Why Open Innovation is Not for Small Companies

It is difficult to find good cases on how smaller companies have engaged with open innovation. It is also difficult to give strong advice on how such companies should engage with open innovation.

I have reflected much on this and I am approaching a conclusion that is slightly provocative: Open innovation is for big companies; not small companies.

Let me provide some reasons for this:

  • Small companies are most often based on one product, service, technology or platform. They are bound to find partners around this in order to prosper let alone survive. This is, however, not open innovation in my mind. This is simply entrepreneurship.
  • Small companies are not big enough to engage with open innovation, which I view as more of a mindset in which they innovate across many types of innovation and business functions. They just don’t have the organizational infrastructure – and need – to engage with open innovation.
  • Small companies have a role to play in open innovation ecosystems, but they get the backseat. The big companies take the driver’s seat. In open innovation, companies either control the projects or they contribute to them. Big companies prefer projects where they are in control whereas smaller companies do not even get a choice unless they have something unique that allows them to run an ecosystem.

These are just some of my reflections on an important topic. It would be great to hear your views on this and also on how you would suggest small companies should embrace open innovation. That would be interesting for a follow-up post on this topic.

  • http://www.teknologisk.dk Louise Hvid Jensen

    Hi Stefan
    I don’t agree – but it might have to do with the definition of open innovation. If open innovation is also about in- and out-licensing inventions and ideas – which I consider to be cornerstones of open innovation – we have a lot of examples from traditional SMEs practicing open innovation at the Danish Technological Institute. Many SMEs just need a little help to orchestra the process. It’s the same observation when it comes to more open and cooperative innovation processes – SMEs have a lot to gain, most of them just need some guiding.

  • PhW

    I agree, that most SME’S can’t engage with open innovation like big companies due to less diversification and R&D resources. But I guess you can’t measure open innovation in SME’s with big company parameters. It might be interesting to define new degrees of commitment to open innovation for SME’s. For example is in my opinion a small company open innovative if it observes open innovative big companies (in their branch) to leverage technologies that fall out of their innovation process. Maybe open innovation for SME’s focuses integration of know-how in later stages and has a smaller fuzzy front end and research phase. The classical funnel-model would in that case change its shape…

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  • http://www.technology-transfer.co.uk Steve Dore

    The majority of small companies lack some of the process’s ,techniques and expertise to practice open innovation.They quite often dont have an innovation strategy,or too few external partners that can help with the innovation mission.Most of them lack formal commercialisation process’s and find it hard to evaluate science and other innovative ideas.Many find it difficult to undertake prototyping.However all of these process’s techniques and resources can be acquired.We have helped several small companies achieve oustanding results once these issuers are resolved.

  • http://www.bizstuff.co Zulfiqar Deo

    I disagree that the size of the company is relevant to how well it can make use of open innovation. Where SME’s have the problems of resources the LSE’s have the problems of leveraging the IP generated from the innovations. The pharma industry is a good example of this. The amount of investment this sector has to make in R&D, the returns needed and the conventional model they use discourages it from using the open innovation model as we have been discussing here.

    In the same way SME’s may not be able to deploy required resources to be equal partners in the open innovation model the LSE sector has the disadvantage of history and how they think about innovation to ensure they do not make optimal use of the open innovation model.

    Look forward to your thoughts.

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  • Wim Vanhaverbeke

    Dear Stephan,
    I do not agree. We are now in a process of writing a report on 10 good practice cases of open innovation in SMEs. It is certainly possible for SMEs to practice open innovation with great results and the impact might even be much larger in comparison with the impact of OI on large companies.
    It is true that smaller companies have to be more careful and that most do not set up the right strategy and don ‘t create the required resources (internally or externally) to succeed. That’s why I’m convinced that teaching good practices in OI is even more important for SMEs than for large companies.
    Wim Vanhaverbeke (www.exnovate.org)

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