What is Open Innovation? What Are Its Advantages and Disadvantages?
What is open innovation? What are its advantages and disadvantages? How can organizations accelerate time to market, and lower costs? In the age of skills shortages, companies that access diverse knowledge and skills have a competitive advantage.
Open innovation allows you to tap into the collective intelligence of the crowd to improve innovation performance or discover new ideas (learn how Assist 2 Develop showed NASA a 90% time and cost savings improvement).
According to a McKinsey survey, 6% of executives are satisfied with their firms’ innovation performance. When comes to organizational capabilities, lack of skill, talent, and the ability to execute ideas was mentioned frequently as a barrier to innovation. Without the right skills and capabilities, it’s difficult to achieve the desired results. This may be the primary reason why more companies are embracing the crowd.
Organizations leveraging crowdsourcing are some of the world’s most progressive and innovative like NASA, Lockheed Martin, Mozilla, XPrize, and SAP. You are starting to see open innovation being leveraged in various disciplines like graphic design, engineering, software development, mobile applications, and others.
Open innovations goal is to find ways to improve and enhance products or services, or discover new opportunities/products. However, despite the apparent benefits, this is still an untapped opportunity. A handful of companies understand and capitalize on the true potential open innovation presents, while others continue to use traditional methods. The hesitation stems from the fact that the entire concept of open innovation is still relatively new and can be perceived as risky due to IP concerns. I would argue that stagnation and disruption are even riskier (see the Forbes cover on the right for a visual example). One way to eliminate some of the risks is by starting with smaller projects, according to Steve Rader, who is the deputy director of crowdsourced innovation at NASA.
Let me share some of the reasons why more organizations large and small should begin to embrace the concept of open innovation challenges.
Open innovation can be an appealing option if companies face the following issues:
Inflexibility
Many large companies have been built on a solid foundation. There are departments that coordinate with one another and assume responsibility for different aspects of the business. They have specific expertise and knowledge for the industry they are working in and assume complete responsibility for creation, production, and sales. Each group has domain knowledge that could be applied, but other priorities take precedence which leads to my next point.
Role Definition
Middle management’s job is to ensure employees have clear roles and responsibilities that they are expected to fulfill. Motivating factors for employees are bonuses, raises, and promotions. These motivations aren’t always in line with taking on a projects that have a high probability of failure (innovation is difficult). This is why people often don’t take the initiative to go beyond their job descriptions for these types of projects.
Burnout
There will always come a time when designers and innovators will reach a point of burnout after being pushed time and time again. This inability to come up with new ideas, upgrades, or enhancements can often create a backlog in the company.
How can crowdsourced innovations help?
There is a reason why many big companies like NASA opt for open innovation; it is highly beneficial and useful. By leveraging open innovation marketplaces, you will be able to achieve the following benefits:
True Feedback
The reality is, crowds that are involved in open innovation challenges don’t have the same responsibilities to the organization hosting the challenge. That means they wont suffer any consequences for submitting a design that isn’t ideal. Similarly, they will also not be shy about feedback since they are the end receivers of the product or service. This means you can get a range of different ideas that can help your organization solve a problem, or propose a new product/service.
Newer Perspectives
When you engage crowds, you will be exposed to a diverse range of ideas, suggestions, and perspectives. Concepts like burnout are quickly resolved when you are feeding off the energy and innovation of others. This newer perspective is something that can be explosive for your company. The best part is that you can choose from a vast pool of ideas and perspectives.
Cost-Effective
Open innovation can be more cost-effective than traditional methods. Depending on the challenge, you can get real solutions to problems you’ve been unable to solve and new ideas for products that can make a real impact. For example, we ran a pilot with NASA and helped them realize a 90% time and cost savings improvement. It was for a very specialized skillset as well.
Bonus: A unique way to identify talent
Looking for talent? Instead of launching a challenge for a cash prize, companies can reward the challenge participant with the most innovative approach by offering a full-time job, internship, or freelance contract. When you post an open innovation challenge on Assist 2 Develop you are engaging an active community of problem solvers. You can activate a pool of senior engineers and designers to help judge your challenge based on the criteria you specify. This can streamline your selection process, and in the end, time to market.
Open innovation is here to stay. Organizations that embrace the crowd will have the ability to do more with more instead of struggling to do more with less.