Back in 2005 or 2006, I was on a business trip in Germany. One night, I was having dinner with a business partner of mine, an innovation manager at a large German chemical company. We chatted about this and that, and I casually remarked that while open innovation was making good inroads in business practices in the United States, its progress was significantly slower in Europe, Germany being no exception.
“I can easily explain that to you,” told my dinner partner, “the reason is our labor laws.”
I put down my fork. “What do your labor laws have to do with open innovation?”
“Well,” was his response, “when you guys in the U.S. want to lay off people, you’re free to do so. But here in Germany, you can’t fire people at will. So, before launching an open innovation initiative, our management wants to make sure that all our own people are fully employed.”
While certainly amused by my partner’s take on the nature of labor relations in the U.S., I wasn’t totally surprised. The perception that open innovation was taking away R&D jobs was alive and well in many tech companies across America. Of course, such a perception didn’t make preaching the open innovation gospel any easier.
Times change and public opinions change with them. Today, no one seriously believes that open innovation takes away any jobs. (I guess, the honor now belongs to Artificial Intelligence.) Yet, the true place of open innovation in the corporate innovation toolbox remains far from settled.
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A friend of mine, an innovation manager, likes to joke: “Innovation is simple…but not easy.”
There is a reason for this uneasiness. Modern corporations, especially large ones, are obsessed with execution. Predictability of outcomes and the precise match between plans and achieved results are the metrics against which firms measure their performance and that of their employees.
But innovation is messy. By its very nature, it’s highly unpredictable and relies on constant experimentation with most experiments ending up in failure. The lack of the predictability of outcomes makes innovation difficult to plan, especially when firms attempt to move their innovation goalposts beyond the incremental improvement of existing products.
Open innovation kicks it up a notch to this complexity by increasing the level of uncertainty: now, one needs to innovate with someone outside the corporate walls. This immediately triggers a round of additional concerns and complications.
First, internal innovation teams often interpret the introduction of open innovation as a vote of no confidence in their abilities to achieve the firm’s strategic innovation goals. So-called Not Invented Here Syndrome (NIHS), a rejection by internal teams of ideas and solutions that did not originate within the firm, almost inevitably ensue. (One should realize that the NIHS affects internal innovation, too, but this is a topic for a separate conversation.)
Second, the perspective of working with “strangers” terrifies the firm’s legal department. Everyone who tried to initiate an open innovation project from within a private company would immediately remember a monstrous volume of paperwork and a ridiculous number of questions starting with “What if someone…?” A bordering on insane, the worst-case scenario speculation follows.
Finally, adding to the adoption problems is widespread confusion over open innovation tools. Some of them, such as crowdsourcing, are not terribly intuitive and need training and experience to use. Worse, what is often missing is a clear understanding that each specific open innovation tool is only good when applied to a matching innovation task. Tool mismatching—when a specific tool is being chosen without careful consideration of its applicability—is depressingly common. (I’ll return to this last point in a separate post.
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At this point, many firms make a mistake that may appear tactical but in fact, can have a serious negative strategic impact: they create a separate open innovation team (that is, not formally a part of the larger corporate innovation unit).
Why do I think this is a mistake?
Corporate innovation requires extensive internal business development, a process by which members of the innovation team try to “sell” new ways of solving problems to other, often skeptical, corporate functions and units.
This isn’t easy by itself but with the added complexity that comes with open innovation, this internal business development often becomes a nightmare. A small open innovation team (it’s always small because open innovation teams are routinely under-resourced) is struggling to find internal clients to do things that sound complicated and often counterintuitive. It’s like going door-to-door around a neighborhood offering a product no one has heard of.
That’s why I strongly believe that in firms that are just starting using open innovation approaches systematically, the open innovation team must reside within a larger corporate innovation unit. This way, selling its “products” will become more organic and therefore more manageable.
Of course, as the open innovation program matures, the team will grow and at some point, may branch out. But starting with a separate open innovation team from the start is a sure way to set it up for failure.
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For someone who for the past 15+ years has been preaching the virtues of open innovation, this might be a strange confession to make. But I’ll make it nonetheless: there is no such thing as open corporate innovation.
There is only innovation, a process that drives the firm’s strategic growth. This innovation has a single body, one side of which is composed of tools utilizing the collective wisdom of the firm’s own employees. The other side of this body extends to the rest of the world trying to reach out to the diverse pools of global talent.
Creating open innovation programs without establishing internal first looks to me like a tree without roots. Or, if you prefer, a house with a roof but no walls.
No, no, and once again, no! I’m not saying that firms should postpone experimenting with open innovation until they establish internal innovation programs first (which may take years). My point is that the full potential of open innovation can only be realized by the concerted effort of properly connected people within a firm capable of identifying and properly defining their own needs. Or, saying this differently, the power of open innovation comes from the strength within.
Image credit: https://thechurchwithoutwalls.com/believe/