“Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.”
Henry Chesbrough, Open Innovation: The New Imperative
Open innovation reduces the cost of conducting research and increases development productivity. Open Innovation provides special benefits for consumer based businesses. Since it incorporates customers in the early development process, customer research is likely to be accurate. Also, because of its potential for viral marketing, the odds of success are higher. Different models of open innovation are required for B2B and end consumer facing organizations. Let’s now see how companies use technology to empower open innovation.
API’s, Partnerships and Open Platforms
The idea of partnerships goes back to the early days of computers. Apple couldn’t have released Macintosh without the help from Microsoft. Microsoft couldn’t have succeeded without their partnership of licensing their software to IBM.
Nowadays, in order to enable more partnerships, companies provides APIs to their services. This allows developers to interface with other applications and build powerful services. This leads to more B2B partnerships.
Open Innovation intermediaries can also help you find an appropriate partner by analyzing your innovation need. IdeaPoke is an example of one such open intermediaries where you can post your innovation need and they will assist you in finding the appropriate partner.
Apple with the IOS platform created a new market. People can build their ideas and deploy them on iPhone, iPad, etc. They enter in a revenue-sharing model with the company. This was so powerful that teenage coders could take their ideas to market and become millionaires.
Crowd sourcing, if used appropriately can work wonders in consumer facing organizations. Quirky is a community-led innovation platform. The idea is to combine each other’s ideas to create even more powerful ideas. Users can post their ideas, the community will comment on each other’s ideas to refine it.
The best ideas are chosen by Quirky used to manufacture and sell the products. This model didn’t last long, since the company went bankrupt. They came back with a new model in 2017, instead of manufacturing products themselves, they license products to companies like Shopify, HSN, etc.
This could be a lesson that not all model works for all companies. Quirky might have realized manufacturing isn’t their strengths hence made a collaboration with appropriate partners to solve the issue.
In 2014, McDonalds offered a platform where customers can create their own burgers, people can then vote to select the best ones. They were also able to create a social media campaign on this idea which eventually went viral.
Lego allowed customers to create their own products. Customers could submit their product designs. If the product gets enough votes, the company takes the product to productions and pays the customer 1% royalty of the total net revenue.
Starbucks has a dedicated website which enables customers to submit, view and discuss ideas.
Open Sources communities of Linux, Mozilla, etc has contributed widely to the internet we see today. Open Source allows rapid software development since it has no boundaries and people around the world can contribute to a project.
Companies that were closed earlier started making parts of their code open. They promote two version of their product, the community edition, and the enterprise edition. The community edition is open source, organizations can use the software free of cost. The enterprise edition offers advanced features and high scalability.
This open innovation process enabled companies to rapidly develop their product and reach more customers.
Ventures and Accelerators
Microsoft provides $150,000 worth of cloud credits to early-stage startups free of cost. Under their Bizspark program, startups can avail all their products free of cost for three years.
They also include an acceleration program where Microsoft’s best business executives offer their services to early-stage startups. This program has led to a lot of business partnerships and acquisitions. This model is also followed by Google with their Google Ventures. Facebook has recently adopted the same.
Companies nowadays have both online and offline hackathons to incentivize people to compete and innovate. Usually, one or more companies come together and expose their APIs to developers. They use their experience to mashup these APIs to create new products. One can combine Alexa’s APIs and Facebook APIs to build a service that can interact with one’s Facebook account via voice commands.
Big Data and Open Innovation
Data Pitch encourages established companies and organizations to share their data. These days companies and organizations generate an immense amount of data. However, only a few of them are able to use data effectively. In Big Data having relevant and authentic data is necessary to derive insights. Hence sharing of information increases the chances of success.
Technology enables open innovation to work at scale. This has enabled companies to create new markets. The IOS and Android store generates billions of dollars in revenue. Open innovation drastically reduces cost and substantially increases productivity. Importantly, it helps stakeholders to share their success.