptical about open innovation and tended to block potentially meaningful solutions from being implemented.
Key takeaways: