Companies like Bosch, Unilever, Siemens, Google and more have leveraged the open innovation model to tap into the external startup ecosystem and access new ideas, technologies, and expertise—all while capitalising on their existing assets.
It’s a collaborative approach that allows businesses to:
We've created this comprehensive guide to give you a better idea of how open innovation works in practice, its benefits, and how to implement it effectively.
Open innovation is a strategic approach that involves leveraging both internal and external ideas, knowledge, and technologies to drive innovation and create value. Unlike traditional innovation approaches that rely solely on in-house resources and R&D, open innovation encourages collaboration with external entities, including:
The approach accelerates innovation by leveraging collective intelligence to fuel the creation of groundbreaking technologies, business models, products and services.
Now that we’ve covered some basics, let’s take a closer look at how open innovation differs from the more traditional “closed innovation” model.
Open and closed innovation represent two different paradigms for tackling the innovation process:
Each approach has its own set of strengths:
For some years now, the open innovation model has been gaining popularity as a superior way to fuel innovation while keeping internal costs low, speeding up the time to market and decreasing risk by sharing it with partners.
Here are some of the key differences between the two approaches:
Closed Innovation
All R&D is internal. Companies rely on their own research staff and resources.
Open Innovation
Integrate external technologies or outsource certain R&D aspects to accelerate innovation.
Closed Innovation
Businesses control their intellectual property (IP) and development processes strictly.
Open Innovation
IP can be shared with partners (shared, sold, or licensed), and companies can tap into externally available IP as well.
Closed Innovation
Ideas are generated, developed, manufactured, marketed, and sold using internal resources.
Open Innovation
Dynamic and iterative, with ideas coming from partners, customers, academia, or even competitors.
Closed Innovation
High levels of investment in R&D are required, as the company bears all the costs and risks.
Open Innovation
By leveraging external resources and partnerships, companies can potentially reduce costs and risks.
In most cases, the choice between open and closed innovation will depend on each company’s industry, culture, size, and the nature of the markets it serves. Most companies use a blend of both models to optimise their innovation strategies.
Both corporate accelerators and open innovation are strategic approaches used to innovate, boost growth and gain a competitive edge. While they are distinct concepts, they both emphasise the value of:
Let's take a look at each strategy individually.
Open Innovation
A strategy that leverages external sources of technology and innovation to complement and enhance internal R&D efforts. It involves companies reaching out to partners, universities, customers, startups, and even competitors to co-create value.
Corporate Accelerators
Partnership programs set up by corporations to engage and partner with startups. They often provide funding, mentorship, office space, and other resources in exchange for equity in the startup
Open Innovation
Corporate Accelerators
Think of corporate accelerators as a mechanism for open innovation. While open innovation opens the door to external collaboration, corporate accelerators help integrate this external entrepreneurial spirit into the corporation's core through a structured and ongoing program.
Corporate accelerators use various collaboration formats to engage with startups, each tailored to achieve specific strategic goals. Here’s a quick breakdown of some of the most commonly used models:
Each of these collaboration formats offers distinct advantages, so make sure to choose a model that can be tailed to your unique objectives, corporate growth goals and return targets.
When developing an open innovation strategy, it’s important to consider the type of returns you’re aiming for (i.e. financial or innovation returns?). While both types of returns are beneficial, its a good idea steer your efforts in the direction of the specific goals you wish to achieve.
The financial pathway focuses on investing in startups, scaling them and producing financial returns through exists. Accelerators are useful in this scenario because they help startups refine their business models, speed up their growth, and achieve a level of maturity needed to attract further investment or prepare for a successful exit.
Examples of collaboration models in this pathway include:
Useful key performance indicators (KPIs) for this pathway include:
The innovation pathway focuses on integrating startups into larger corporate structures to spur on-the-ground innovation. This integration often results in the development of groundbreaking products and services that can significantly enhance a company’s offerings.
Examples of collaboration models in this pathway include:
KPIs for this pathway include:
Here’s an example of how open innovation vehicles like accelerators can help you achieve both financial and innovation goals:
Entity: Accelerator
Founded: 2023
EntertainmentLAB is shaping the future of entertainment by connecting the brightest startups across the globe with top corporate players. It identifies, develops, and integrates new products an services into the value chain and/or ecosystems of its corporate partners.
Here’s how EntertainmentLAB delivers both financial and innovation returns:
There are several types of open innovation models, each catering to different strategic needs and contexts:
Outside-in open innovation involves companies actively sourcing new ideas, processes, and insights from external entities, including startups, research institutions, universities, customers, and even competitors. The goal is to bring external knowledge and technology into the company to complement and enhance its own capabilities, speed up innovation, improve existing offerings and reach new markets.
This model focuses on leveraging and monetising internal assets like ideas, IP or technologies by licensing, selling, or spinning them off to external partners. The approach enables companies to capitalise on existing assets and resources while leveraging the expertise of external partners to bring new products and services to market.
Coupled open innovation combines the inbound and outbound models. This model often takes the form of strategic alliances, joint ventures, or partnerships in which both entities contribute and benefit from shared intellectual property. The key to success in this model is ensuring a balance of give and take that aligns with the strategic goals of each party involved.
Crowdsourcing through open calls can yield unexpected and valuable insights from a broad spectrum of contributors. This involves issuing open calls to external communities, inviting them to contribute ideas or solutions to specific challenges. The approach leverages the collective expertise and creativity of a wider audience, leading to a more comprehensive and inclusive innovation process.
Building networks and strategic partnerships with startups, research institutions, and industry experts enables companies to leverage cutting-edge ideas, technologies, strategies and expertise, enhancing their capabilities and leading to more effective solutions to complex challenges.
Engaging in collaborations across different industries to exchange ideas and explore innovative solutions can lead to valuable breakthroughs. By combining diverse expertise and perspectives, companies can build broader ecosystems that include various players and innovation vehicles, including incubators, accelerators, venture arms and more.
Involving customers in creating and developing new products and services helps ensure you’re launching offerings your target audience will love. By soliciting their feedback, preferences, and insights, you can tailor your products and services ensuring their profitability and reducing risk.
Open innovation allows companies to tap into a broader range of ideas and technologies beyond their internal resources, leading to a faster, more efficient and more profitable innovation process.
By collaborating with external partners, companies can share the financial and operational risks of research and development. This can lead to cost savings and more efficient resource use.
Leveraging external innovations can speed up the development process, enabling companies to bring products and services to market more quickly than if they were relying solely on internal capabilities.
Open innovation provides companies with access to essential tools and resources, enabling them to pivot or scale their operations quickly. This adaptability ensures they stay responsive to emerging market changes and evolving customer expectations.
Open innovation can lead to highly valuable collaborations and partnerships that generate cutting-edge products and services. The influx of new ideas, technologies and expertise can also help companies bring new offerings to the market faster, creating a first-mover advantage over the competition
Managing IP rights can become complicated in open innovation settings because there is a risk of disputes over ownership. Companies should establish clear agreements to protect their interests during collaborations.
External innovations may not align with current processes or technologies, making the integration complex and resource-heavy.
Large companies typically have formal, risk-averse cultures and slower decision-making processes, while startups embrace lean and agile innovation processes and take bigger risks. These disparities can lead to clashes during collaborations.
Relying on external sources implies shared control over the innovation process and its outcomes. Companies might find themselves dependent on external entities when making critical decisions about how to tackle new technologies or innovations.
Effective communication and coordination are essential in open innovation, especially when multiple stakeholders are involved. Misalignments and misunderstandings can delay projects and lead to inefficiencies.
Navigating privacy, security, and compliance issues can be challenging as these may vary greatly across industries, markets and geographic regions.
Without a structured process, collaborations can become disorganized, leading to missed deadlines, unmet expectations, and potential failure of the innovation initiatives.
Initiative: BMW Open Innovation
BMW’s open innovation efforts include connecting with startups, research institutions, and other external partners to foster collaboration and co-creation of innovative solutions. They focus on unlocking the innovation potential of entrepreneurs, cross-industry technologies, intrapreneurs and innovation crowds in areas like automotive technology, digitalisation, sustainability, and mobility services. They have several entities dedicated to helping them achieve this goal, including BMW Startup Garage, BMW Crowd Innovation, BMW Technology Scouting, BMW Accelerator and more.
By fostering partnerships with diverse external entities, BMW is integrating new ideas and technologies with high potential into its offerings, diversifying its portfolio, creating new sources of revenue and maintaining its competitive edge in the market.
Initiative: Bosch Open Innovation Partnerships
Bosch Open Innovation Partnerships fosters collaboration with startups and external innovators to develop new technologies and solutions in areas like IoT, mobility, automation and smart technologies. Participants who are chosen for the program gain access to Bosch’s extensive resources, mentorship, and access to its global network, facilitating the rapid development and integration of cutting-edge solutions.
The Initiative leverages external expertise and new perspectives, accelerating innovation and enhancing Bosch’s product portfolio. By partnering with startups, Bosch is integrating innovative (and potentially disruptive) technologies into its offerings, driving advancements in connected devices and smart solutions while fostering a dynamic ecosystem of innovation.
Set clear and attainable objectives to work toward. This will serve as the foundation for you to build your innovation strategy and find external partners with the same goals. Useful questions to consider at this stage include:
Whether it's improving existing products, exploring new markets, or solving specific challenges, having clear goals will help you direct your efforts effectively.
Engage with a wide range of external partners to diversify your sources of innovation. Potential partners can include startups, universities, research institutions, and customers (among others). Consider the following questions:
Building a diverse network will bring in a variety of perspectives and innovative ideas, enriching your innovation efforts.
Cultivate a culture of collaboration and openness throughout your organisation by encouraging both internal and external teams to share knowledge and actively participate in open innovation activities. Questions to think about at this stage could be:
Recognising and rewarding contributions fosters a more engaged and motivated innovation ecosystem.
By carefully selecting and leveraging the right digital tools, companies can facilitate seamless communication to better manage the complexities of multiple innovation projects. Here are a few examples of tools that can come in handy:
Make sure to choose tools that are suited to your specific needs and goals.
Establish clear guidelines to help manage and protect your intellectual property (IP) during collaborations. This can include setting pre-established agreements like IP licensing and joint ownership models. To help guide the process, consider the following questions:
Having these protections in place and making them transparent to partners can prevent potential conflicts later on.
Agile processes promote flexibility, rapid prototyping, iterative testing, and quick incorporation of feedback, all of which are essential for successful collaboration with external partners.
The approach focuses on regular communication and feedback loops, allowing for the swift integration of diverse perspectives. This approach encourages experimentation, aligns efforts with strategic goals, and ensures that innovations meet real-world needs, making the entire process more efficient and responsive to change.
Invest time and effort in attracting and engaging with the right external partners. Potential characteristics to seek out include:
By carefully identifying and engaging the right partners, you can boost your innovation efforts through effective collaboration and shared objectives.
Transparency and trust are crucial in successful partnerships, helping to ensure alignment and clarity throughout the collaboration process. Clearly defined roles, responsibilities, and expectations enable all stakeholders to move forward with confidence and clarity. Questions to consider include:
Regular updates and clear communication channels ensure that all stakeholders are aligned and informed.
Structure and select metrics that match your overarching open innovation strategy, going beyond the traditional financial markers of success. Consider the questions below to help guide the process:
Using KPIs to assess your progress will help you make data-driven decisions and improve your strategy as you move forward. Useful metrics to measure the success of your collaborations include:
Be prepared to learn from both successes and failures and adapt your strategies accordingly. Stay up to date on what’s happening in your markets and be ready to adapt quickly based on your learning and any emerging trends or opportunities. Consider the following questions to guide the process:
Adapting based on feedback and results will help you stay ahead of potential challenges and improve your chances of successful outcomes.
When executed the right way, open innovation can be a powerful strategy, helping companies fuel growth, agility and their competitive edge. By tapping into multiple external sources for new ideas, insights and concepts, businesses can access new technologies, develop new offerings, and enhance their market reach - all in a fraction of the time and with less risk.
The model is particularly valuable for companies looking to expand their reach or streamline their R&D without exponentially increasing internal costs.
If you’re wondering whether open innovation is the right move for you, be sure to contact us. We’d love to help guide you through the process.
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