Featured Story May-June 2017
Open Innovation in European Industries

by Eric Soderquist, Associate Professor


Over the last decade, open innovation (OI) has been widely accepted and implemented by large multinational corporations (Mortara and Minshall, 2011) and SMEs (van de Vrande et al., 2009). It can be observed that the role of open innovation has become more strategic leading to formalization of new open innovation functions and roles in companies (Dabrowska and Podmetina, 2014; Mortara and Minshall, 2014). Not surprisingly, new managerial titles emerged, for example the Vice President for Open Innovation at Unilever, Open Innovation Director at Crown Packaging and Philips (Mortara and Minshall, 2014), Open Innovation Manager at Nike, PepsiCo, Lenovo, GM, Electrolux, etc.

Open Innovation was coined by Professor Henry Chesbrough of Haas School of Business, University of California Berkeley. In an interview I recently conducted for iMBA Scope, the newsletter of AUEB's MBA International Program, he defines Open Innovation as follows: "There are lots of uses of 'Open Innovation', like the Eskimos have many words for snow.  The best definition I work with is that Open Innovation is a distributed process involving inflows and outflows of knowledge from organizations for both monetary and non-monetary reasons, according to their business models.  So it includes open source, like in open source software, but is not restricted to that.  It includes crowdsourcing, but involves more actors than just the crowd.  And there is a business model dimension to it, which is what determines what knowledge to seek from the outside, and what knowledge to share with the outside of the organization.  Traditional collaboration might have been concerned with two parties; open innovation includes ecosystems, complementors, crowds, and many more actors beyond a dyadic collaboration.".

In spite of the broad adoption of the principle of OI, research has not explained how firms could prepare their employees to cope with the challenges of external engagement (Salter et al., 2014) while simultaneously design and implement an open innovation strategy (Vanhaverbeke and Cloodt, 2014). One of the objectives of the European Academic Network for Open Innovation - OI-Net (Erasmus Life Long Learning Programme) was to conduct a survey across European countries about the adoption, use and needs for OI and OI education and training. The OI-Net project partners collected over 500 responses from European companies (large, SMEs, and micro firms), see figure 1 for an overview of the sample.

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                                                Figure 1. OI-Net Industry Survey Sample.

Concerning the adoption of different OI activities, there is a basic distinction between inbound (outside-in) open innovation where focus is on flows of external knowledge into the firm, and outbound (inside-out) open innovation where focus is on how internal knowledge created around the core innovation activities can be allowed to flow out and create value from new ventures and/or collaborations.

From the monetary perspective, OI activities are divided into Pecuniary (monetary) and Nonpecuniary (non-monetary) dimensions, which illustrate the direct (or not) financial reward and compensation associated with it.

Overall, pecuniary OI dominates among the surveyed firms. Moreover, inbound open innovation activities such as collaborative innovation, scanning for external ideas, customer co-creation, are intensively adopted. Outbound open innovation is adopted less, see figure 2.


                                                            Figure 2. Adoption of OI activities.

Concerning innovation performance, the majority of OI adopters reported increased ROI (62%), increased market acceptance (68%) and improved success of their radical innovations (76%. The downside is that product development lead-time was reported to have increased for 56% of the adopters.

Concerning the Open Innovation Manager, the research enabled the development of a competency profile consisting of six competency clusters, namely Transformational, Methodic, Collaboration, Exploitative, Explorative and Interdisciplinary competencies. Examples of critical competencies include:

Transformational: Entrepreneurial Mindset, Leadership and Creativity,
Methodic: Multitasking and Problem-solving,
Exploitative: IP Management and Project Management,
Explorative: Ability to share knowledge internally and externally, Risk awareness and Failure tolerance.

To sum up, Open Innovation has taken root in European companies, with a large majority adopting it or planning to adopt it in the near future. Adopters see ROI and market acceptance of innovations increasing, while development lead-time can increase. Most OI activities adopted are outside-in OI, with collaborative activities, idea scouting and user of external networks dominating.


The full report can be downloaded from the OI-Net project website: http://oi-net.eu/m-oinet-network/m-news/m-news2/879-the-report-in-open-innovation-in-european-industries-is-out-2

References

Dabrowska, J. and Podmetina, D. (2014), "Identification of Competences for Open Innovation". 15th ISPIM Conference, Dublin, Ireland on 8-11 June.

Mortara, L. & Minshall, T. (2011), "How do large multinational companies implement open innovation?", Technovation, 31, 586-597.

Mortara, L. and Minshall, T. (2014), "Patterns of Implementation of OI in MNCs", In: Chesbrough, H., Vanhaverbeke, W., West, J. (eds.) New Frontiers in Open Innovation, Oxford: Oxford University Press, 242-255.

Salter, A., Criscuolo, P., Ter Wal, A.L.J., (2014), "Coping with Open Innovation: Responding to the challenges of external engagement in R&D", California Management Review, 56, 77-94.

Van De Vrande, V., De Jong, J. P. J., Vanhaverbeke, W. & De Rochemont, M. (2009), "Open innovation in SMEs: Trends, motives and management challenges", Technovation, 29, 423-437.

Vanhaverbeke, W. & Cloodt, M. (2014), "Theories of the Firm and Open Innovation", In: Chesbrough, H., Vanhaverbeke, W., West, J. (eds.) New Frontiers in Open Innovation, Oxford: Oxford University Press, 256-278.