Open Innovation is certainly one of the hottest topics in innovation management.
The big question however is: To what extent is it already practiced in “normal” companies – companies that are not P&G, IBM, Eli Lilly and other well-respected singular beacons of Open Innovation.
To answer this question – at least for the German-speaking countries – I conducted a statistically representative study together with Zeppelin University. The initial results are in. The full results will be presented at the flagship conference on Open Innovation in December (see here).
There are six initial key insights:
- 70% of all companies are practicing outside-in Open Innovation, but with a limited intra-industry focus
- Only a small part of companies has a systematic scheme for outside-in Open Innovation with universities or research institutes
- At present, outside-in Open Innovation is not effective – There is no significant correlation between outside-in activities and a measurable increase in the innovativeness of the company
- Vast business opportunities in developing new markets via inside-out Open Innovation are neglected – Only 10-20% of the companies are doing this in a systematic way. For large companies this is of significantly higher importance
- Web-based Open Innovation activities are currently of secondary importance – many companies are still experimenting with this
- Barriers and risks to Open Innovation are not systematic – they are company-specific
The study built on an extensive, formalized questionnaire and follow-up phone calls. It was conducted in Germany, Austria and Switzerland. The vast majority of the participating 200+ companies came from Germany. With respect to industries there is a clear spike in manufacturing and ICT industries – together these industries make up for two thirds of the responses. 40% of the participating companies are SMEs with a maximum of 500 employees, 32% had 500-1000 employees and 28% over 1000 employees. The study was conducted in-between December 2009 and September 2010.
Open Innovation activities: “Classical” outside-in Open Innovation is of highest importance
More than 70% of the companies are integrating customers or suppliers into the innovation process. 40% of the companies practice systematic lead user integration, conduct regular workshops in order to integrate external ideas and knowledge or run joint development projects with other companies.
For large companies, the inside-out part of Open Innovation, i.e. the external commercialization of proprietary technologies through joint ventures or networks, plays an important role – 40% of these companies are having formalized processes for this.
Of secondary importance are online-based forms of Open Innovation (e.g. online brainstorming, idea platforms, crowdsourcing etc.). Many companies are still in the testing phase. I expect online-based forms of collaboration to increase significantly in the coming years.
Sources for Open Innovation: Mainly intra-industry
Currently, predominantly intra-industry sources (customers, competitors and suppliers from the own industry) are used to gather external input. A meager 7% of companies are working systematically with universities, research institutes or databases to absorb external knowledge. Only 1% of all businesses are using extra-industry sources intensively to conduct cross-industry innovation.
The strategic side of Open Innovation: Huge room for improvement
In general, companies conduct their various Open Innovation activities with different strategic rationales:
- Outside-in Open Innovation (including cross-industry innovation, lead user integration and the use of Web platforms) is done mainly to get access to resources and knowledge. To a lesser extent, improved market access, cost savings in product development and risk reduction can be achieved
- Inside-out activities such as the commercialization of proprietary technologies in non-core markets and Corporate VC activities are done to extend markets and to absorb external resources and knowledge.
- Joint developments with customers and suppliers, other companies or universities are done for minimizing risk and achieving synergies – and to a lesser extent to gain access to resources and knowledge.
Looking at the strategic dimension of current Open Innovation in Germany there are two main findings:
- Vast business opportunities in developing new markets are neglected – Only 10-20% of German companies are heavily into this aspect of Open Innovation.
- Outside-in Open Innovation is currently not effective – There is no significant correlation between outside-in activities and a measurable increase in the innovativeness of the company. This suggests that the anticipated targets are not met and companies should think about how to improve existing activities and/or extend their portfolio of Open Innovation activities
No systematic risk and barrier profile
A correlation between the specific operational barriers to Open Innovation and the conducted activities could not be detected. The conclusion is that perceived risks and barriers (e.g. perceived conflict between Open Innovation and daily business, Not-Invented-Here syndrome, risk of IP outflow etc.) are company-specific.