The Limitations of Open Innovation

Open innovation is the concept of using both internal and external resources and knowledge to drive innovation– whether that is developing new products, services, business models, or ideas. According to most definitions, there are two core aspects of open innovation: inbound and outbound. Inbound open innovation involves integrating external expertise, information, or technology into an organization’s internal innovation process. Outbound open innovation is sharing or commercializing internally developed innovations for others to use, sometimes through joint projects.

One of the ideas behind open innovation is that true innovation demands collaboration, and it has risen in popularity as more and more expert knowledge exists outside of large companies. There are a number of benefits to this model. By opening up the innovation process, companies can access a broader range of ideas, technologies, and solutions from external sources like customers, suppliers, universities, and even competitors. It can encourage collaboration and speed up product development. Open innovation provides an alternative to the traditional vertically-integrated approach, allowing firms to reduce costs, spread risks, and generate new revenue streams.

However, there are also a number of limitations and challenges that organizations adopting open innovation principals must face.

Strategic Limitations

One of the biggest pitfalls of companies seeking to adopt open innovation initiatives is a lack of clear strategic goals and mis-alignment with the company's overall innovation strategy. Without well-defined objectives tied to the core business, open innovation efforts can fail to deliver meaningful value. Many companies also struggle to provide sufficient capacity and resources to effectively process and integrate the external inputs and ideas they receive.

Operational and Structural Challenges

Even when the strategic intent is clear, open innovation can be hindered by operational and structural barriers within the organization. Integrating external ideas and technologies into internal R&D processes and product development cycles is often difficult due to a lack of appropriate infrastructure and established procedures. Legal and intellectual property concerns around ownership and use of external contributions can also create significant hurdles, both administratively and in terms of employee buy-in.

Cultural Barriers

One of the toughest challenges with open innovation implementation stems from company culture. "Not invented here" syndrome, meaning employees who are resistant to or dismissive of external ideas, is a pervasive issue. This syndrome can be exacerbated by a lack of incentive and leadership support for embracing open innovation practices.

Potential Solutions

To overcome these limitations, companies pursuing open innovation must take a holistic approach:

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Strategic Alignment

• Clearly define strategic objectives and expected outcomes for open innovation initiatives
• Ensure that open innovation activities and core innovation strategy/processes are in lockstep
• Check out this great comparison table from openinnovation.eu for more information

Operational Readiness

• Develop robust processes and infrastructure to capture, evaluate, and integrate external resources/researchers/technology
• Establish clear policies and guidelines around internal intellectual property and the use of external contributions

Cultural Transformation

• Build a culture of openness through visible leadership commitment and incentives
• Provide training to help employees understand and embrace open innovation practices
• Make use of technology platforms and tools to streamline open innovation processes

Open innovation has a great deal of potential for driving new ideas and products, but for an individual company to realize the benefits requires concerted effort. It’s important to address the strategic, operational, and cultural limitations. With the right approach, however, open innovation can serve as a powerful complement to any given company’s internal innovation capabilities, enabling all kinds of organizations to build future-focused roadmaps.