04/11/2019
By
Lucas Bueno

Open Innovation: definition, what types and benefits

We could summarize open innovation as the use of inflows and outflows of knowledge to accelerate internal innovation and expand markets. But that would be far less than the concept can embrace. In this article, we go further. Keep reading to understand in depth what open innovation is and how it can be used in […]

We could summarize open innovation as the use of inflows and outflows of knowledge to accelerate internal innovation and expand markets.

But that would be far less than the concept can embrace. In this article, we go further. Keep reading to understand in depth what open innovation is and how it can be used in your business!

The open innovation concept

In his book, Open Innovation: The New Imperative for Creating and Profiting from Technology (Harvard Business School Press – 2003), researcher Henry Chesbrough coined the term Open Innovation.

According to the author, it is the use of intentional knowledge flows to accelerate internal innovative power and expand markets for external use of innovation. Once open innovation is adopted, the boundaries of the organization become permeable and allow resources to be combined with external collaborators.

The counterpoint relates to closed innovation companies, which innovate using only internal resources. In this case, ideas are evaluated and only the best and most promising are selected for their development and commercialization. Those with less potential, are abandoned.

Thus, the difference is that in the case of closed innovation, the ideas, inventions, researches and development required to put a product on the market are generated solely with internal efforts.

By applying the open innovation system, the company can use external resources such as technology and partnerships with startups and universities and, at the same time, make their own creations available to other organizations.

Under the open innovation paradigm, there is an important flow of external knowledge to the organization that transforms into collaborative projects and causes the purchase and incorporation of technologies created by third parties.

At the same time, innovations generated within the company can be sold as technology and/or industrial property, as they are not only applicable to your business model – or because the company doesn’t have the capability or experience to develop the invention.

The 3 types of open innovation

We can categorize at least three types of open innovation: inbound, outbound and coupled. See below each of them detailed.

Inbound

The English term inbound open innovation refers to a type of innovation that happens when a company appropriates an innovative idea created by other entities, so that it can be transformed through its own innovation process, in order to generate value for itself.

Usually, this happens with the incorporation of technologies developed by other companies. For example, an app created by a startup can transform the client service of a bank.

Outbound

The term outbound open innovation refers to a type of innovation that happens when a company develops an asset derived from its innovation process and makes it available to external partners for the purpose of developing and/or marketing it.

An example of this is when a company creates a product or service and gives it to a business partner to improve or even when a commercial agreement is signed, with the partner company increment or simply as a distribution channel.

Coupled

Coupled open innovation is a term that describes a type of innovation that is the union result of two or more companies. This “marriage” takes place with the goal of generating innovative ideas together, so that the group can individually explore the resulting assets.

Open innovation benefits

There are many advantages of opening up the innovation process. They can be summarized as follows:

  • Reduction in time and cost of innovation projects;
  • Incorporating solutions and innovations in the form of ideas, patents, products and technologies that would never have been generated by the company due to lack of time, knowledge and technological resources;
  • Access to markets where partners are most active and the company has limited participation;
  • Adaptation of the knowledge base, according to market changes;
  • New business opportunities through R&D activities not exploited internally;
  • Marketing of inventions which, due to lack of capacity or for strategic reasons, can not be placed on the market by the owner company.

The search for innovation outside the company boundaries and access to semi-ready technologies and solutions means that the costs of investing in research and development, as well as the risk of something goes wrong, are reduced.

According to Professor Henry Chesbrough wrote in an article in Forbes Magazine, “open innovation is a more profitable way to innovate because it can reduce costs, accelerate time to marketing, increase market differentiation and create new revenue streams for the company”.

Read more: How does MJV work the innovation process?

Open innovation isn’t antagonistic to closed innovation – a conclusion

As you can see, the concept of open innovation presupposes the pursuit of innovation beyond the company boundaries, using external resources to find answers to business challenges, bringing several benefits to the organization.

Finally, we add that open innovation must be seen as complementary to what is already done internally. It comes to open the organizations’ horizons, provide more ways to continue developing and competing in a market that demands more and more inventiveness and disruption.

Here at MJV, we apply many methodologies, tools and approaches to the realization of open innovation projects – Design Thinking, Lean Startup/UX, Design and Agile Sprints, Digital Marketing, Hackathons, etc. We understand that the various stages of the Open Innovation process demand different strategies to achieve the expected results and, therefore, this know-how is applied in a specific way in each of them.

Did you understand what is open innovation? To further explore this issue, download now our e-book “Open Innovation: The Innovation Revolution“!

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