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Open Innovation Benefits for Small and Large Businesses

March 5, 2012 15inno No Comments

This is an excerpt from my latest book, Making Open Innovation Work. CLICK THIS LINK FOR A FREE DOWNLOAD!

If small businesses are natural innovators, where does open innovation fit into the picture for them? Although open innovation was discussed going back as far as the 1960s, it was not until the past decade that it really came alive in large corporations around the world.

Leading the way was Procter & Gamble (P&G), the world’s largest consumer-packaged goods company. In 2000, its new CEO, A.G. Lafley, expressed the radical idea that half of the company’s innovation output should include a key external contribution. This led to the adoption of an innovation model P&G calls Connect + Develop via which P&G accesses externally developed intellectual property in its own markets while allowing its internally developed assets and know-how to be used by others. It collaborates with individuals, companies, laboratories, research institutes, financial institutions, suppliers, academics, and R&D networks.

P&G has had tremendous success with its open innovation efforts, success that has encouraged ever-growing numbers of corporations to follow its lead over the past ten years in search of the benefits that accrue from open innovation. Chief among these benefits––which apply no matter how large or small an organization is––are:

• Faster development and market launch of new products and services, which will build revenues, market share, and profits;

• More diversity brought to innovation, which will result in uncovering more opportunities;

• Improved success rate of new products and services by making the innovation process stronger; and

• Diversified risks and the sharing of both market and technological uncertainties of innovation.

Obviously, these are important advantages for organizations of any size, especially in today’s hyper-competitive global marketplace. But these are only the beginning of the reasons companies both large and small are embracing open innovation.

In a webinar conducted in advance of Co-Dev 2011, an annual conference on co-development and open innovation, Blaine Childress, a research scientist at Sealed Air Corporation, delineated a number of other important reasons Sealed Air, which is a large corporation, started pursuing open innovation several years ago. These reasons apply equally well—or perhaps even more so—to smaller companies:

• You can’t know everything; the world of science is far too big for any organization to employ experts in every field.

• Science and technology advance too rapidly for any one company to cover all advances in any single field.

• Innovation is essential for market survival.

• Talent is a global resource.

• Organizations must fill skill gaps by finding external partners (enlarging networks).

Let’s look more closely at these reasons. First, P&G learned that for every one its 7,500 scientists and researchers, there were 200 others outside their organization who were just as good or better, meaning there are perhaps 1.5 million talented people outside of P&G who could be of value to the company’s innovation effort. How many experts do you suppose are out there in the world who have knowledge and ideas that might benefit your small company?

To Childress’s idea that science and technology are advancing too rapidly for a company to keep apace, I would add that business and consumer trends are also evolving at a far more rapid pace than ever before. This makes it difficult for even large companies to stay on top of things, never mind the challenge that this presents for smaller companies without access to expensive research that big companies use to track shifts in the marketplace.

Over the past few decades, it has become a given that innovation is necessary for survival. And by this I mean real innovation, not just slapping a new name and packaging on something old. The creation of new value is what separates the companies that thrive from the ones that languish in the doldrums or even fail altogether.

If you like this read, then you should download the full book for free: Making Open Innovation Work

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