10 Steps for Creating an Open-Innovation Culture

Oct. 12, 2011
Open innovation does not entail the creation of a massive business concept. Instead, it is the transformation of an internal culture, and the development of a process to encourage and promote innovation from every available source.

Rome, as the old saying goes, wasn't built in a day. Likewise, open innovation is not something you can achieve overnight. It is not a single event, but a process and a culture that must grow over time.

Rome did not build itself, either, and similarly, open innovation won't just happen. It takes work, commitment and patience to cultivate an effective program. It is a major initiative requiring focus, investment and time.

But the rewards are great. Open innovation takes a company beyond its own R&D capabilities. Through this strategy, a company reaches out to access innovation resources that expand internal capabilities and become an asset for the company.

The strategy focuses on outcomes rather than on sources. In today's rapidly evolving business environment, the companies that can adapt and innovate quickly will be successful.

Your company can be one of them, relying on open innovation to keep it on the cutting edge of its industry and accelerate the development and rollout of new products. Here are 10 steps that companies should follow to create and cultivate a successful open-innovation program.

1. Create a needs list. This is a process that should involve senior innovation leadership, research and product-development leaders, as well as people from the business units.

Together, they should create a prioritized list of critical strategic and business needs that can become the starting point to initiate the search for new innovations.

2. Define the company's core competencies. What knowledge, expertise and technology are unique to your organization? In what areas do you lead your industry (and in what areas do you lag)?
Knowing these answers makes it easier to be honest about where you don't have expertise, and therefore can benefit from external innovation.

3. Initiate scouting. The fastest way to realize impact from open innovation is to scout for new partners and technologies against the identified needs.

This can be through a formal request-for-proposals (RFP) process, or through more informal outreach. Build a scouting team to lead the effort, and identify experts and potential development partners who can help with ideation.

Remember that messaging in the RFP requires great care and precision; it's important to "get to the root" of your challenge to find the best partners, who may be from unrelated industries.

Innovation partners can be particularly helpful with this messaging process.

4. Develop an IP strategy. Companies' standard policies related to intellectual property need to be modified to encourage open innovation.

Develop a strategy that facilitates the open discussions and collaboration that will enable your company to move forward and collaborate with outsiders.

At the same time, your policies must describe upfront, and in a clear way, "who owns what."

5. Broaden outreach to additional stakeholders. For instance, many companies actively engage customers to identify and define their next products (such as Hallmark Cards' use of contests to enable consumers to create new greeting cards). Others leverage their internal "brain trust" to tap into knowledge and expertise that may be hidden across the organization.

For example, AkzoNobel, a Netherlands-based Global 500 leader in coatings and specialty chemicals, developed a companywide networked innovation program to help drive strategic innovation across its business units. By issuing internal, cross-business searches, they are able to uncover new solutions and pools of talent not previously considered.

6. Let everyone know that the company is "open" to innovation. Keep every suggestion alive, both from internal and external sources. Being open to any idea from any source can pay off in surprising ways.

Examples of open-innovation portals to encourage new partnerships with external technology providers abound from companies in food and beverage (Innovate with Kraft), consumer products (Unilever Working with Us) and automotive (Johnson Controls).

7. Transform existing relationships. Turn the tables on conventional thinking and engage your suppliers and vendors, elevating them to strategic partners. Put agreements in place that guarantee confidentiality in the open exchange of ideas and be open to sharing long-term goals.

Your suppliers are on the front lines of where their industry is headed. Move discussions out of the back room and work on building more strategic, trusted relationships.

8. Build a knowledge base. This happens typically in Year Two of a company's push to open innovation and shows why it is a long-term process. You can't do this at the beginning.

Create a repository of best practices and see what kind of metrics you can develop to measure progress. Create mentors in the organization based on who has been able to achieve a track record of success. This also is part of transforming the corporate culture that simply takes time and experience.

9. Collaborate with peer organizations. Be the company to articulate the big challenges facing your industry and be willing to take a leadership role in addressing those challenges.

Executed correctly, this is an opportunity to work with competitors and deal with industry-wide issues like regulations, safety and sustainability.

10. Create accountability. This should be a positive, incentivizing part of the program. Celebrate and showcase successful outcomes from collaborative innovation projects. Highlight them as big things, and celebrate individual and team achievements.

You need to demonstrate that the company highly values this collaboration, both internally and externally.

Open innovation does not entail the creation of a massive business concept. Instead, it is the transformation of an internal culture, and the development of a process to encourage and promote innovation from every available source.

As such, it is within the reach of any company -- large or small -- willing to make the commitment to work at it and join the ranks of innovative companies leading in today's global marketplace.

Kevin C. Stark, Ph.D. is director, technology solutions, at NineSigma, a Cleveland-based provider of innovation solutions and strategy. Contact him at [email protected].

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