Is open innovation over-hyped?

Open innovation has been hyped in the media and by some consulting firms over the past few years as the next new thing and is just giving a term to an activity that has been underway in business for a long time. Simply put, open innovation is partnering to gain leverage and build barriers to competition.

Open innovation has been hyped in the media and by some consulting firms over the past few years as the next new thing and is just giving a term to an activity that has been underway in business for a long time.

Simply put, open innovation is partnering to gain leverage and build barriers to competition. The actual effect of working with outside partners makes a lot of sense. A company is able to capitalize on a new business opportunity much quicker, and makes it harder for its competition to duplicate, when it brings in the best thinking and technology from any source.

It is not necessary to reinvent the wheel and build everything in-house. An article by Linder and Davenport (2003) listed five external innovation sourcing channels:

  1. Buying innovation on the market through sponsored research, innovation for hire, strategic procurement.
  2. Investing in innovators through venture capital or equity partnerships.
  3. Co-sourcing with competitors within or across innovation sectors, or through joint ventures.
  4. Sourcing from communities of sophisticated users (i.e., open source).
  5. Resourcing on-demand talent and innovative new tools.

The five sources listed above are presented in the marketplace by various sources as “open innovation.”

A company must first establish its strategic intent and vision, and then determine various ways of achieving that intent. Achieving strategic intent may involve a combination of approaches to deliver increased value to customers, and partnering with external sources for building solutions is one approach.

Working with an outside partner may be an excellent choice for a company, depending on its business strategy. The most difficult challenge a company may have in working with partners is the not-invented-here syndrome and a cultural reluctance to seek out the best solution components.

With all that said, the term “open innovation” may lead people to think that this is some new management fad, which is unfortunate because the underlying rationale for partnering is strong and getting stronger as companies try to realize growth in markets like China and India where adapting offerings locally will be increasingly important over the next several decades. Forget about the hype and remain focused on where your firm is going to win.

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