Open Innovation – Why Some Do and Some Don't

If you are reading this blog, you’re probably already aware of the fact that open innovation (OI) has not yet reached its prime across all industries. In fact, many business leaders still haven’t heard of it yet, or want nothing to do with it. So why is it that some companies swear by it, and have reached a point where OI is completely embedded in their internal organizations and processes, while others are afraid to play? I have a theory about this, which boils down to two key points: market leadership culture and reward systems.

Companies with a culture of market leadership have traditionally relied on strong internal innovation competencies in order to develop and maintain market share for their products. These leaders have recently realized (sometimes the hard way) that achieving and holding on to market share is no longer reliant upon the old first-to-patent or ownership philosophy held by a company’s innovators. It now has more to do with who is in control of the IP. With today’s ever-increasing speed of information flow, coupled with the vast availability of global OI resources, companies no longer have to own their IP. In fact, such a belief can actually hold a company back. If a company focuses more on control vs. ownership of the new technologies that they need to stay ahead of their competitors, they can continue to maintain their leading edge, drive demand, and create new product generations, but at a much faster rate.

Understanding the evolution of market leadership principles is one thing, but putting them into practice is quite another. Changing the ways that R&D organizations have been working for decades can be a real challenge. So how can we suddenly align our first-to-market business objectives with those who are deeply rooted in the traditions of first-to-patent or first-to-invent? Are we talking about a complete cultural change? Well, changing a company’s culture doesn’t happen overnight. We can, however, guide the behaviors of people with a few basic business fundamentals. A clearly communicated reward system based on first-to-market drivers, guided by a clearly articulated set of metrics can quickly align a company’s overarching objectives with those of its innovators. When the entire company is aligned under first-to-market vs. first-to-patent objectives, OI efforts will begin to take hold, allowing a company to realize success through sustainable market leadership. I am interested to hear how R&D leaders are instituting change in their organizations and the metrics they have defined to measure success.

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Matthew Heim is President of NineSigma and has responsibility for global strategy, strategic alliances, marketing and new product development. He is also the author of Breaking the Musashi Code: Transcending Competition through Visionary Strategy.