Open innovation is one of the most resonant and promising business strategy initiatives of recent years. 

Open innovation can be quite profitable for your business, especially if you are looking to expand your market reach and to develop new technologies and products. However, it’s not without risks and challenges.

For that reason, we will tell you what open innovation is, how it differs from other types of innovation, why it is important and how it can benefit you. We will also give you some examples of how to put it into practice without dying in the attempt.  

What is open innovation and what are its characteristics?

Open innovation consists of the collaboration of different companies for the creation, development and optimization of products and technologies.

According to this premise, true development is achieved through internal and external ideas to the company. Also, through joint research, collaboration and the creation of strategic alliances oriented to innovation.

This approach goes beyond classic competition between companies. It seeks joint development towards more and better technological and methodological alternatives. All with the combined strength of two or more companies or research teams. 

This approach is not only applicable to companies. In fact, it’s quite oriented towards research teams, universities, organizations, associations and consortia. 

Open innovation is also characterized by:

• A strong focus on co-development.

• Collaboration and agreements between competitors.

• Business transparency.

• Partnerships between research teams, companies, organizations and universities.

How important is open innovation?

In an increasingly globalized market, collaboration between companies and research teams is crucial. On the one hand, open innovation makes it possible to combine efforts and resources towards joint progress, whether between companies or research teams.

On the other hand, this shared effort is key in expanding the number of resources, technologies and talents for your innovation projects. Moreover, it can help you minimize costs, even in the most ambitious projects.

On the other hand, open innovation, unlike closed or traditional innovation, is not focused on competition. On the contrary, it’s focused on collaboration and joint progress, making it vital for the creation of strategic alliances.

This approach is also vital for establishing market agreements, laws, regulations, processes, protocols and good business practices. 

How is open innovation applied?

1. Collaboration

Companies and organizations can establish collaborations with other companies, startups, universities, research institutions or other organizations to share knowledge, resources and develop joint solutions. 

This may involve joint research projects, knowledge sharing programs, strategic alliances or even mergers and acquisitions.

2. Crowdsourcing

This is a collaborative model in which the contribution of a broad community, usually online, is solicited for ideas, knowledge, solutions or participation in a given project.

Crowdsourcing leverages the collective intelligence and diversity of skills and knowledge of a community to:

• Solve problems.

• Generate innovative ideas.

• Gather more data.

• Perform complex tasks, such as developing a new technology.

• Participate in collaborative projects.

Also, through crowdsourcing, you can get fast, cost-effective and diverse results, results that are more difficult to obtain if you only have internal resources.

3. Open innovation platforms

These are online tools and spaces that facilitate collaboration, idea generation and knowledge sharing between internal and external stakeholders. 

These platforms provide an exceptional digital environment, one where participants can contribute, interact and co-create innovative solutions. 

Open innovation platforms also give you the opportunity to co-create solutions in collaboration with the community. 

Here, participants can work together to refine ideas, bring complementary expertise and contribute to the development of more complete and viable solutions. 

It all adds up to: diversity of perspectives and more innovative solutions tailored to your real needs.

4. Incubators

Organizations can establish incubator or accelerator programs to support and nurture external startups, companies and entrepreneurs working in areas relevant to their industry. 

These programs allow them to connect with emerging talent and ideas, and can also provide them with the opportunity to invest in or acquire promising early-stage startups.

In other words, excellent opportunities to get in touch with investors and even angel investors. And these represent huge investment and funding opportunities.

The 3 types of innovation

To better understand open innovation and its applications, we need to know about the other types of innovation.

We already know the first one, but let's take a brief look at it.

1. Open

Open innovation is based on the premise that the best ideas and solutions can emerge both inside and outside an organization. 

In this approach, an organization seeks to collaborate and leverage external knowledge and ideas. It engages external stakeholders such as customers, suppliers, universities, startups and the community at large to contribute ideas, expertise and resources.

And now, let's move on to the other two alternatives.

2. Closed

Closed innovation, also known as internal innovation, refers to the approach where your organization seeks to generate ideas and develop innovative solutions, all based on your internal resources and those of your company. 

As you can imagine, this is the most traditional innovation method.

In this case, the innovation process is carried out within the confines of the organization, usually by the internal R&D team. Research, development and implementation of ideas are done internally and protected under intellectual property rights.

3. Mixed

Mixed innovation, as the name suggests, combines elements of closed innovation and open innovation. 

With this approach, your company or organization can focus on its internal innovation activities. And at the same time, on seeking external collaborations and expertise. 

This approach combines the best of both worlds, but is still more conservative than open innovation.

On the one hand, there may be projects and areas where your organization needs to focus on internal innovation. For example, your business, marketing and production strategies.

In other cases, such as the development of new technologies and in-depth research, you may seek collaboration with external players to boost the innovation.

Differences between open and closed innovation

Having said all this, let's take a better look at the advantages of open innovation over other methodologies.

Benefits of open innovation

Open innovation represents a great number of benefits, but what benefits exactly? Is it really worth it?

The answer is YES, and these are some of its major advantages:

1. Greater access to resources and knowledge bases

Open innovation represents joint research, but also shared research and access to databases of other companies and research teams.

We are talking about vast, immense, well-nourished databases, perfect for complementing your research and carrying out innovative projects. In other words, you will have access to much more information with much less effort.

It can also give you access to resources and new technologies to develop your research. And of course, it also gives you the opportunity to help other companies and organizations move all kinds of projects forward.

2. Reduced costs

More resources with less effort means less expense for you and your company, team and organization.

Besides, you can spend what you save on information and resources to invest in your team and in the development of new innovations. Therefore, you'll have a better chance of getting your projects off the ground even if you are on a tight budget.

And the best part, your projects will be more sustainable in the long run. And by developing them together with other companies, you will even be able to carry out more ambitious innovations. 

3. More innovation speed

Joint efforts are much more efficient, functional, and of course, fast, as long as they have an excellent organization. 

Greater access to resources, technologies, databases and knowledge bases, added to the division of costs represents:

• More speed to innovate.

• Better prepared teams.

• Better quality standards in the final product.

Again, to meet these objectives, every project requires a great organization, resources and well-prepared teams.

Otherwise, teams could end up interfering with each other, delaying projects and innovation in general.

4. Expanding Networks and Strategic Alliances

One of the clearest benefits of open innovation is the possibility of expanding your network of contacts. And of course, to establish strategic alliances.

In this environment, networking is a fundamental and decisive resource, especially if we are talking about open innovation projects.

And as your network of contacts continues to grow, you will have better opportunities for collaboration, strategic alliances and partnerships, and even investment.

5. Talent attraction

Open innovation will help you attract the attention of the best qualified professionals.

You see, today's specialists are not only motivated by attractive salaries. Many professionals are looking for innovative projects, projects capable of making a real difference.

And these are the kinds of projects you can undertake through open innovation. Moreover, by expanding your network of contacts, you will not only find collaborators and stakeholders, you can also get new prospects for your team.

And of course, you can position your company as an innovation leader in the job market.

Disadvantages and Considerations of Open Innovation

Open innovation also entails certain risks that are impossible to ignore. Some of the most considerable are:

1. Confidentiality

Collaborating with other companies and organizations forces all project participants - including you - to share information, databases, resources, technologies, names, etc.

This is the kind of information you would not share with your competitors in other contexts. By revealing this data, you can reveal some of your most confidential internal strategies and methodologies.

In addition, the information shared also requires privileged access that could cause confidentiality issues. And the chances of security breaches would be higher.

2. Patents 

Patents can always cause problems, but especially in joint projects and open innovation projects.

• Who owns the patents.

• Who had the initial idea and when.

• Who owns the copyrights and intellectual property.

Among other aspects.

Patent problems can cause the end of collaborations and strategic alliances. And they can turn into legal conflicts between the parties involved.

For this reason, it’s best to seek all possible legal support before entering into a joint collaboration. And of course, establish contracts and agreements on patents and intellectual property.

Although there are risks of confidentiality, unfair competition and patents, open innovation remains a formidable model for promoting collaboration between companies and organizations.

Open innovation offers countless opportunities to obtain more and better resources, data and means to carry out your projects. It also represents opportunities to network and connect with potential partners, collaborators and investors.

And with the right organization and determination from all parties involved, the results in terms of innovation are mind-blowing. 

Ready to put this innovation model into practice? Let us know what you think, how you would like to implement it and what other ideas you can think of to develop new innovations.