Open innovation for executives

Marc-David Rompf1. June 2019

High hopes, modest results: In many companies “Open Innovation” experiments peter out quite quickly. The cardinal error is the failure to take advantage of contact points with the leadership culture. By adhering to a few simple, basic rules, managers can turn open innovation activities into success stories.

How companies can connect their leadership cultures with the Open Innovation paradigm.

Share your ideas with everyone, especially the really good ones and everyone will benefit in the end. This is the credo of the “Open Innovation” (OI) approach to changing corporate organizations and cultures. And what about intellectual property and specialization? That’s a thing of the past. In the digital age, economic success is achieved not because of, but in spite of the boundaries between teams, departments, locations and competitors. The more you dissolve these boundaries and share everything with everyone – from operational improvement suggestions to creative R&D output to registered patents – the faster and more far-reaching the success story will be. At least, that’s the theory.

Update for the management culture

In corporate practice, however, things look somewhat different. The idea of OI is not really catching on there – even though it has been on the curriculum in management seminars and universities for around two decades. And even though, in the context of VUCA (Volatility, Uncertainty, Complexity, Ambiguity), it is currently regarded as an adequate approach to getting organizations through the rocky passages of digital transformation. And no wonder, after all, it takes a lot of courage to serve up your most valuable know-how on a silver platter to your competitors, right?

By no means. The psychological dimension – courage, fear, leaving the comfort zone – is important, but secondary. Like any other (far-reaching, significant) change, this step requires solid decision-making authority and decisions first and foremost, whether at the strategic level for the proposed direction, or at the operational level by department and team leaders. Whoever is serious about aligning their company with OI should therefore dovetail these activities closely with the further development of the leadership and management culture.In addition to the competencies of a “digital leader”, two general perspectives on the topic are helpful: first of all, what is required in the short term so that leadership strategy and styles and OI make a good match? Secondly, what long-term effects should be considered?

A look to the workplace: positioning management tools for Open Innovation
Open Innovation usually pursues two objectives in the enterprise: First of all, to use the inflowing and outflowing knowledge streams to accelerate an internal innovation development. Secondly, to expand the options for external innovation use. Following this OI paradigm, which Henry Chesbrough developed at Harvard Business School some 20 years ago, OI can be understood as the opposite of the traditional vertical integration approach, in which in-house R&D activities lead to internally developed products that the company then ultimately sells (1). According to Chesbrough, two aspects are important here: first, the “outside in” aspect, in which companies feed external ideas and technologies into their own innovation process. Secondly, the “inside out” aspect. Here, ideas and technologies of the company that are hardly used, or not used at all, go outside in order to be integrated into the innovation processes of others (2). This is also aptly summarized by the motto “The world is our innovation department”. But to what extent should companies align their management culture with this today? With regard to both aspects there are a total of six points of orientation that provide initial, concrete support across all industries for further narrowing down the objectives and measures of OI:

Outside-in: linking people and technology in a meaningful manner

  • Reducing complexity: Innovations are available globally overnight and consumer behavior manifests in real time. This calls for greater flexibility and agility.
  • Receptiveness to new things: don’t underestimate the inertia of evolved structures; test new ideas in small units and share experiences transparently.
  • Drive investment forward: The combination of innovative corporate culture and contemporary strategies provides effective growth impulses in productivity, creativity, commitment and collaboration.

A look to the horizon: Changing traditional corporate cultures over the long term

There is, however, also a great deal to be learned from the failure of open innovation. Surprisingly, there is one cardinal error in dealing with this idea that is repeated time and time again: Managers ignore the fact that traditional cultures do not change in a matter of years, but over the course of decades.

The seat belt, which protects us when driving a car, offers a vivid example. It is the result of a revolutionary idea that the Swedish engineer Nils Bohlin came up with some sixty years ago: Why not combine the lap and shoulder belts that had been common in cars up to that time into a new design that would prevent vehicle occupants from being ejected from the car in the event of a collision? The fact that the resulting three-point safety belt still saves lives every day is also thanks to the openness of Bohlin’s employer at the time, namely Volvo, as the company made the invention available to all manufacturers. In retrospect, however, this classic OI example usually omits an interesting and important fact: The seat belt was not a success story because of, but in spite of, drivers’ attitudes towards their own safety. Even into the late 1960s, Bohlin was still promoting his product in many countries because, for example, there was a persistent misconception that in the event of an accident, drivers could hold themselves in their seats by muscle power alone. And even after introducing numerous technical improvements and traffic education measures, many passengers in Germany did not take the issue of seat belts seriously until 1984, when driving without a seat belt incurred a fine for the first time.

Within the corporate context, this very dilemma is well known when OI projects kick off in high spirits and then peter out bit by bit: too many process participants, no clear guidelines, lack of intrinsic motivation of those who are affected the most. In terms of an OI-attuned management culture, the following three points should be adhered to as countermeasure:

  • Create suitable framework conditionsRahmenbedingungen schaffen: In order to actively shape and design change, leadership with a clear focus on results is necessary. In order to achieve this, a company must, for example, think in a customer-centric way and precisely identify customer demands and requirements.
  • Trust instead of control: Success in digitization stands and falls with the trust of managers. This can be strengthened by providing as much scope as possible for freedom of thought and decision-making.
  • Communication is becoming the most important management task: Generations Y and Z in particular fail to get motivated in the context of traditional and hierarchical systems. This requires a culture of direct communication at eye level.

Naturally, OI success does not happen overnight – but every journey begins with the first step. Only those who manage to truly “think digitally” for their company will be able to hold their own in global competition in the future. This also includes the realization that digital transformation not only calls for technological changes but also, and above all, necessitates cultural changes. In this context, establishing OI approaches in executives’ job specifications helps to establish an essential foundation for this.

(1) See bolg post from Henry Chesbrough (Updated: 07/09/2018)
(2) Ibid.

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