[vc_row][vc_column width=”1/1″][vc_column_text]“Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology”[Henry William Chesbrough]

Today’s products are becoming more and more complex, and the market pressure requires both to offer innovative products and to contain costs and time to market. This means that:

  • Companies, and especially SMEs, often do not internally have all the skills and knowledge required to develop a new product (e.g. materials, human factor design, etc.).
  • Companies should avoid to “reinvent the wheel”, committing resources into something (including knowledge) that already exists, trying instead to acquiring it through external collaboration, and focusing on creating real added value.

However, Open Innovation requires the development of enhanced capabilities for:

  • Exploration to find new capabilities and match these to current needs
  • Extraction to build cross organizational teams and partnerships that can deliver novel solutions
  • Exploitation to develop business structures that reflect appropriate distribution of risks and rewards.

Advantages

Open innovation offers several benefits to companies operating on a program of global collaboration:

  • Reduced cost of conducting research and development
  • Potential for improvement in development productivity
  • Incorporation of customers early in the development process
  • Increase in accuracy for market research and customer targeting
  • Potential for synergism between internal and external innovations
  • Potential for viral marketing

Risks

Implementing a model of open innovation is naturally associated with a number of risk and challenges, including:

  • Possibility of revealing information not intended for sharing
  • Potential for the hosting organization to lose their competitive advantage as a consequence of revealing intellectual property
  • Increased complexity of controlling innovation and regulating how contributors affect a project
  • Devising a means to properly identify and incorporate external innovation
  • Realigning innovation strategies to extend beyond the firm in order to maximize the return from external innovation

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