Organisations must evolve over time to survive, and this, in part, requires innovation. Increasingly, the pace of available technology – from mobile to big data, social media to a proliferation of digital customer touchpoints – and its rapid adoption by customers has made meaningful innovation even harder to manage.
A useful definition of innovation is “ideas and inventions that are implemented and taken to market to achieve their objective – usually a return on investment – over their lifespan”. “Open innovation” extends this concept by acknowledging that not all ideas and capabilities are contained within the boundaries of the organisation, and therefore integrates partners and third parties in the process.
However, the concerns of large organisations tend to be operational consistency, efficient processes and known outcomes; this is at odds with innovation which is inherently risky and often lacks appropriate controls.
Interestingly, many organisations with a strong track record for innovation, particularly digital innovation, have commonality in their approaches:

  • A structured (stage-gated) and controlled innovation process that brings in large quantities of ideas at the top of the “funnel” and quickly progresses the most promising candidates to prototype and implementation, weeding out “failures” quickly
  • Acknowledgement that innovation is wider than a single department, so create a cross-departmental forum/structure for innovation, including external support from SMEs/consultants and partner/non-compete organisations. This leads to representatives becoming “innovation champions” within their departments and ensures that innovation is a company-wide concern, and also brings in ideas and delivery capabilities from partners
  • Use a “customer-centric” approach to give clear direction to the “types” of innovation that are required and to test candidates with potential customers
  • Have access to technology (and other “building block”) platforms that support rapid prototyping from inside and outside the organisation

Working across the organisational boundary appears to be key; individual partners can contribute a particular expertise, applicable ideas from a different industry, sector or market, resource that is scarce in the host or other types of value. Similarly, they are flexible in their involvement; they may be permanent members of the innovation process, or work on a by-innovation basis, or contribute to a particular stage (for example, prototyping).
Also, key to success is the idea of a structured process that has top-level support and a balanced measure of strong innovation candidates.

The innovation value chain

 The innovation value chain progresses a wide funnel of ideas in four stages. At each stage, the ideal is to progress the strongest candidates and allocate resource accordingly.

  • Ideation: This generates the maximum number of ideas from without and outside the organisation – and/or invites “problems” to be solved – via a range of techniques from (internal) employee suggestions and brainstorming to (external) website submissions, and customer forums to “Dragons Den” style third party pitches
  • Product Selection: Screening to identify the strongest candidates, typically using broad and balanced measures such as financial potential, corporate synergy, technical and production synergy, product differential, product life, strategic compatibility and market considerations
  • Product Development: This stage develops the prioritised ideas. Having taken the innovation to a customer community (via presentation, prototype, workshop or other), there may follow reprioritisation or even discontinuation if progress does not match anticipation. It is important to measure both individual candidate and portfolio progress, as innovations may be combined or refined, and also because even with a structured process, achieving 100% success is practically impossible
  • Commercialise:  Finding the most effective route to market could well be different to usual product launches and may require [open] innovation itself

It is important to note that other organisational influences – including strategy, capabilities, structure and culture – have a significant bearing on the ability and efficacy of innovation and should ideally be aligned.
Elements of this model can be seen in successful open innovation models including

  • John Lewis’ JLAB: Attempting to innovate in cross-channel shopping experience by partnering with small start ups and providing funding and support
  • Unilever’s The Foundry: A regularly evolving list of business challenges to small businesses provided by the brand and functional teams looking for innovative technology solutions
  • Clarks’ Innovation Forum: A multi-department initiative to gather ideas from inside and outside the business and progress the strongest candidates to market; this has led to the creation of mobile apps, in-store digital services such as self serve kiosks and digital signage and crowd-sourced content funnels for social media

So, why should organisations adopt an open innovation approach? Innovation can be fostered, structured and controlled if an appropriate process is put in place to stage-gate internal and external ideas and capabilities. This means that organisations can derive new services and revenue streams, create new markets, help position the brand via a pipeline of innovations or other objectives of innovation in a controlled, predictable manner. Ultimately, given our rapidly-changing digital world, organisations that are able to evolve in line with their customer needs are most likely to survive and thrive.