What Is Open Innovation? (And Why is It Important?)

Let’s talk about LEGO.

You know, the iconic interlocking plastic bricks that can be built into anything, from flowers to ships, to robots. One of the toy companies that revolutionized its industry.

Today, LEGO stands as the leading toy brand worldwide, with an astronomical value of almost $8 billion. You could say they built that.

But do you know, there was a time they almost tumbled?

In 2008, LEGO faced a significant crisis. The company had overextended itself by diversifying into various ventures, including video games, theme parks, and licensed products. This strategic misstep, coupled with a decline in core toy sales, led to a sharp decline in revenue and a significant debt burden. The company was on the brink of financial ruin, forcing it to make drastic cuts and reevaluate its business model.

But then they did something, interesting.

They streamlined their product lines, focusing on their core strength: their iconic LEGO brick. They also began actively seeking input from their passionate fan base. This led to the creation of LEGO Ideas, a platform where fans could submit their own designs for LEGO sets. Successful submissions were then produced and sold by LEGO, with the original designer receiving a share of the profits. This strategy not only generated fresh and exciting ideas but also fostered a strong sense of community and loyalty among LEGO enthusiasts. This multi-pronged approach helped LEGO regain its footing, rebuild its brand, and ultimately emerge stronger than before.

You see that thing they did, seeking input from their fan base?

That’s called open innovation.

Imagine if instead of being stuck on a project, you could tap into the collective intelligence of your entire organization, your customer base, or even beyond, to find a solution. That’s the power of open innovation.

So in this blog, we’ll be going deep into the concept of open innovation, exploring its benefits and how you can implement it in your organization.

But first, you have to know what it is.

What is Open Innovation?

Open innovation is a paradigm shift in the way organizations approach innovation. It involves collaborating with external partners, such as customers, suppliers, researchers, and even competitors, to generate new ideas and solutions. By breaking down traditional barriers and fostering a culture of openness and collaboration, businesses can accelerate innovation and gain a competitive edge.  

In traditional innovation, companies often operate in silos, relying solely on internal resources to generate new ideas. This approach can be limiting, as it can stifle creativity and prevent the organization from tapping into a wider pool of knowledge and expertise.  

Open innovation, on the other hand, encourages a more inclusive and collaborative approach. By involving external partners, businesses can access a diverse range of perspectives and insights, leading to more innovative and impactful solutions.  

Traditional Innovation VS Open Innovation.

Traditional innovation, often referred to as “closed innovation,” is the classic approach where companies rely solely on internal resources to generate new ideas and develop products. It involves in-house research and development teams working independently to create proprietary solutions. This approach emphasizes secrecy and intellectual property protection, intending to maintain a competitive edge. While traditional innovation can be effective in certain contexts, it can be limiting, as it restricts the flow of ideas and can lead to a lack of diversity and creativity.

In contrast, open innovation is a more collaborative and inclusive approach that involves seeking ideas and knowledge from external sources. It breaks down the traditional boundaries between organizations, encouraging partnerships with customers, suppliers, universities, consulting firms (like us), and even competitors. Leveraging external expertise and perspectives can help you accelerate innovation, reduce costs, and increase the likelihood of developing groundbreaking solutions. Open innovation can take various forms, including crowdsourcing, hackathons, joint ventures, and licensing agreements.

The key difference between open and traditional innovation lies in their approach to knowledge and collaboration. Traditional innovation operates within the confines of the organization, while open innovation extends beyond these boundaries to tap into a broader ecosystem of innovation. By embracing open innovation, you can foster a more dynamic and agile innovation culture, ultimately driving growth and success in today’s rapidly changing marketplace.

Why Does Open Innovation Matter?

If you’re still skeptical about open innovation, here are some reasons why you should consider:

1. Accelerates Innovation:

I. Diverse Perspectives: By collaborating with external partners, organizations gain access to a wider range of ideas, experiences, and perspectives. This diversity stimulates creativity and leads to more innovative solutions.

II. Reduced Time-to-Market: Open innovation can streamline the development process by leveraging the expertise of external partners. This can significantly reduce the time it takes to bring new products or services to market.

2. Enhanced Problem-Solving:

I. Collective Intelligence: Open innovation harnesses the collective intelligence of a diverse group of individuals. By combining different viewpoints and skill sets, organizations can tackle complex problems more effectively.

II. Breakthrough Solutions: Collaborating with external partners can lead to unexpected breakthroughs and innovative solutions that may not have been possible through internal efforts alone.

3. Cost Reduction:

I. Shared Resources: By partnering with other organizations, companies can share resources and costs, such as research and development expenses.

II. Risk Mitigation: Open innovation can help spread the risk of innovation, as multiple organizations share the costs and potential rewards.

4. Stronger Brand Reputation:

I. Customer Engagement: By involving customers and other stakeholders in the innovation process, organizations can build stronger relationships and improve brand loyalty.

II. Positive Perception: Open innovation demonstrates a commitment to innovation and collaboration, enhancing an organization’s reputation as a forward-thinking and customer-centric company.

5. Competitive Advantage:

I. First-Mover Advantage: By being the first to market with innovative products or services, organizations can gain a significant competitive advantage.

II. Sustainable Growth: Open innovation can help organizations adapt to changing market conditions and maintain a competitive edge over the long term.

In Conclusion…

In today’s fast-paced world, businesses that want to stay ahead of the curve need to embrace open innovation. By working together with other companies, researchers, and even customers, you can spark new ideas, solve tough problems, and create amazing new products and services. It’s like tapping into a global brain trust to supercharge your innovation efforts.

And did you know one of the ways you can build open innovation, is by getting a consultant? And oh, you don’t have to look any further from here. We’ve been in the game of providing innovative solutions and insights for businesses for over a decade. From learning initiatives to managing your employees, our team of experts delivers tailored solutions that can help your business thrive. So what are you waiting for? Contact us today and let’s work together to build a future for your business, brick by brick.