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It’s no longer viable to innovate in a closed circuit! Like P&G, Google, and Boeing, more and more companies are recognizing the need to seek new ideas beyond their borders and are thus opening their innovation processes to outside communities (e.g., researchers, suppliers, consumers). How do they do it?

The company must take leadership on joint initiatives without getting in the way!

Open innovation in three parts
• Realize the benefits of open innovation: increase innovation capacity; better understand market and client needs; optimize marketing campaigns.
• Lift internal barriers: To prepare for open innovation, first prepare in-house. Only companies that already practice cross-fertilization internally will know how to take advantage of outside exchanges.
• Open yourself to the outside without giving up all control: Opening the floodgates of the innovation process is possible only if the company develops mechanisms to lead, motivate, and sometimes restrict its interactions with external innovators.

Organize your co-developers: collaborative communities or competitive markets?
• Collaborative communities encourage transparency, joint development, and sharing of information and intellectual property (e.g., Linux open source software)
•In a competitive market, external parties separately develop different solutions, and the “client” company chooses between them (e.g., InnoCentive.com)

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How to Drive Open Innovation

Business Digest no. 219, September 2011.

Based on “Three Paths to Open Innovation” by Barry Jaruzelski and Richard Holman (Booz & Company, May 2011), “The Next Step in Open Innovation” by Jacques Bughin, Michael Chui, and Brad Johnson (McKinsey Quarterly, June 2008), and “How to Manage Outside Innovation” by Kevin J. Boudreau and Karim R. Lakhani (MIT Sloan Management Review, summer 2009).