10 Reasons for Open Innovation Failure
It happens. Open innovation initiatives fail to deliver on the expected outcome. There is not much of a surprise in this, but I am curious on the reasons and I have thus started to make a list on why this happens.
It would be great if you can help build this list by adding your comments to my starters.
• Companies have difficulties making innovation happen internally. Now they hear about open innovation and think of this as an approach that will make everything better. Not true. If you cannot make innovation happen internally, you will have even more difficulties doing this with external partners.
• Many companies start off with idea generation platforms hoping that external contributors will contribute with great ideas and/or technologies. Most do not deliver on the expectations as they get more trash than gold.
• Companies copy competitor’s initiatives rather than creating their own unique initiatives that match their business reasons for doing open innovation.
• Companies fail to make their employees, partners and customers understand what open innovation means to the company and they fail to explain the impact of such a new direction to the internal and external stakeholders.
• The various organizational units – and in particular the operational ones – are not fully aligned with the innovation initiatives, making it difficult to execute in full on otherwise well-devised initiatives.
• Executives fail to understand that issues surrounding handling risk and fear of losing control are key to successful open innovation and thus they don’t deal with them head-on.
• Companies put their “best people” in charge of open innovation failing to recognize that the “best people” who do great by doing things as usual are not necessarily what is needed in order to succeed with open innovation. It is a paradigm shift and you often need different perspectives to succeed.
• Companies focus more on their own gains rather than working towards creating a true win-win scenario.
Deborah Mills-Scofield, an innovation advisor and partner with Glengary LLC, an early-stage venture capital firm, has previously offered these reasons for open innovation failures:
• Management – “Trying to ‘manage’ the process vs. ‘moderating’ the process. While well-intended and rationalized, many open innovation ventures are not done on a level playing field. If it’s a large company starting it, they tend to be condescending or paternalistic instead of viewing the other ‘innovators’ as equals and this sets a very strong tone.”
• Trust – “This is somewhat related to above, but there is a fear of losing control over intellectual property (and hence money), and I’ve even had clients mention losing people – that the open innovation forum becomes a means of recruiting away their best talent (which in and of itself is a symptom of bigger issues).”
What can you add?
Stefan,
Please consider the following additions:
1) Companies do not share their strategy with their open innovation partners (PARC)
2) Companies employ open innovation processes that are transaction-based and not relationship-based (John Hagel)
3) Companied do not share control with their open innovation partners (Joel West)
4) Companies focus their open innovation initiatives mostly on large bets and big breakthroughs (IFTF)
Thanks,
@ariegoldshlager
Taking an innovation to fruition. If there are no successes, no matter how small, to point to, why participate? (Similar to Arie's #4.)
Proper alignment of compensation to open innovation. (It seems sort of crass, but if folks don't see the value, $$ or respect, they don't have reason to participate.)
Some excellent points, gentlemen. Open innovation also tends to fail–or at least is less likely to be successful–when organizations forget to incorporate what they *have* into their efforts to find what they need. Doing both (spin-out and spin-in) simultaneously turns "Open Innovation" into what Fuentek calls "Symbiotic Innovation" (http://bit.ly/ec0lt3), which offers advantages as implied by the term.
So how do you get to success? Our Nannette Stangle-Castor recommends first taking stock of your IP portfolio (http://bit.ly/hHD8wp). She also offers 8 keys to successful R&D partnerships (http://bit.ly/lQRtDU). More of Fuentek's insights on open innovation and Symbiotic Innovation are available here: http://bit.ly/h84dzq
Thanks!
Nancy Pekar
@fuentek
My opinion is that innovation may be developped by an increased exchange of ideas between persons, producing common values, objectives and finally new opportunities. The previous aspects require a cooperation behaviour (culture) with respect and trust between persons. In many company cultures (for example in the italian medium/small sized companies) there is still a clear difficulty to have this, with an excessive competion, distrust of others and a great difficulty to have an enlarged sharing of the ideas. In these cases before to do real innovation in a company, probably we must work to create a real and new “social vision/culture” …
To complete Aries list:
5) Companies should open and share their development process with outside participants – this generetes insight, ideas and input – but most dont (Francis Gouillart "The Power of Co-Creation)
On the top of this list and these comments I would add three reasons that seem critical to me:
1- Companies do NOT think and formalize their innovation (open or not) strategies: therefore it becomes difficult to align operational entities, to on board potential partners and finally to be successful. Innovation strategies should be built through crossing strategic objectives and key market trends / anticipations, allowing to provide a consistent vision on where to innovate and on which tracks.
2- Open innovation processes are me-too of internal innovation processes (as for people, skills, valorization models…). This generates some important issues in how partners are chosen, how usage value is evaluated and shared, and above all how decision are made.
3- Companies hardly understand that the key value today is not anymore in the information but stands in the ability to link differently open information. Knowledge or intelligence systems are underdeveloped compared to what they could be, narrowing the scope of potentialities, keeping large areas in the dark of secret and protection. Open innovation = open access to all information.
Hope it helps !!
TRUST – has been mentioned by several people already – here is a link to an article carried on Innovation Management a couple of months ago on that very subject http://www.innovationmanagement.se/2011/02/24/how…
The other potential reason for OI failure is along the same lines – companies who fail to put in place a recognition and reward system that is fair and equitable to those with the ideas and those requiring them.
Too much OI activity is a one-sided benefit to the business commercialising ideas which leaves very little incentive or motivation for the idea generators to particpate.
It is human nature to fear exploitation or idea theft – even ideas that are a bit rubbish are still precious to the Creator – and actually no-one would commercialise a rubbish idea (well not intentionally) so at least recognistion and reward schemes might increase participation and quality
Industry needs to reconsider its attitudes towards engaging with idea generators and move away from the theory that all ideas have no value until they are commercialised or that ideas can be simialr or even identical. That's true but a system that recognises their original source and of course the difference in application, articulation and execution can overcome that issue.
For the professional creative industries and brand owners alike http://www.creativebarcode.com might offer a ready made IP Management system for OI activities.
To enter the Open Innovation requires the existence of virtual innovation intermediaries how Innoget. Through its Market place, and with minimal resources compared to other systems, organizations remain connected to this network of external knowledge as necessary for the implementation of open innovation.
Thank you for your contribution!
Oscar
The seminal work in this area probably starts with Cohen and Levinthal 1990 paper on absorptive capacity. Putting the wrong people in the OI initiative is a prescription failure. I have to think that there are not 10 or 15 reasons why OI initiatives fail, probably they are all people related.
The second has to do with institutional problems. The formal or informal rules the focal firm establishes (see Pyka and of course O. Williamson) can also set the stage for failure. I think some of the posters refer to opportunistic behavior.
A final area worth looking at could be view of "failure" itself. Van haverbeke and Chesbrough published an interesting paper in 2008 on OI and real options. Its a worth a real. Look at this way, perhaps: (a) if you are running an OI effort within a larger company you really acting as an intermediary so all the problems associated with intermediary are now YOUR problem, (b) setting the expectations correctly or doing a poor job of managing them may lead senior management to "declare a failure" and pull the plug, (c) have you aligned the incentives for all parties that you want in your OI ecosystem (this is poster John Norris's point I believe, and finally (d) understanding the value in failure.
Point (d), regarding failure, is generally understand by corporate venture capital and early stage investors. Not so much, I don't think, by less experienced OI practitioners. The lessons from failure of a firm in your OI ecosystem should serve to reduce the uncertainty about the technology or what you are doing. Hopefully, you can identify the failure quickly, learn from it and use it.
Open Innovation is based on a network (non-linear) paradigm, whereas most internal innovation programs, processes, systems are based on regular, linear, cause-effect paradigms. In my experience, the biggest cause for low open innovation success (I wouldn't call it open innovation failure, because even regular innovation approaches don't succeed very often) is the lack of fundamental understanding and alignment of two different paradigms.
Hi Stefan,
Great list!
I will quote few other (some overlap in their essence with the above list) reasons that cause innovation failure in general and apply seemingly well for open innovation failures.
—- from my past blogpost http://fail92fail.wordpress.com/2011/02/13/top-16… —
The seven deadly sins that choke out innovation in all sorts of companies and industries include:
1. Thinking the answer is in here, rather than out there
2. Talking about it rather than building it
3. Executing when there is need for exploring
4. Being smart
5. Being impatient for the wrong things
6. Confusing cross-functionality with diverse viewpoints
7. Believing process will save your company
Few other relevant posts about why innovation (generally and open innovation to a certain extent) fails are below:
http://fail92fail.wordpress.com/2009/05/20/how-no…
http://fail92fail.wordpress.com/2010/10/30/guidel…