Open Innovation in New Product Development - Extend your Horizon

Open Innovation in New Product Development – Extend your Horizon

Posted on Posted in Marketing Explained

Open innovation in new product development is the dominant model of innovation in the 21st century. It allows us to extend our horizon when developing new products and capture the best ideas out there. Let’s see how open innovation in new product development works – and what special role so-called connected innovators play.

Open Innovation in New Product Development

Open innovation means no longer relying solely on the company’s internal resources for innovation, but looking to external sources such as customers and suppliers to complement internal knowhow and capabilities. By doing so, firms have the opportunity to improve innovation performance.

For years, firms have sought to externally acquire technologies they lack, on an as-needed basis. This is called outsourcing, which is for instance common in the pharmaceutical industry. Top firms such as GlaxoSmithKline outsource a substantial amount of their new product research due to the huge costs involved in the new drug product discovery, development, regulatory approval, and launch.

However, open innovation goes much further: under an open innovation model, firms start with the understanding that much (if not most) of the knowledge they could use for new product ideas can be found outside the firm. This makes open innovation in new product development so important: the best ideas are in most cases not inside of the company, but in its environment, out there. And that makes sense: Not all the smart people work for us. Therefore, companies can rely on open innovation in new product development: they systematically and intentionally set out to acquire knowledge from external resources to complement their own internal resources and accelerate innovation.

Doing this and accessing all the ideas residing outside of the firm is critical, even more so as global competition heats up. Open innovation in new product development leads to improved joint value for all partners. The firm can access a much larger pool of innnovative ideas from which to draw, and it speeds up its new products process by linking partners that have the required technology.

Open innovation is seen as a powerful alternative to traditional closed innovation models. The closed innovation model allows for inputs to come from internal sources as well as external ones. But under open innovation, firms are no longer looking externally only for inputs (such as unmet needs or unsolved problems). Instead, the firm seeks innovation – ideas, technologies, knowhow, processes, inventions and so forth.

Open innovation works in two directions: while the firm looks externally for innovation, it also provides its own innovation further to its environment: internal inventions not being used in the firm’s business are taken outside the company (e.g. through licensing or joint ventures).

Certainly, open innovation does not mean looking for innovation exclusively outside of the company. It does not mean that the firm outsources its R&D. Rather, the firm’s goal is to reach out beyond its familiar research sources and to access R&D carriet out globally, so that the knowhow developed internally is complemented. Thus, open innovation refers to a synergy of external and internal sources. This makes the connection between them so important: connected innovators are key to the success of open innovation in new product development.

Connected Innovators – Key to Open Innovation in New Product Development

Open innovation, in general, refers to no longer relying solely on the company’s internal resources for innovation, but looking to external sources such as customers and suppliers to complement internal knowhow and capabilities. Connected innovators have a special role in this process of externally searching for innovation.

Connected innovators, defined as persons who build relationships and find solutions easily, drive the search for and collaboration with external partners. In other words, open innovation would hardly be possible if there were no connected innovators. Connected innovators are connectors: they bring together two parties in open innovation and thereby make a much more creative, efficient and powerful innovation possible: “It is not sufficient to be focused on external innovation. We’ve realized that the important thing is connection – or what we call connected innovation” .

The reason is that collaborating means bringing together a variety of different personalities, each with their own unique expertise and experience: a variety of different innovators. When brought together, they can combine the resources they have to maximize the success of the outcome – as connected innovators.

In essence, one could describe the role of connected innovators in the concept of open innovation as

  • Bringing skills, expertise and experience together
  • Complementing resources the partner(s) do not have
  • Combining good ideas and extracting the best ones together for maximum effectiveness, widening the horizon of the whole team
  • Increasing speed to market by helping each other in the process
  • Lowering cost and risk, as the company does not have to do everything on its own and saves capital investments
  • Closer collaboration with open innovation partners: not just directing them what to do, but going together through the whole process: defining objectives, roles, timing, evaluation…
  • Enhanced communication between the teams, saving time and cost
  • Directing as well as focusing the joint efforts to reach the best possible outcome