Open Innovation - Disruption

Innovate or Die: Open Innovation and 4 Key Measures to Stay Alive

This is a fascinating time to be alive. Technology is rewriting the rules of humanity. Everything is changing, how we interact, the way we do business and even the way we spend our free time. This constant and rapid state of change is creating new and big challenges… but even bigger opportunities.

Open Innovation - Disruption

Companies commonly used to assume the best route to innovation was to control processes by keeping all data and knowledge internally and hiring the best employees. However, during the last decades, the world observed the emergence of different trends changing the rules of traditional work. These trends are marked by globalization and job volatility, accompanied by an increasing number of highly-skilled people and a new generation, the “millennials“, with a different mentality and values around work. Hence, the interaction between companies and talents changed, creating new flows of goods and knowledge, driven by a greater mobilisation of people.

On the other hand, important technological advances led by connectivity and digitisation are shaping customer’s behaviour and expectations. This new compass of change is characterised by the development of products with seamless user experiences and a higher level of standards. Thus, pushing businesses to follow trends towards sustainable value creation.

Traditional companies have also started to deal with a new competition since the entry of fast-emerging businesses referred to as “startups“. These are generally known by their agility and fast implementation of their products or services, giving them a great growth potential.

Moreover, experts explain that technological advancements are driving to “furious rates of change”. In fact, the velocity of obsolescence, referred to the rate of speed at which a product or service and/or the competitive advantage of it will lose its value, has dramatically increased. Meaning that the time between the growth and decline phases of products or services is progressively shorter. As featured on The Guardian, a study made by the German environment agency was conducted to analyse consumers’ reasons for replacing electronic appliances. The research showed that the proportion of all units sold to replace a defective appliance grew from 3.5% in 2004 to 8.3% in 2012. However, more than 60% of replaced televisions were still functioning in 2012. This phenomenon could be explained by the impact of increasing technological advancement, shortening the lifespan of products, but mostly by a customer desire to replace them for newer models. As a result, companies have to not only adapt to these new ways of interaction and requirements, but they have to do it very fast in order to maintain a competitive edge.

The major challenge is then for large companies, usually built on cumbersome processes and lack of agility. As a matter of fact, today it is very difficult for a company to innovate individually. The way is to focus on core competencies and to collaborate with external entities such as other companies, universities, research centers, etc. To stay alive, it is crucial for companies to nurture initiatives between themselves and to build an innovation ecosystem outside their own boundaries.

This is how “Open Innovation” was born. In 2003, this term introduced by Henry Chesbrough was defined as an open system that fostered the exchange of resources of a firm with its external environment. However, nowadays, this term is much broader. Today, Open Innovation is no longer a simple flow of ideas, people and knowledge, but a profound cultural, organizational and strategic transformation that companies need to establish to adjust to the latest market trends.

This does not mean that old innovation methods should be discarded. Yet, as a contrary, it means that companies have to become aware of the increasing importance of more collaborative operating models, such as open innovation, agile methodologies, and co-creation. Good ideas can also come from outside the company’s boundaries. Hence, it is essential to manage change in a strategic way.

Here are 4 key measures that companies could take into account when applying more collaborative operating models:

  • 1. STIMULATE A NEW CULTURE: this transition requires a new mindset for both executives and employees. Employees are not just workers with a defined set of job or managerial skills but the ones that drive change in companies. And directors are the ones that define and support the change. By encouraging companies to integrate the whole company at all levels increases the chances of better engagement and implementations of new processes and practices.
  • 2. ALIGN THE COMPANY’S INNOVATION AND BUSINESS STRATEGIES: to avoid misalignments of the business goals.
  • 3. ENGAGE THE RIGHT PEOPLE: the innovation project must be led by motivated and committed people. It is fundamental that these people are fully involved in the strategic planning and vision of the company in order to develop a successful innovation project, with a clear and sustainable vision and planning.
  • 4. ALWAYS FOCUS ON THE CLIENTS: it is essential to deliver products and services that are responsive to real market needs.

An important point to highlight is that innovation is no longer the domain of a chosen few. A large number of companies implementing more collaborative operating models are already established in the market. Innovation includes improvement, but improvement is just a small part. Innovation is about creating a breakaway differentiation or as Geoffrey Moore, author of Crossing the Chasm, describes as “an outcome that competitors are either unable or unwilling to match.”

From my point of view, what is important to retain is that, in an era of digital business and rapid technology changes, no company can ignore the imperative to innovate. Failing to do so, is an invitation to slowly die.

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