The innovative way to innovate

Posted on 1 Dec 2009 by The Manufacturer

Dr Letizia Mortara from Cambridge University’s Institute for Manufacturing on open innovation...

Traditionaly organisations had their own research and development teams tasked with producing the next must-have product or technology in a bid to secure a competitive advantage. But as manufacturing processes and technology become increasingly complex and global competition grows, few companies can now afford the luxury of going it alone.

This is where Open Innovation (OI) comes in. For those unfamiliar with the term, OI is about sharing ideas and knowledge to enhance innovation capability. OI is an innovation itself, it was first described by Prof Henry Chesbrough of the University of Berkley in 2003 and aims to accelerate the development of technologies, products and services by working with external partners.

It’s a simple, yet powerful idea and one that is gaining traction. You can see examples of OI across a range of business sectors including Electronics and Telecoms; Energy; Aerospace and Defence, Fast Moving Consumer Goods and Software and Media.

The benefits of collaboration appear obvious, especially in a period of tight budgets. It has often been said innovation is the best route out of recession, indeed there has been a raft of reports over the last 12 months saying exactly that. Yet, in a downturn, activities which don’t immediately add
black numbers to the bottom line tend to get cut. With OI R&D activities, development risks and costs are shared, meaning companies have access to additional resource without additional expense. It also means firms gain access to markets and expertise which might otherwise only be achieved through costly acquisition.

Though it may appear to have some of the characteristics of a management fad, there are several examples of how it has worked effectively. The Japanese clothing retailer Muji, for example, uses its existing customer base to pre-evaluate designs before developing new products. In Germany, a country where OI has really taken hold, the automotive product development company EDAG unveiled its Light Car, a new vehicle developed with nine open
innovation partners, at this September’s Frankfurt
Motor Show.

And the phenomenon is not confined to small niche manufacturers or design groups.

Unilever and Procter & Gamble have embraced this approach and have openly said how much they have benefitted from access to fresh ideas and thinking. Likewise the European electronics giant Philips has a similar view, seeing OI as a way of encouraging entrepreneurial thinking in the innovation process.

Problem: effective implementation
OI could be a key factor over the coming decades. As emerging economies evolve, so the competitive edge will most likely lie not in manufacturing capability but in idea generation and the ability to act on new ideas. OI may help UK manufacturers gain that competitive advantage. It is apparent from the case studies that it can be a positive and successful method to innovate. The problem seems to lie with execution.

The challenge for manufacturers is not in accepting the potential positive benefits of OI; but rather in facing the challenges of implementing it effectively, an issue not unique to OI. When Toyota’s Just-In-Time techniques first transferred across from Japan little thought was initially given to how these should be adapted for UK industry, until the development of lean methodologies. The same can be said of OI.

Firms contemplating adopting an OI approach need to think carefully about how to introduce it. For many employees, imbued with a set of company values, it represents a radical change. People don’t tend to like reorganisation or radical change especially when it involves an entrenched method of doing things — a culture of open innovation can’t be introduced overnight!

Some companies, such as Google, were created from the start with innovation as a central ethos, and may find introducing open innovation relatively easy. For most firms it takes time to evolve their OI approach. These companies, for example Unilever – one of the pioneers of OI – have had to overcome obstacles such as motivating staff, developing processes and building the right skills set.

The IfM and other academic institutions continue to devote a great deal of research effort into OI as it clearly has the potential to have a big impact on industry. While it may not be a panacea to all business problems, it is certainly an approach that could help to ensure UK manufacturing maintains its competitive edge.

Dr Letizia Mortara from Cambridge University’s Institute for Manufacturing