Pushing the Boundaries – Part 1: Understanding the Different “Faces” of Open Innovation

The MOOI-forum is in its 4th month now, focusing on Human Resources Management and Open Innovation as monthly theme. Every month, great discussions emerge on the forum. One topic that came back each month but remained somewhat in the background is what we could label “the different faces of open innovation”.

Examples of (usually successful) open innovation projects have been around for years. You can find them in books on open innovation, numerous websites focusing on open innovation management, corporate websites and press releases. Yet, it always struck me that the vast majority of the examples can be categorized as new products / services that are offered through existing business units, sold through existing distribution channels and in some cases are just an add-on to existing products. Take for instance the Pringles Prints of P&G: the FMCG giant was using a technology where words and images can be printed on the crisp. It adapted an ink jet technology that a bakery in Bologna used to print messages on cakes and cookies.

Other open innovation examples represent products that provide a better technology for an existing application. Take for instance the Swiffer Duster of P&G. P&G got the technology from Japan’s Unicharm. P&G signed a deal with Unicharm to distribute the duster under the P&G name everywhere in the world except Japan.
These two products are typical exemplars of open innovation success stories as we have witnessed in the last decade. Yet, they represent only “one face” of open innovation and they may blind sight us for the full potential of open innovation.

As some discussions in the MOOI-forum witness, open innovation has the potential to be deployed as a viable innovation approach for a broad range of innovation objectives. Take for instance the MOOI-forum discussion of last month where some members (thanks to Diana Rus for several contributions) were exploring this topic.

When discussing open innovation and corporate strategy, we focused among other topics on the different growth objectives of companies: there are usually several growth horizons – as explained by the three growth horizons of McKinsey.

The basic idea is that in order to achieve consistent levels of growth, firms must not only be innovative to continue growth or attenuate growth slowdown in existing businesses, but also explore areas they can turn into high growth business opportunities in the future. This challenge to balance the typical tension between short-term priorities and the longer-term vision is called ambidexterity.

The concept is central in innovation management and an increasing number of innovative companies understand what is at stake. Yet, many others are imbalanced as they are very good at handling the demands of today’s businesses, but not so successful in being creative and renewing themselves over the long term. Ambidexterity has been discussed for almost two decades in the literature, but it has not yet been introduced as a central notion in the open innovation literature.

The ambidexterity notion is nevertheless crucial to understand the full potential of open innovation.

The ambidexterity notion is nevertheless crucial to understand the full potential of open innovation. The examples of the Print Pringles and the Swiffer Duster only show the relevance of open innovation for the short-term growth objectives of a company. Yet, open innovation can even be more important in developing long-term growth objectives of companies.

There is no consensus on how exactly ambidextrous organizations should handle their “long-term” innovation streams, but it is obvious that open innovation initiatives fostering long-term growth will be quite different compared to open innovation that is intended to support the short term actions of the existing / mainstream businesses. Take the example of DSM’s Emerging Business Areas (EBAs).

DSM starts with the incubation of ideas (in several cases these ideas were generated outside DSM). Ideas that have the potential to grow into a significant business are turned into growth platforms and are organized as EBAs: they are structured as separate units, with the agility and flexibility of a start-up, yet can still benefit from the services and resources that a large company can offer.

Although EBAs only represent one type of long-term growth organizational vehicle, they are interesting to analyze the role of open innovation in realizing long-term growth objectives for the chemical company. Compare now the role and management of open innovation in EBAs compared to open innovation initiatives deployed in existing businesses. In EBAs the business model is not yet crystallized, technology and business uncertainty is much larger, new partners have to be found not only to help out the company with technology, but also with new business models, new routes to market, etc.

It is important that managers understand that open innovation is a multiplex concept when it comes to using it for different corporate growth targets.

Organizing open innovation for the long-term growth is clearly different from the more popular form of open innovation, where companies reply on external partners for sustaining growth in the short term. It is important that managers understand that open innovation is a multiplex concept when it comes to using it for different corporate growth targets.

Open innovation has different “faces” and each of them needs a different way of organization. Compared to open innovation supporting short-term growth objectives, initiatives that enable long-term innovation streams will be taken away from established business units and management will give them some sort of formal authority. They tend to be organized centrally and they report directly to top management. External sourcing modes are different (long term strategic research projects, CVC, minority positions in high-tech ventures, etc.) and so will be the type of partners, who have to work under high levels of technological and market uncertainty.

In sum, open innovation targeting long-term growth is hardly comparable with open innovation projects that sustain short-term growth.

More important, open innovation is required for the development of new capabilities, as a company may not have the required technological and business capabilities to compete successfully in emerging business areas: capability development is less of a priority in the case of existing businesses since capabilities have been developed over the years. In sum, open innovation targeting long-term growth is hardly comparable with open innovation projects that sustain short-term growth.

Achieving ambidexterity has several implications for the organization and management of open innovation in large companies. Yet, it is exceptional that professionals develop a management framework or tool that (re-) balances different open innovation approaches catering the divergent needs of short-term and long-term growth objectives leading to a consistent level of corporate growth.

By Prof. WimVanhaverbeke, Hasselt University, ESADE& National University of Singapore

Read more about the MOOI Team members and the project.

Join the forum: There is more to come!

We hope the Open Innovation themes included in MOOI are especially valuable to practitioners working inside organizations. You’re invited to share the daily challenges and experiences you face in the workplace and discuss possible solutions. Please find a list of the themes below.

  1. Aligning open innovation (OI) with corporate strategy. December 3, 2013
  2. Role and actions of top management in supporting OI. January 7, 2014
  3. How to set up organization, management, and communication structures supporting OI projects? February 4, 2014
  4. How to recruit, select, train, etc. for open innovation: What skills, attitudes, personalities are needed? March 4, 2014
  5. How to create a corporate culture where OI can thrive? April 1, 2014
  6. How to use IP strategically to accommodate OI? May 6, 2014
  7. How to change the R&D-department for OI? June 3, 2014
  8. The OI implementation team. July 1, 2014
  9. How to make effectively use of Innomediaries? August 5, 2014
  10. How to evaluate the success of OI activities? September 2, 2014
  11. Making it happen: From closed to open innovation. October 7, 2014
  12. A theme to be chosen by the community. November 4, 2014

Once all themes are discussed in the forum, the MOOI-team will write an e-book that explains the best practices in open innovation management.

Click here to find more information about the MOOI-forum or to join.

Photo: financial growth over vintage from Shutterstock.com

  • Annalie Killian

    I started an Innovation Culture initiative in a division of a large Australian Financial Services firm 12 years ago and amplified that through establishing the Amplify Innovation & Thought Leadership Festival. More recently under the corporate strategy team, the grassroots movement was broadened into a company wide initiative and through trial and error a number of elements put in place. But still, open innovation is a failure ( despite no-one actually wanting to admit it). We have seen examples of successful ideas developed out of the crowd, some even with prototype testing with paying customers but they failed to get backing from the company in terms of time resources or investment- because these new business ideas do not fit the mental model of what this company’s core business is. I understand this- and logically it makes sense….but therein lies the difficulty. Its not as if the company ha a host of other better ideas to invest in- so it invested in nothing and the good ideas, with huge potential, but not aligned to core business withered on the vine. The problem is that in the heavily regulated financial services sector, ideas that are futuristic, address current and digital consumer needs, and require the compliant and risk/ reputation -managing incumbents to deliberately ignore the regulatory framework as they develop and test ideas that play to where consumers are moving to get simply thrown out of the options bucket on first round review. Yet, if they originate outside the sector by disruptors who are ignoring the constraints of the regulatory framework, and get adopted by consumers …eventually the change in consumer behaviour puts pressure on regulators or the law catches up. But the incumbent organisations won’t have a bar of such innovation. Can you address this topic in how ideas get evaluated vs legal frameworks, barriers etc. To give you another example….its unlikely that a trade union organisation would ever give birth to an innovation platform like Fiverr where all jobs are just paid $5.00, yet this platform has created income for many millions of people.

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