From Closed to Open

For this week’s post I wanted to focus on a successful strategy that I learned about in my internship two summers ago. The strategy is called open innovation and it is becoming more prevalant today as more and more companies use it to generate new ideas, products and technologies. The objective of open innovation is to generate ideas and products using sources outside of a company’s R&D. In the old and more formal “closed innovation,” the focus was on internal control and the idea that a company must generate their own ideas and then develop, manufacture and market them. While this can be successful, the new form of “open innovation” takes the process one step further, by enbracing external ideas and knowledge in conjunction with internal R&D. The concept is based on the idea that the world is full of widely distributed knowledge and thus companies cannot afford to rely entirely on their own research, but should instead buy or license processess or inventions from other companies, startups, or vendors. In addition, internal inventions not being used for a company’s business should be taken outside the company throughh licensing, joint ventures or spinoffs.

To discover these external ideas or technologies a company can join an open innovation conference which meet throughout the year and share ideas or tehcnologies they may have discovered or developed that don’t meet their company’s needs. Additionally, the company may attend vendor shows where startup companies or individuals with new ideas and technologies could provide insight. For other companies their customer’s may be an external source with valuable information and the company can host competitions or solicite feedback for new product ideas.

One company that has found great success with this stratgey is Proctor and Gamble. One example of their success was when the company was trying to develop a way to keep cotton shirts wrinkle-free, however their internal R&D were struggling to come up with a solution. Since they could not come up with a method on their own, they approached a knowledge broker who posted a few details of the dilemma to its network of solvers. From the submissions that the company received, a solution was found in a place P&G would not have expected. The answer was sent from a laboratory professor studying polymers related to the semiconductor industry. His idea was then applied to garments and solved P&G’s wrinkle problem.

I believe this is strategy is a great way to share knowledge and continue to produce innovative technologies and products that can help the world. I think the recognition that not every company has all the ideas is humbling. Additionally, I believe it is important to understand that there are a variety of ideas and technologies in the world today that can be used for different purposes and keeping lines of communication open can better many companies.


6 responses to “From Closed to Open

  1. Hard to give it five stars till I see others.

    How did you learn about it in your internship? If this is such a good idea , why did it take until now to think of it?

    • I learned about open innovation when I worked with The Hershey Company as they were in the midst of rolling out open innovation within their company. From what I understood, for the strategy to really work many companies need to buy into this idea of open communication. The open innovation conference is a great way to communicate with other companies and has continued to grow of late. To gain credibility and support from a variety of companies, this obviously takes time. Additionally, most of the successes of open innovation are in terms of processes and technologies. For example, I know Hershey was looking for a better technology to package some of their products. Since the focus is normally on technology and processes it does take time to deal with licensing terms and patents which is one downfall. I do think in a world with so much knowledge and the advancements of technology, the concept of sharing and finding several purposes for a technology is a positive.

  2. While this seems like a positive way to encourage innovation, it seems as though there would be a large risk involved because of the potential for idea stealing. While it would be great in situations like the one you mentioned in your post, most of the companies I worked for doing new product development would go to great lengths to keep even vague product concepts top secret. I think this is a really interesting method and wonder how companies and inventors keep their ideas safe. Obviously patents and other legalities are involved but even small changes to an idea can make it something newly patent-able.

  3. I think the concept of open innovation is a creative strategy. However, I too have hesitations. When someone submits an idea or technology to a company seeking help (as P&G did in the scenario you described), do they receive credit? Some sort of recognition? Monetary compensation? I think open innovation is a a great idea in theory but could demonstrate company manipulation if there is no recognition supplied to those that generated the idea.

  4. I love the idea of open innovation. I think that the consumer/producer relationship is based on the fact that the latter, knows what the former wants, and needs. Furthermore, there why should a company squeeze what little it can out of its limited resources, when there is a whole world of resources right outside their doors. This kind of reminds me of crowd sourcing, or user made resources like Wikipedia. Overall, I think this kind of communication in terms of ideas, and knowledge is the future of research, and development.

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