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Friday, April 30, 2010

Will Open Innovation benefit my competitors?

by Yann Cramer

Will Open Innovation benefit my competitors?Robert Shelton published an enlightening article about the three levels of open innovation maturity. But for most companies, open innovation raises instinctive fears that their ideas will leak out to their competitors and destroy any competitive advantage they would have hoped to get from their innovation.

Three levels of Open Innovation
  • Level 1: aware & adhoc - Companies are aware of the need to open up to external sources of ideas and to leverage external capabilities. They build adhoc partnerships with suppliers and customers along their tradtional value chain.

  • Level 2: pro-active & systematic - Companies set up an explicit goal that a significant portion of their new developments will come from outside and they organise themselves to attract outside input. P&G's programme Connect&Develop provides a case in point.

  • Level 3: confident & natural - Companies orchestrate a multilateral collaboration network (Shelton says "an eco-system") of companies and talent. They are not directly involved in all interactions that happen throughout the network. They let interactions happen in a natural way at the most appropriate level. They are confident that the value generated in any part of the network will directly or indirectly benefit the whole network and them in it.

A management-style analogy would be the evolution from directive to participative to delegative.

A question I often get is:

"How can I be sure that innovation that springs in such an open environment (Level 2 or 3) will benefit my company and not my competitors?"

The answer is time-to-market: more specifically, developing the capability and reputation for taking innovation to market faster than the competition. This comes from gradually pushing the company out of its comfort zone.
  • Level-1 companies operate within the comfort zone of developing new products with their traditional suppliers and customers. They have processes and tools designed to drastically reduce risk (risk of innovation failure, risk of IP leaking to their competitors). They need to relinquish some level of control on the risks where it enables the most significant gains on the time-to-market metric.

  • Level-2 companies, having efficient time-to-market processes, become the partner of choice of suppliers who want to get revenue (or recognition) as fast as possible, and of customers who want to enjoy the use of new products before their competitors. But they still operate within the comfort zone of controlling most information flows, in the sense that they are either at the receiving or at the transmitting end of information. To reach Level-3 they need to relinquish that sense of security and trust that having built that position of partner-of-choice innovation will come to them first rather than to the competition.

With innovation coming to them first and superior time-to-market processes, Level-3 companies can therefore build a significant lead to cash-in on innovation and grab market share before the pack of competitors joins in.

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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

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