Is Open Innovation Really the Best Approach?

back in 2014, i wrote about a recent paper released by henry chesborough and his team that highlighted how 78% of organizations were currently practicing some form of open innovation.

it creates an impression of an approach whose time has very much come, its questions answered, and any doubts about the validity of the approach firmly banished.

a major part of the allure of open innovation is not only that you open things up to a much wider range of participants, but by also only paying for successful entrants, it is more efficient for you than hiring staff full-time that may, or may not, produce anything of note.

the efficiency of open innovation

a recent spanish study casts an element of doubt into the equation again, and questions whether open innovation is really as efficient as we’d like to think.

the authors suggest that the open market for ideas is not always beneficial, with more research required to fully understand what does and does not work.

they analyzed the open innovation efforts of some 681 belgian manufacturers, and the findings were fascinating.

“buying and selling innovative ideas increases a firm’s innovativeness, but this process seems to increase costs disproportionately,” the authors say.

cost-benefit analysis

to an extent, that’s to be expected as open innovation requires a great deal of work in managing external relationships, working with partners and sifting through potential ideas.

the flip side to this is that you gain an awful lot of insight and knowledge that you wouldn’t traditionally have access to.  not only do the authors contend that an open approach to innovation will increase the knowledge of the organization, but that it also offers a more efficient means of r&d than traditional methods.

the study revealed that the rise in complexity of having an open technology alliance network required additional management resource to oversee effectively.

whilst this may paint an unduly negative picture, the researchers are adamant that more work needs to be done.  they outline two key considerations to think of when assessing the benefits of open innovation:

1. whilst adapting to the new way of innovating can increases costs in the short-term, it can be reduced as the company adapts
2. there may be challenges in aligning your knowledge inflows and outflows at a company level, despite it existing at an industry level, where specialization and division of labor have positive impacts on productivity.

the authors suggest that more research is needed to fully understand the costs and benefits of open innovation, but it probably goes without saying that is not an easy win.