Managing the Uncertainty of Open Innovation

One of the hottest topics in business management today is open innovation. The concept uses an open business model for companies to “co-innovate” with their partners, suppliers, and customers – in order to accelerate the rewards of innovation. For example, a small or midsized company develops a game-changing new idea and works with a larger company to bring the product to market.

Through the collaborative relationship of open innovation, companies are able to leverage new ideas and products, and conduct experiments at lower risk levels. However, open innovation does bring up some concerns, like who owns rights to the intellectual property (IP). Open innovation should be conducted in a manner that promotes mutual trust and respect. It can be a double-edged sword when the larger company insists on owning the IP in exchange for their investment. The open innovation relationship can be a tricky one to navigate.

Large corporations like Nestle, Kraft, Siemens, General Mills, and Clorox all participate in open innovation practices. Here is a case study of the open innovation process at Proctor & Gamble, one of the most respected consumer product companies in the world. P&G introduced their Connect + Develop program on their website at www.pgconnectdevelop.com. The site is a place where the general public can submit their innovations, read about successful business partnerships, and even scavenge current IP needs of the company.

“Historically, P&G relied on internal capabilities… We did not actively seek to connect with potential external partners. Times have changed, and the world is more connected. In the areas in which we do business, there are millions of scientists, engineers and other companies globally. Why not collaborate with them? We now embrace open innovation…” reads the P&G website. In just over two years, the program has received 7,500 submissions. P&G has established more than 1,000 active agreements with innovation partners, and claims more than 50% of their product initiatives involved collaboration from outside innovators.

In the Connect + Develop program, innovators must have their IP in place before they submit their idea. This protects the innovator while the IP adds value to the organization – the key is to build relationships and produce win-win deals. Through working together and developing effective ways to manage IP rights, open innovation can further advance innovative culture and produce favorable results for all parties involved.

Here are some tips for nurturing open innovation in your business.

• It takes leverage, courage, and toughness to create a balanced open innovation relationship. In a balanced relationship, the IP or technology of the inventors or small business should remain theirs.
• Develop both reactive and proactive ways to address open innovation. On the reactive side, invite the world’s finest innovators seeking open innovation opportunities to develop your IP needs.
• Proactively, tap into local universities, companies, and venture capital firms to meet inventors, set up networks, and make connections that are not readily apparent to most people.

For more tips, see “Robert’s Rules of Innovation : A 10-Step Program for Corporate Survival” by Robert Brands with Martin Kleinman.

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