10 Points on Open Innovation

These points are based on the recent report ‘The Open Innovation Model’ from the ICC.

1. Open Innovation can be broadly defined as a collaborative approach to innovation where there is knowledge exchange with external organisations.

2. A company should view open innovation as a strategically managed exchange of information, based on the realisation that the best ideas will often come from outside.  Also in practical terms few innovation companies are able to realise the potential of every new finding.  Open innovation provides the possibility of ‘outsourcing’ such things.

3. There are different forms of the open innovation model, for example, based on bilateral collaboration, networks and ecosystems.  Open innovation is therefore a very flexible way of operating.

4. Open innovation has come about in response to many factors: globalisation, increasing complexity of products making R&D complicated and risky, industry convergence in certain areas (e.g. the food and pharmaceutical sectors), advances in ICT reducing the ‘perceived’ distance between companies, the increased tradeability of IP rights and the growth in in private venture capital making it easier to create startups to commercialise inventions.

5.  Open innovation requires the proactive management of IP.  There need to be clear predictable IP arrangements between all parties, and so as a practical matter there need to be effective IP protection systems in the relevant territories.  One consequence of this is that small players with less, or no, IP may be at disadvantage

6.  In general open innovation collaboration allows rapid product development (and shorter time to market), more innovations in the long term, being able to exploit new market opportunities and flexibility in the face of changing market conditions.

7. Organisations participating in open innovation do require ‘absorptive capacity’ allowing them to identify and use valuable external information.

8. Open innovation will also require organisational changes to manage the process.  For example, a joint steering committee may need to be set up.

9. There are transaction costs in setting up and managing an open innovation strategy.  There is also an ‘appropriation risk’ of your knowledge being stolen and so decisions will need to be made about how much to reveal to a collaborator.

10. Goverments can help by open innovation by improving the IP system, educating innovators about management of IP and fostering the creation of innovation networks and clusters,

The report can be found here.

You may also wish to see related articles Top 10 Points on the Trans-Pacific Partnership and Top 10 Points from Banking on IP.