How Leading Firms Use Open Innovation
Many CEOs see collaboration as key to their success with innovation. They know they cannot achieve their innovation targets using internal resources alone. So they look outside for other organisations to partner with. A good example is Mercedes and Swatch who collaborated to produce the Smart car. When Mercedes wanted to produce an innovative town car they did not choose another automobile manufacturer – they partnered with a fashion watch maker. Each brought dissimilar skills and experiences to the team.
Costa Coffee is a chain of coffee shops which is in fierce competition with Starbucks and Cafe Nero in the UK coffee bar market. It has had considerable success by collaborating. Costa develops concessions with key partners. Current concession partners include coffee stores in Abbey National banks, W. H. Smiths and Ottakars book stores and Homebase DIY stores. The concession stores are managed by the Costa team who provide high quality coffee and service experience to businesses who want to provide their customers with that little something extra. Customers in concession stores can relax with a cup of coffee and food offering as they take a break from retail therapy, consider that purchase or await an appointment.
The next step beyond collaboration is open innovation. This is something that Proctor and Gamble, IBM and Kimberly-Clark have focussed on as a way of driving innovation. Open innovation replaces the vertical integration of innovation processes within one company with a network of collaborators working on innovation projects. Using outsiders can speed up processes, reduce costs, introduce more innovative ideas and reduce time to market.
Kimberly-Clark reduced the time is takes to bring out new products by 30% through open innovation. It launched Sunsignals in just six months by collaborating with a smaller company, SunHealth Solutions. Sunsignals is a self-adhesive sensor that changes colour when the wearer is in danger of burning in the sun.
Proctor and Gamble aims to source 50% of its innovations from outside using open innovation. Early results include new products such as Mr. Clean Magic Eraser and Pringles Prints. In 2005 Kimberly-Clark partnered with more than 30 companies including joint-development, joint ventures, co-distribution, and licensing deals.
The leading companies are pointing the way forward – collaboration and open innovation.
Here are some key steps for success in open innovation:
- Each party should define what it wants to get out of the relationship.
- Who owns the intellectual property in the partnership must be clear.
- Each side should allocate a senior person with overall responsibility for the success of the partnership.
- Key obligations, expectations and milestones should be established early.
- Honesty and trust is built on clear communication – especially when objectives look likely to be missed.
- Get a good legal contract.