Beyond Open Innovation – Co-Innovation

While the quest for innovation as a source of future growth is a minimum common factor, among local and global enterprises, scholars and practitioners are yet to determine a common or universal definition of innovation: in fact because of the lack of consensus on the dimensions and measures characterizing innovation, we do mean different concepts when referring to innovation. However there are elements we almost all agree on:

1. Newness and pioneering-ness: The concept itself was introduced by Schumpeter before world war two; however it is in practice difficult to measure newness of product or services: in the Schumpeter sense the iPod would not probably be an innovation because the set of needs it was inspired on and the set of technologies was engineered on were already existing. It was part of a cluster of imitation. Hence the iPod would be an imitation. Nevertheless the iPod was the platform on which both iTunes – disrupting content distribution – and the iPhone – disrupting mobile communication – were based on. Once again, it is difficult to agree on what innovation is.
2. Focus of innovation: Innovation can happen in products, services, processes, administration and technology and business models.
3. Output Development Attributes: Generally accepted is the observed consistency of the s-curve describing the introduction and development of innovation.

Furthermore the innovation methodologies are rapidly evolving :

1. Closed Innovation

In line with a Schumpeterian model of innovation, R&D departments would work in strict isolation to develop new products and new processes with the objective of developing a competitive advantage. Pillars to this model are the internal center of expertise as much as the internal networks of employees sharing knowledge. Core to this system is internal R&D, whose objectives and current task are achieved and executed under a complete secret to the external world.

2. Collaborative Innovation

When both scholars and managers realized that the ‘first mover advantage’ was more a myth than a reality, and at the same time the awareness that not all technological problems could be efficiently solved in house, we notice the raising of collaborative innovation. This is still the most used form of innovation, whereby companies co-develop with selected partner suppliers, new products and manufacturing solutions. The most typical example of collaborative innovation is perhaps in the automotive sector, where many safety, security and new-to-the world features (e.g. navigators, wireless communications…) were developed together with suppliers and not by the internal R&D departments.

3. Open Innovation

The concept was developed prior to and first published in 2003 (H. W. Chesbrough 2003), and it is based on a multi-agent relationship, where the internal R&D is complemented by a Connect and Develop function (Lee, Olson, and Trimi 2012) to establish and maintain relationship with the external world. In the OI model in fact, technologies, patents and licenses flow in and out of a company, through partnership with universities, research centers, competitors and so on. This entails that – beyond R&D trying to acquire external knowledge and/ or assets – the flow is both inbound and outbound.

Still according to Huizing, the forms in which relationship translate typically include alliances, joint-ventures, joint development centers, and tend to be formalized by long term contracts. Furthermore along side with the development of Open Innovation business models, OI brokerage firms have appeared in the market place (e.g. Nine Sigmas, co-founded by P&G for their Connect and Develop OI Ecosystem): they provide connecting, scouting, auditing services to companies which aim at being a partner in any OI ecosystem.

4. Co-Innovation

Concept introduced by Lee, Olson and Trimi in the past years. Core to the approach is collective intelligence which is now possible to formally organize in three pillars:

1. Converges of ideas
2. Collaborative arrangement
3. Co-creation of experiences

Beyond the pillars, innovation’s beginning is not technological (neither new technology nor invention), but a market reality: new blue oceans, new product ideas, new ventures spark from the convergence of ideas and the co-creation of internal and external stakeholders to the firm. Moreover value creation through innovation will aim at improving the operational flexibility of the firm, so that it’s supply chain can quickly and economically adapt to new realities. The third area of value creation according to Lee et al. is the engagement of consumers in developing and activating brands.

This is a new definition of customer experience which goes beyond consumers being part of its execution, but include consumers designing, planning for, supervising the experience itself. Co-Innovation is an open to the world platform – pretty much as OI is for R&D – that connects internal function with external stakeholders. In co-innovation the revolution which happened to R&D is now expanding into marketing and commercial functions, creating intertwined ecosystems which are difficult to unbundle.

Suffice to think of the iPhone’s, which is not possible to separate from the apps. There are nearly 200,000 app developers, with around 500,000 different apps ready to download in iTunes store. The iPhone brand experience depends from the Apple marketing planning as much as from the consumers interacting on Facebook and Instagram, as much as from the developers of applications like Foursquare or Vivino.

References
1. Lee, Sang M., David L. Olson, and Silvana Trimi. 2012. “Co-Innovation: Convergenomics, Collaboration, and Co-Creation for Organizational Values.” Management Decision 50 (5): 817–31.

Filiberto Amati worked for 15 years in various international firms (e.g. P&G, Philips, Campari and Auberon Growth Consultants) before founding Amati and Associates an international growth advisory boutique based in Warsaw, Poland. Filiberto assists his clients in challenges related to branding, innovation and international expansion. He tweets from @filibertoamati.