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Is Open Innovation Worth The Risk?

How to effectively practise Open Innovation and avoid the risks of disclosing too much

7Jul

The paradigm of Open Innovation (OI) appeared not long ago, firstly described by Henry Chesbrough, in the book Open Innovation: The New Imperative, published in 2003. OI is now increasingly popular amongst businesses, but many also see challenges and risks in its implementation. One of the attractive features is its cost effectiveness, especially among SMEs, where financial resources may be limited. It was one of the reasons it appeared because some companies struggled to solely rely on their own research and started looking for innovative ideas and trends elsewhere. The trend evolved and created many opportunities for innovation growth and development in productivity.

OI is not as easy in practice as it may sound, though. Henry Chesbrough suggested that there are three factors that OI creates, and of which businesses need to be aware. Firstly, it is the acknowledgment of the competitive risks of sharing your problems, the limitations in knowledge for framing a challenge, and finally, the impact of interdependencies on innovation. Competitive risks can be avoided if innovation seekers describe their need not as a problem but as a challenge for external organizations. Understandably, a company doesn't want to lose its competitive advantage, thus it may fail to properly describe a problem, due to an attempt to protect critical details of their IP, to remain safe from ideas being stolen. Thus, it is critical to pay attention to how effective the company's IP management is and how resistant it is to possible legal risks.

The third factor is a risk of interdependence with proposed solutions. It may create a bigger problem with innovation than a company is already trying to solve. One such example is Boeing and its 787 Dreamliner model. The design development was initially divided into subsystems, where different external partners were responsible for the development of each one. When Boeing came to the point of proofing the final aircraft design, the company discovered it couldn't get the pieces work together and as a result, the model is now years behind schedule. Thus, a failure to frame a challenge to external participants may result in an inability to deliver the final product.

Another challenge in OI is trust. The frames and strategies might be in place, but there is a human factor. As a company dealing with innovation, sharing problems and disclosing project details with others may be intimidating, but the chance of creating a great impact, sometimes wins over a fear of ideas being stolen. Companies should learn how to build trust without disclosing too much. When addressing the problem, it's not necessary to disclose the final function of the product, thus, narrowly focussing on the specific problem rather than a product performance can be useful. Also, IP management is critical, and can be achieved by making clear agreements between seekers and providers, and ensuring IPs are legally protected.

An effective unification of forces can only happen if ideas are shared confidently, with a clear understanding of each other's commitment. With the right preparation and aligned expectations, companies who seek innovation and those who can provide solutions can generate mutual value. Rosabeth Moss Kanter, a professor of Business at Harvard Business School, once said,'After years of telling corporate citizens to 'trust the system,' many companies must relearn instead to trust their people - and encourage their people to use neglected creative capacities in order to tap the most potent economic stimulus of all - idea power.'

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