The case for open innovation
I often find myself giving a talk at an industry conference or just chatting informally with friends and colleagues about why it is so critical for businesses to find ways to embrace and embed Open Innovation within their core strategy. I usually explain this with a number of really powerful examples and case studies. A case study that I find extremely effective is the one of Kraft Foods as explained by Steven Goers in the book "A Guide to Open Innovation and Crowdsourcing". Kraft Foods is a global snack powerhouse with an unrivalled portfolio of brands. With annual revenues of almost $60 billion and sales in 170 countries, Kraft Foods is the world's second largest food company and the largest in North America.
"Kraft has a long history for developing innovative products, with more than 3,000 scientists and engineers based in 15 R&D research centres around the globe. It holds the third largest global patent estate in food & beverage with the Number 1 position in North America."
So with these impressive numbers and resources, what exactly is the issue?
What if you were given as an internal goal to deliver 5%+ organic growth rate? As Steven puts it in his article, this translates into generating over $2 billion in new revenue per year – this is the equivalent of creating a new Fortune 1000 company year after year! These are BIG numbers that will unlikely be achieved by harnessing Kraft's internal R&D horsepower alone. Consider also the following trends faced by Kraft Foods and probably any corporate in other industry sectors:
- The rapid pace of innovation
- The rising cost of innovation
- The need for speed
- The downward pressure on R&D budgets
Add all the above points together and you have a compelling case for Open Innovation. A critical question remains though (one that corporate Open Innovation evangelists face over and over again when trying to sell OI internally): how likely is it for Kraft Foods to find the answers externally to its company boundaries? How vast is that external innovation pool?
As the saying goes, a picture is worth a thousand words. The single most powerful vehicle Steven used to get internal buy-in for his OI push during his days as VP Open Innovation at Kraft was this image. Despite having a strong patent estate, the vast majority of IP is external to Kraft. The call to action is therefore clear: tap into this vast pool of external IP innovations.
Other companies who, like Kraft, have understood the importance of tapping into external networks and talent pools to keep innovating their products and services are today's leaders in their respective industries. At Skipso we work with top brands globally and across different industry sectors, providing them with the tools and services to help them accelerate their pace of innovation and, ultimately, achieve tangible top and bottom line results.
Contact us to share your experiences or to learn more about our services.