How to manage the external innovation process
Innovation is key to your company’s survival. It can be disruptive, transformative, radical, breakthrough or incremental and can influence your products, services, processes and business models.
However, the creative thought process is not always logical and makes the management of the external innovation process somewhat of a difficult task, given that an external innovator and a company must work together to find out if the technology is viable for the company, beneficial for the customers and most of all if it adds value.
Traditionally, companies in the past have only relied on internal innovation in order to keep their concepts secret, unwilling to assimilate new ideas or information from external sources. However, the ‘do-it yourself’ mentality is outdated and major advances have been made in technology that now help us to diffuse information and realize remarkable new innovations. Therefore, engaging a wider base of stakeholders can help you to solve problems faster and more efficiently.
What are the main advantages of external innovation?
Tapping into the creative energy that external innovators can offer will increase the likelihood of finding good ideas, because they have peripheral knowledge of the problems at hand. In addition, open innovation costs less and offers more quality and benefits. Instead of recycling ideas internally, external innovation can help you to find new perspectives.
By working externally, you can avoid restrictions that you might otherwise face internally, which slow you down. Plus the external innovation process is distributed based on managed flows of knowledge in line with the company’s business model. In addition, companies can’t afford to rely solely on their own research. That’s why they buy or license ideas and concepts from inventors or other companies.
Here are some advantages of external innovation:
- Reduced cost of research and development
- Improvement in development productivity
- Inclusion of customers early in the development process
- More accuracy for market research and customer targeting
- Synergism between internal and external innovations
- Viral marketing
Plus external collaborators are self-selected and want to work with you. They are motivated to find solutions for your business. It also positively affects your brand and reputation, including marketing and PR, because you are forming new partnerships.
Collaboration and cooperation
Cooperation and collaboration is not easy and the most important thing that businesses should do before bringing in external stakeholders, is to clean up their own house. If a company can effectively manage their internal innovation processes, they will benefit more from external stakeholders.
Collaboration and cooperation can be executed with many different external parties:
- Universities and research centers
- Key suppliers and vendors
- Application developers
- Content providers
- Incubators and accelerators
- ‘Open’ communities
- Innovation networks
- Customers and end-users
- Venture capitals
Other models for open innovation include: government driven partnerships (KTP), product platforming (API, SDK), idea competitions (Skipsolabs, Hackathon), collaborative product design and development, etc. In addition, the technological success of open source software has played a significant part in diffusing open innovation thinking.
Managing the whole process
The organization of each group in terms of their knowledge, competence and skills is important. In order to manage the external innovation process, you should be asking yourself the following questions: what will each party contribute? What type of framework will be used? What does each party ultimately expect? And lastly, how should success be measured? These questions should be answered in a way that satisfies all the parties involved.
In order to manage the external innovation process, you can also break it down into 4 stages:
What does your company want or need from possible external stakeholders in order to meet your strategic goals? What method will you use to find these external resources? What system will you use to organize, structure and mediate an agreement to retrieve the resources? What devices, metrics and management techniques will you use to execute the relationship?
The management of external innovation requires good relationships between the stakeholders, able to accept and offer input, adjusting to requirements set in place. It also means understanding all of the intricate elements of cooperation necessary to fulfill objectives, such as balancing the participation of the stakeholders and their motivations and managing interdependence. The idea is to create common goals for cooperation and rely on each other to achieve results.
One of the most well-known tactics is the use of patents. They can support external innovation because they promote and safeguard innovation. However, in this way, the concept or innovation must be new, call for an inventive step, be industrially applicator or beneficial to humanity. Patents clearly declare proof of ownership, allowing you to ultimately understand the in’s and out’s of the agreement.
How to reap the benefits of open innovation
There are four types of open innovation: revealing (freely sharing its resources with other partners), selling (commercializing its inventions and technology through selling or licensing to a third party), sourcing (freely using available external knowledge, as a source of internal innovation), acquiring (buying innovation through licensing or other procedures)
When working with external stakeholders, the internal R&D grows and four basic modes of open innovation are used: a traditional intellectual property contract, a partnership, a contest or a community. In order to have success and create long-term advantages, you must know when and how to use these four modes in the most effective way.
It takes time for a company to reap the full benefits of open innovation. However, the positive side effects is that once you get ahead of your competitors, you become a preferred partner of choice within the industry, which is a long-term advantage.
Embracing external innovation
External innovators can play a huge role in the success of your company, and extraordinary people and influential ideas are evenly distributed, both inside and outside of your company. That’s why open innovation is such a smart strategy for businesses. If your company needs a new product, service or technology, open innovation can help you to connect to the brightest innovators in the world.
That’s why you should embrace external sources of knowledge as a part of your open innovation strategy!