Open innovation is good for business

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Open innovation is an area only beginning to enter mainstream enterprises, despite years of success in open source communities. It allows people both inside and outside the company to get involved and collaborate on new products and processes that result in beneficial change.

Dr. Andrew McAfee, who coined the term "Enterprise 2.0," recently highlighted "open innovation" as an area ripe for mainstream business adoption. Organizations that want to find fresh approaches to their business processes, product or service offerings are encouraged to look outside traditional sources of expertise and be receptive to new contributors.

A research paper released last month by the McAfee-led AIIM Task Force on Social Business and Process Innovation, showed high levels of satisfaction for early adopters, but still found significant levels of reluctance to engage with external stakeholders such as customers, partners or prospects.

Through its case studies and survey results, the McAfee research reveals open innovation is working for its practitioners who report consistently satisfactory outcomes. Forty-eight percent of respondents engaging in open innovation reported major changes to internal processes, while 34 percent reported positive changes to external offerings.

Best summarized in what has become known as "Joy's Law," open innovation encourages companies to consider that "the smartest people work for somebody else. " Tapping into this intelligence is a key component to cost-effectively uncovering new perspectives on process and product improvements. Looking for expertise anywhere in the company org chart, across business units, regional offices and in all levels of the hierarchy can benefit a company on many levels. One research participant observed, "With a social media innovation system, you can find the ideas and develop them so that you can grow your business. "

Entrenched company culture can be a barrier to change, according to the McAfee Task Force paper. Many companies don't feel ready to embrace open innovation. Changing internal culture to be more receptive to diverse contributors can be difficult, as can re-thinking reward systems to encourage new ideas to be offered and adopted.

The McAfee research offers a series of recommendations to aid in breaking down business resistance to open innovation practices and encouraging a more open work culture. Key recommendations:

  • Do something. Open innovation is appropriate now for most if not all organizations. Ideas that can contribute to revenue growth or cost savings exist all across the enterprise — not only in management ranks.

  • Be focused. Help get creativity started by focusing on specific goals. Unstructured, vague calls for contribution are less effective than asking for concentration on specific opportunities or challenges.

  • Reward contribution and reputation. Monetary rewards aren't required, but a form of recognition of contribution, participation or helpfulness does increase participation and repeat input.

  • Open up to customers. Most of the task force respondents had "internal only " innovation communities. However those organizations that did open up more broadly to include external stakeholders received most of their best ideas from outside participants.

  • Be patient. Open innovation is not an overnight phenomenon. It means changing behavior and culture, and this requires sustained attention and effort, often accomplished slowly.

Open innovation is second nature for open source communities, but remains a relatively new concept in most businesses. More research and case studies that demonstrate the tangible benefits of an open approach to contributions, ideas and debate are needed. Keeping the focus on this important evolution in enterprise thinking is essential to helping your company stay relevant, creative and competitive in the digital knowledge economy of today.

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Cheryl McKinnon
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Vice President at AIIM, the global community of information professionals. Experienced consultant, marketer, educator in the information and content management field.
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1 Comment

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Colin Hope-Murray | February 10, 2012
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Good article, in particular I like the use of Open Innovation as a better way to describe the practice of open collaboration. In the past I have used Open Methodology, but have come to notice that there is a tone of implied constraint when responded to in conversation. Innovation implies positive change and open suggests transparency.

I very much agree with the McAfee Research recommendations though I would emphasize the focus on specific goals. Unless there are clear and unambiguous objectives asking people to be openly innovative is like asking them to participate in Social Media; without an end in focus people will dabble and either become distracted or eventually resort back to their workday habits.

Even when specific goals have been set focus is paramount, as scope creep can derail the best intentioned project. Open innovation is exhilarating and can open the floodgates of ideas producing a plethora of innovations. Good management practices are needed to remain on track and ensure that the supernumerary innovations are recorded and reviewed in regular planning cycles.

The reluctance to engage mentioned in the article is commonplace for the following reasons to name but two:

1) Enterprises are still focused on shareholder value and meeting stock market expectations. This forces short termism, that is maximizing profits and efficiency at the expense of long term growth, employee loyalty and most importantly focus on their customers. Open dialogue with employees and customers is almost antithetical. Roger L. Martin's book - "Fixing the Game" articulates the need to focus on the real market, where business interacts with customers, rather than the expectations market where business reacts to investment mechanisms.

2) Hierarchy and the culture of protectionism. All too often openness and collaboration is obstructed by organizational segmentation and the belief that ideas and knowledge are the property or responsibility of anointed groups and individuals. The thought of sharing is anathema because to do so is to dilute the value of the group or individual. Those that are aware of their shortcoming and those that are unaware yet believe in their own infallibility will both resist the call to collaborate, one from fear and the other from arrogance.

Establishing and maintaining the objectives, especially those that are culture changing, requires not just leadership, it needs champions. Champions are individuals who walk the walk, challenge business thinking, break down the walls of resistance and demonstrate that sharing is to everyone's benefit especially the business.

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