Why Open Innovation Matters

A few weeks back someone told me an interesting story about Procter & Gamble and their competitors. It is well-known that P&G is the open innovation champion and their long focus on open innovation has given them an important advantage.

They get to see interesting proposals within their business areas before their competitors. In the story I heard, one of P&G competitors complained they only saw ideas and proposals that P&G already had rejected. Ouch, talk about being a second-tier choice…

This leads to a very important point on open innovation for market leading companies and those aspiring to be. The key game is to become the preferred partner of choice.

A preferred partner of choice simply gets to see the best ideas first and such a position can help a company out-innovate their competitors and develop substantial long term overall business advantages.

As each industry only has one – or perhaps two – winners in this game, companies should begin to focus harder on their open innovation strategy and efforts. It becomes even more important as this positioning game already plays out in many industries. Let me give you a couple of examples.

Mobile phones: Apple and Nokia seem to have taken the lead here. I do not see much open innovation activity from Motorola, Samsung, HTC and the other players.

Software: IBM, SAP and Intuit are doing great things here. I acknowledge that software is a very broad business category that can be divided into smaller segments. Nevertheless, these are the companies I hear about on open innovation. What about the many other companies?

Technology: Cisco seems to build momentum over their direct competitors HP, Alcatel-Lucent and Juniper Networks.

Companies should have in mind that this game is very much about perception. A company starts an open innovation-like initiative and if they get some success they are encouraged to continue down this path. This is picked up by bloggers and others in the open innovation community and the word quickly spreads that a certain company is doing interesting things.

This spreads just as fast in the industry of the given company resulting in two things; internally the company gains even more momentum on their open innovation efforts and externally the company is perceived as an open innovation leader within the given industry.

Voila, the company is on its way to claim a preferred partner status and if they do not mess up they can soon reap the benefits of this.

I think this provides another example of why companies need to wake up with regards to open innovation. Your thoughts?

Stefan Lindegaard is a speaker, network facilitator and strategic advisor who focus on the topics of open innovation, intrapreneurship and how to identify and develop the people who drive innovation.