Open innovation: what is it and how does it contribute to a long-term business strategy?

Open innovation –Open Innovation– has emerged as a key strategic approach for the integration of external knowledge into an organization. Why?

It is no secret that companies, just as it happens in their context with the different species of the animal world, require constant adaptation and evolution to meet the needs of the market and society in general. A Darwinian situation of business evolution in which, as in all economic spheres, the resources to be allocated to this constant adaptation are limited and must be distributed among multiple matters crucial to the survival of a company. Thus, and despite the fact that investment in innovation, or open innovation, is not a negotiable matter for a company with a long-term vision, they must adapt to new formulas that transcend the usual internal innovation to which they already allocate resources in the most traditional way in this area.

It is in this demanding and changing context that the term we are going to analyze today was born: open innovation, or Open Innovation in its original Anglo-Saxon terminology. Today we are going to pause to understand what this type of innovation is in a company and how it affects its future. Let’s start at the beginning.

What is open innovation?

Perhaps the first issue to address before understanding its implications is to explain what Open Innovation is. The concept of Open Innovation emerged just two decades ago from the American academic from the University of Berkley, Henry Chesbrough, who proposed that companies should not only address their innovation needs through internal processes based on knowledge within the organization. On the contrary, Chesbrough coins a new model of open innovation through which companies go beyond their natural limits by incorporating external knowledge to solve challenges of the business structure itself.

In this way, the open innovation model proposes cooperation with different companies, startups, organizations or external professionals to advance in the great challenges of R&D thanks to the expertise of these third parties in fields where a company does not necessarily have key knowledge. Thus, Open Innovation means a combination of internal talent with external knowledge.

A disruptive concept that has changed the way companies invest in their own innovation, improving their competitiveness.

How is it transferred to a company and what does it translate into?

These types of processes are incorporated into a company through different methodologies and tools that it must apply and develop to ensure that its needs are adapted to the opportunities offered by these external agents.  It is essential that all of this be supported by a strategic innovation plan with clear objectives, identifying – through the creation of an Open Innovation team or work area – the main challenges or development points necessary for the company in the following years. This team will also be in charge of energizing future challenges by bridging the gap between internal talent and external knowledge. A fundamental task that requires the appropriate legal and financial mechanisms to guarantee the success of future projects.

Thus, we find three main open innovation methodologies that apply within the structure of a company:

1. Inbound Open Innovation: This is a model in which the company adapts an innovative solution already developed by a third party. In this way, an internal challenge or need is identified and potential collaborating partners are selected based on the requirements established for each project and their adaptation to the company. This is what Professor Chesbrough explains as outside-in. It is a methodology that includes tools known as the Venture Client.

• Outbound Open Innovation: In this case, it is the company itself that has developed an innovative solution, but for its commercialization it makes it available to third-party companies. In this way, those companies with a strong presence of innovation in the generation of solutions and with limited options when it comes to their actual launch ensure their continuity in the market through third parties that do require these for their survival as companies. That is, what Professor Chesbrough explains as inside-out.

• Coupled Open Innovation: This is a mixed model in which several agents sign a collaborative agreement on innovation through which each of them will take advantage of the fruits of this based on the needs of their own market. These companies are usually from different sectors and seek, through this methodology, to generate synergies and solutions that, otherwise, would be totally impossible due to economic and structural barriers.

Open Innovation: main advantages for a company

These are some of the main improvements that this new open innovation strategy generates in companies:

1. Access to new concepts and ideas: Perhaps the most obvious of the advantages. Opening the door to collaboration entails the introduction of new, often disruptive, concepts in organizations outside of these. In this way, it allows for organizational evolution in many aspects.
2. Cost reduction: Because projects are joint in responsibility and tasks, companies do not face the high costs that individuality entails in these fields. In addition to implementing technology internally that improves and makes processes more efficient.
3. Greater flexibility and speed in the market: The result of collaborating with external agents, with greater expertise in the company’s needs, means that it can adapt flexibly to the needs of the market.
4. Generation of new opportunities and businesses: There may be a situation in which, as a result of collaborations, products or services arise that cannot find an outlet through the company’s traditional marketing. However, this type of innovation creates channels to bring these to life through collaborating entities.
5. Continuous improvement of internal talent: The coexistence of internal talent with external knowledge in projects enhances the company’s know-how, generating a breeding ground for future internal developments and enabling professional growth.
6. Creation of new value nodes: By integrating third parties into the innovation strategy, companies experience improved relationships with third-party companies over the long term.
7. Access to talent. It allows the company to work with external talent with skills that the company does not have internally.

Ormazabal Startup Switch, do you know our Venture Client vehicle?

Ormazabal Startup Switch is Ormazabal’s new open innovation vehicle and aims to support the company’s innovation path by identifying new startups and technology providers that serve to promote competitiveness by adding new technologies, attracting diverse talent, and strengthening the company’s internal innovation ecosystem company.

Thus, this new tool, based on the Venture Client model, will allow the creation of collaborative environments with external agents that help solve problems and challenges facing the organization at a horizontal level. To this end, Ormazabal Startup Switch has a specific website where you will find the different challenges in which we seek collaboration. This publicly accessible website allows startups to present their solutions and proposals to various international startups in order to achieve proof of concept with Ormazabal for each of these challenges.

This collaboration format represents an opportunity for startups looking to accelerate their growth, with a test bay in a proven company like Ormazabal where they can test their solutions in the real world.

Want to know more? Click here: