they aren’t considered and handled in a professional manner in the start, the risks and possible negative impacts will not only affect your open innovation project but can harm your brand image as well. With this constantly changing risk landscape, internal priorities must also change to place greater emphasis on emerging risks and vulnerabilities. We've just launched our new Unlimited plan. While some executives will find it easy to answer these questions, others will be in less comfortable terrain. Why share risk? Once you’ve defined your objectives, prioritize them and stay focused. Subscribed to {PRACTICE_NAME} email alerts. Specialized innovators may find it desirable to work toward mutually beneficial royalty deals with suppliers and buyers that have adopted open solutions. Perhaps the internal team feel that their position is threatened, or simply just aren’t truly aware of the real benefits of co-creation. At some point, however, the law of diminishing returns comes to picture. Depending on your individual case, you might want to consider inviting the submitter of the initial idea to be a part of the implementation process as well. The point of open innovation is to improve the quality and speed of development. 1,* and . In this video, Dr Christos Tsinopoulos discusses the risks of engaging in open innovation and how they might be mitigated. Open innovation challenges – How to overcome the most common ones? Keep in mind that building an open innovation process that works most definitely requires a few iterations. It is measured by the number of patent applications multiplied by the number of unique patent applicants.3 3. Identification of benefits and risks as well as assessment of their occurrence probability (analysis aspect with regard to a concrete open innovation project): Specific risks and benefits of open innovation cooperation will be prompted using a predefined catalogue. The real challenge is how to find the right open innovation platform as there are several great options available. The best way to change behavior is to reward it. "The way to get good ideas is to get lots of ideas and throw the bad ones away. If you'd like to learn to more about combating these challenges, you might want to download our Innovation Management Toolkit, which provides you with a variety of useful tools and templates. But as open-source innovation, “crowd sourcing,” and engaging with open communities become increasingly prevalent, could IP-free zones appear in the competitive landscape of other industries? In the beginning of an open innovation project, your results and benefits are likely to be better compared to if you’d innovate solely by yourself. When it comes to new ideas, inventions, designs and prototypes, intellectual property rights are more or less always on the table. Organizations use open innovation to access more diverse source of ideas and talent with little investment to create value they wouldn’t necessarily be able to create by themselves. This skepticism towards even great ideas may lead to a situation where these ideas will not be given a chance and no resources will be allocated to the development of these ideas. Technology complexity indicates where risk is a function of the volume and spread of new technology. Open innovation is about combining internal resources with external ones to boost innovation culture in the company open innovation than it is to actually kick off the project. As already mentioned, the more difficult part of open innovation is to decide on. There’s obviously no point using open innovation just for the sake of it, which is why the most important step in starting off the whole open innovation project is to define what you want to accomplish with it. Dr. Henry Chesbrough is a co-founder of the Open Innovation Community and created the theory and coined the term "open Innovation." Whatever choices you make, there's always an opportunity cost that needs to be considered. Successful results tend to follow a systematically executed process. "Research Roundup: The ‘Flip Side’ of Open Innovation, Productivity Losses from Bad Weather and Assessing the Risks of Outsourcing" Knowledge@Wharton, February 01, … Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. For details, see Joachim Henkel and Mark Tins, “Die industrielle Nutzung und Entwicklung von Open-source Software: Embedded Linux,” in Bernd Lutterbeck, Robert A. Gehring, and Matthias Bärwolff, eds., See Erik Markowitz, “The case for letting your customers design your products,”. Successful open innovation benefits both parties and is fair for everyone. Unleash their potential. For details, see Joachim Henkel and Mark Tins, “Die industrielle Nutzung und Entwicklung von Open-source Software: Embedded Linux,” in Bernd Lutterbeck, Robert A. Gehring, and Matthias Bärwolff, eds., Open Source Jahrbuch 2005, Berlin: Lehmanns Media, pp. If, however the contest would have lasted twice as long, the US Army most certainly would not have received double the amount of ideas. The challenge and a general misconception when it comes to open innovation is that you only have to gather good ideas. Motivation can drop at any level of the process, which is why it’s important to keep constant focus on enhancing and rewarding engagement. The more complex the system an innovation enters, the more likely and severe those consequences will be. These types of organizations are keeping themselves busy with different kinds of open innovation projects but often fail to integrate them to the big picture. “Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” In contrast, Intellectual Property Rights (IPRs) are generally designed to exclude others from using a If anything, incentives to use open-source alternatives may be increasing, which would imply that our risk profiles have a conservative bias. Several years ago, something interesting happened in the infrastructure software sector: IBM and a number of other companies pledged some of their own patents to the public to create IP-free zones in parts of the value chain. Because open innovation is a complex field with many moving parts, it’s almost always necessary to rethink your current ways of working to be able to apply open innovation successfully. Do integrated firms seek to cut development costs in my industry by drawing on open technologies to substitute for these proprietary solutions? If you’re unsure of how the legal matters are or should be handled in your case, you can always turn to your vendor or legal department for more information. The report was commissioned by the consultancy Open Source Risk Management and carried out by experts in the open-source community. It's really all about leveraging and enhancing your internal capabilities.". Risks of innovation. Research in the field of open innovation, suggests three major risks that are likely to be experienced by organizations as they engage in open innovation projects . In the beginning, its nearly impossible to know which ideas are good and which ones aren’t. Sometimes, an issue that limits open and innovative culture can be a negative attitude towards something that wasn’t invented in-house. People create and sustain change. It will often require an investment of time and money before any positive effects become visible. During the 75-day contest, 140 people engaged in the project and over 50 web and mobile application were developed by the deadline, of which 15 winners shared the cash prize. These are the latest numbers available, and the structural factors they represent change only slowly over time. The climate change risks affect institutional and community choices in different sectors over space and time in less predictable manner than before. The more affirmative the answers to these questions may be, the more likely it is that the interests of specialized vendors of proprietary solutions will collide with those of firms drawing on open innovation, which could involve any type of open good, from software to the genetic code to crowd-sourced designs for parts or tools. In 2010, US Army launched the ‘Apps of Army’- contest for military and civilian members to help the army speed up its development of mobile software applications. Overlooking legal aspects can cause unnecessary hurdles if not thought through already in the beginning of an open innovation project. In the pharmaceutical industry (further down the exhibit), several players have formed consortia to ensure that basic genetic information remains accessible to them all. Additionally, their respective occurrence probability will be estimated by indirect closed questions, for example, regarding past … But open innovation and integration between customers and suppliers does require an element of trust in the sharing of ideas between the different parties. The alliance spent several million dollars to purchase patents held by third-party developers. Making sense of a big pool of ideas and developing the most promising ones is only the tip of the iceberg. Source: UK Office for National Statistics, the EU KLEMS project, and the 2009 UK Innovation Survey. I won’t argue that you should not use innovation. Aim for targeting audiences that are willing to offer that type of knowledge you need to make your project successful that you wouldn’t necessarily be able to find within your organization. To illustrate the three-factor risk profiles—capturing the value of proprietary solutions, the viability of open-source solutions, and the complexity of technology—we used the proxies described below. They tend to rely too much on technology in a sense that they fail to realize that the process is really what makes or breaks the open innovation project, not the tool used for the job. Sometimes, negative attitudes towards open innovation can also originate from uncertainty. The challenge here is to decide where to draw the line and how much input is enough before the process starts to slow down if the organizer isn't investing enough in facilitating and activating the community. Often the person who has submitted the initial idea may have some valuable opinions and knowledge about how to proceed with it. Source: UK Office for National Statistics, the EU KLEMS project, and the 2009 UK Innovation Survey. Less hurdles means more innovation! RISKS OF OPEN INNOVATION . Good open innovation platforms increase both the speed and the quality of the process. A strategy of investing in R&D and innovation can bring significant rewards, but it is not without risk. They did so when a 2004 report showed that Linux, the open-source operating system that had emerged as a viable, low-cost alternative to established operating systems, such as Microsoft Windows and Unix, was inadvertently infringing on more than 250 patents.1 1. The earlier you’re able to identify and address open innovation challenges and risks, the less time you’ll have to spend on fixing issues. Ideally, engaging external partners to collaborate with your R&D will maximize your returns in the beginning of the project with low cost. We hope that the industry tableau we’ve presented and the questions we’ve raised will provoke a productive debate in your organization about the evolution of the IP landscape and what it means for you. Although open innovation projects should always be built on mutual trust, carefully developed terms and conditions can help eliminating unnecessary uncertainty. People were excited to contribute to developing Netflix’s algorithm because for them, it was a cool project to be a part of and they had a chance to work with interesting data. What are we going to do with all of the other ideas that are good but cannot yet be implemented? These aspects are nothing magical nor difficult, but if they aren’t considered and handled in a professional manner in the start, the risks and possible negative impacts will not only affect your open innovation project but can harm your brand image as well. Often, people may have a fixed, “this is how things are done here”-mindset. Intellectual property includes patents, trademarks and copyrights that gives the creator exclusive rights to certain aspects of the innovation. we believe executives can gain some insight into this possibility by asking three questions that underpin the logic of competing by protecting the open space—open competition, as you might call it: Do specialized firms offer proprietary solutions within certain layers of my industry’s value chain? Learn about hbspt.cta._relativeUrls=true;hbspt.cta.load(516474, '4bf7db31-7c79-4b64-a295-f0d2e227d6dd', {}); This post is a part of our Open Innovation blog series. Only after some time you’ll really know what it takes for it to be able to work in practice, so be patient. However, as open-source movements gather steam, corporate innovators will need to consider whether and how to approach open-source innovation. By A. All rights reserved. This can be highly rewarding for you, and for the participant. The last, but probably the most critical, challenge of open innovation is the lack of collaborative, cross-functional company culture. Something went wrong. Most transformations fail. In this case, your open innovation goal could be for example to hire a number of talents who are about to graduate. This is one that most firms are definitely already engaged in. Sometimes simply just giving recognition is enough for some to be willing to participate and keep them engaged in the project. This type of culture might be problematic if people aren’t committed to executing ideas that are coming from outside of the organization. Consider construction cranes, a subset of the “machinery not elsewhere classified” sector (at the top of the exhibit). "Companies have too much focus on ideas. The appropriate corporate response to open-source innovation is difficult to define, as the risks are unknown. Now it is time to look on the other side of innovation. Abstract. 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