According to the BCG Global Innovation Survey 2023, nearly 9 in 10 global innovation executives expect to increase or maintain spending on an open innovation ecosystem. Why are organizational leaders prioritizing investment in open innovation?
Open innovation stems from the idea that organizations can no longer introduce new concepts, methods and products using internal resources alone. In the current state of information abundance, organizations can gain a competitive advantage by leveraging external resources in their innovation efforts.
This blog post explores the benefits of open innovation and reveals how leaders can foster an organization's culture of open innovation. You’ll also learn how earning an EdD in leadership prepares professionals with leadership goals to inspire change.
What Is Open Innovation?
Open innovation is an innovation process that strategically uses internal and external resources to bring something new to the market.
Internal resources refer to an organization's people, processes, tools and ideas. External resources refer to those outside of an organization, including:
- Customer feedback
- Organizational suppliers
- Universities
- Consultancies
- Public communities
- Research institutions
There are three types of open innovation:
- Outside-in: Also called inbound open innovation, the outside-in approach brings external innovations into an organization’s innovation process. For example, a company could purchase and use intellectual property from another entity to develop its own innovation.
- Inside-out: An organization using inside-out open innovation, or outbound open innovation, transfers internal ideas to an external partner. A company may partner with a venture capital investor to develop an idea.
- Coupled: Coupled open innovation leverages the outside-in and inside-out approaches. Multiple organizations work together to generate innovation.
What Are the Benefits of Open Innovation vs. Traditional Innovation?
Organizations that use the traditional innovation process do not integrate outside ideas. Innovation occurs within the organization, relying exclusively on internal resources.
Compared with traditional innovation, open innovation can help organizations improve efficiency, cost savings and customer engagement.
Benefit #1: Efficiency
Open innovation is an efficient way to bring new ideas to market.
Consider an organization that purchases an innovation from another entity or crowdsources ideas from customers. In both scenarios, open innovation can reduce the time needed to launch something new. This speed to market creates a competitive advantage.
One example of an open innovation process that improves efficiency is IBM InnovationJam®.
IBM InnovationJam® is a live virtual event that helps organizations jump-start innovation around a specific issue. It brings together a mass crowd in a forum where they contribute their opinions. The organization receives a report of recurring themes and recommended actions after the event.
IBM InnovationJam® allows organizations to collect insights from hundreds or thousands of stakeholders simultaneously, enabling faster innovation.
Benefit #2: Cost Savings
Reduced costs are another benefit of open innovation.
Organizations can use the open innovation process to share costs with external partners rather than taking on the entire financial burden. For example, cost savings could come from grants or investments.
The efficiency of open innovation can also create cost savings. Organizations can grow revenue more quickly by increasing their speed to market.
Benefit #3: Customer Engagement
Organizations integrating customer insights into their open innovation process can benefit from more robust customer engagement.
Nivea, an international personal care brand, developed its best-selling deodorant by mining online customer reviews. It was discovered that customers had issues with deodorant discoloring light and dark clothing. Nivea set out to create a product that solved both problems.
First, Nivea interviewed customers about the characteristics they prefer in deodorant. It partnered with a chemical company and textile research firm to develop a new patented technology that protects both light and dark fabric. Then, Nivea embedded the technology in a new deodorant.
Customers rewarded Nivea’s innovation by making the new deodorant Nivea’s top-selling product in its 130-year history.
Learn how to develop a product innovation strategy in five steps.
How to Foster a Culture of Open Innovation
Transformational leadership plays a vital role in fostering a culture of open innovation. Transformational leaders encourage employees to innovate and enact positive change. They understand the value of open innovation and are prepared to drive an organization to embrace it.
Leaders encourage open innovation by establishing clear goals and encouraging collaboration, often through external partnerships. Promoting calculated risk-taking and individual empowerment also makes a difference.
1. Clear Goals
Clear goals are at the heart of a culture of open innovation. What does the organization want to achieve through the open innovation process?
Leaders should create innovation goals that reflect their strategic objectives. Then, they must communicate the goals openly across the organization.
Goals give stakeholders a sense of direction and an understanding of the expectations. They also drive the measurement of innovation outcomes.
2. Collaboration
Leaders who want to foster a culture of open innovation must promote collaboration. This involves showing respect for others and encouraging cooperative work.
Collaboration ensures diverse perspectives and ideas, contributing to innovative and efficient problem-solving. It also helps organizations avoid duplicative efforts—collaboration is essential for allocating resources and communicating progress and next steps.
3. External Partnerships
Leaders must promote collaboration outside their organization through external partnerships. Research shows that some of the most innovative companies rely on them for innovation.
Effective open innovation depends on the value derived from external partnerships. With collaboration, organizations can enhance their innovation capabilities by leveraging additional perspectives, technologies and skills from external partners.
4. Risk-Taking
Successful innovation involves risk-taking. Creating a high-risk tolerance culture promotes continuous learning, sparking breakthroughs.
Leaders should demonstrate and encourage taking calculated risks that align with organizational goals.
Create an environment where people feel safe taking risks without fear of penalty. Recognize people who take risks, regardless of the outcome. These actions can foster a culture of open innovation.
5. Empowerment
A culture of open innovation is rooted in empowerment. Leaders must provide autonomy and recognize diverse perspectives.
When people feel a sense of ownership of their work, they’re more likely to invest in organizational success. This can be a powerful motivator for contributing to innovation efforts. Engaged employees also deliver better outcomes.
People who feel empowered are also adaptable. When faced with the need to act quickly, they can feel confident making decisions.
Prepare to Become a Leader Who Inspires Change with an EdD in Leadership from Spalding University
Current and future leaders who want to affect meaningful change can evolve their leadership approach through a Doctor of Education (EdD) in leadership. EdD in leadership programs confer a terminal degree demonstrating the theoretical understanding, knowledge and skills to lead effectively.
Getting your EdD in Leadership from Spalding University can help you inspire change in your workplace and community. The program teaches proven methods and systems thinking to facilitate innovation and influence organizational transformation.
Students also develop a sophisticated awareness and understanding of cultural differences in local, national, and global contexts.
“I love that our cohort is interdisciplinary,” said Spalding University EdD student Laura Harbolt. “It makes our discussion both in person and online much richer. I’ve already learned so much from the people who are on this journey with me.”
Consider Spalding's online EdD in Leadership program to evolve your leadership through an academic approach. It’s designed for working professionals, whether senior or mid-management organizational leaders. You can complete the program entirely online in two years.
Spalding supports you wherever you are in your leadership journey. Connect with an enrollment advisor to get started.