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Open innovation: innovation to drive success

Social innovation

26/04/2021

A door-opening technological and cultural model

Open innovation: default to open

Innovation comes from anywhere’ is the first rule of the technological giant Google which whole-heartedly embraces the open innovation strategy. 
Open innovation is an innovation model conceived by the US economist and author Henry Chesbrough, characterised by the opening of companies to the external environment to create more value and be more competitive on the market. This is a new cultural approach as well as a strategic decision. A company decides not to solely deploy in-house resources and ideas but to look for expertise, solutions and options externally, which may be start-ups, universities, research centres and professionals such as programmers and inventors. 
 

Internal research is no longer enough, companies must look outwards

The term “open invention” was coined by Chesbrough in his 2003 book “Open innovation: the New Imperative for Creating and Profiting from Technology”. He reflects on how globalisation has made research and development increasingly costly, as well as risky. This is because products have shorter life cycles making it necessary to reinvent their development processes each time with the related financial and timing commitments. Open innovation resolves this issue as it uses a two-track scenario featuring both long-standing companies and newcos. On the one hand, the market giants need to innovate and so turn to the newcomers while these start-ups need an incubator environment that facilitates their growth.

Is Italy ready for open innovation?

Chesbrough had already understood in 2003 that in-house research was no longer sufficient to innovate but the importance of open innovation is still not grasped by everyone. Its gradual implementation is a recent phenomenon with the approach to innovation only changing in recent years. Companies have understood that closed innovation is no longer enough: talents travel with information and it is increasingly harder to retain them long-term. Despite this, Italy, and Europe in general, still do not invest enough in innovation and while this trend is slowly changing it is not fast enough to keep up with the rest of the world.

Innovation is and will continue to be the key to success

Together with Smau, the platform that connects companies with the innovation ecosystem, the consultancy and innovation company Mind the Bridge carried out a survey on open innovation in Italy. Its project, entitled Open Innovation Outlook Italy 2021, analysed the issue and compared its data to those of global innovation leaders to find that Italy still lags behind its international competitors. Most Italian companies are only setting off on their open innovation pathway and the key players continue to be large companies. There are not many structured SMEs that have adopted open innovation and even the more mature start-ups are far behind their international counterparts. At the end of 2019, Italy only had 245 scale-ups (innovative companies that had already developed a product and business model) able to generate more than USD1 million, placing the country tenth in the European ranking. Its figures are not even close to with those of the global leaders like China, the Silicon Valley and Korea. 

Open innovation in practice

Companies that can develop innovative products and services by combining external and internal resources in the best possible way are more competitive. This is the underlying tenet of open innovation. Indeed, the number of companies that have sufficient internal resources to not have to rely on external resources is marginal. So how can a company implement open innovation? There are numerous ways including through partnerships and opening hubs and the most common are:

-    Business incubators or accelerators. Programmes managed directly or indirectly by the company to assist and foster the start-up, especially in its early stage by providing it with facilities and tools.
-    Partnerships. Agreements with external partners, such as between a company and a start-up.
-    Call for ideas, hackathons. Calls for ideas (often with prizes involved) from professionals or companies active in specific sectors.
-    Acquisitions. The acquisition of investments by corporations and big companies is one of the main open innovation tools. 
 

More resources, more points of view, more options

Italian open innovation: growing in the health, energy and transport sectors

Today, more than ever, knowledge spreads in all directions quickly and pervasively thanks to technology. The current public health emergency has certainly contributed to accelerating digitalization processes that also encourage open innovation. We are moving towards a future that is increasingly open to participation in order to find quick and innovative solutions to problems. A key example of this is Enel, which has deployed open innovation significantly in recent years to renew its business. This has entailed setting up a special innovation and sustainability unit to speed up projects. It also rolled out hundreds of partnerships with start-ups. In 2016, for example, it agreed a very positive 80 partnerships in 30 countries where it has a base and opened an innovation hub in Berkeley (California) which works directly with the University of California. 

Ideas and knowledge travel at the speed of a click

The most significant cases of open innovation adopted in the transport sector include Trenord. This company recently launched a call for ideas about innovative solutions for social distancing, cybersecurity and remote working. One of the winning ideas was proposed by Needpower with its “Need to power” project that offers a solution for smart phones that need to be charged with a device recharge service by installing recharging points in strategic highly frequented areas that can be found using a geolocation app. In the health sector, the pharma company Angelini Holding took part in a call for ideas promoted by Smau for two reasons: to identify new product delivery/dosage systems and materials to produce face masks and new sustainable packaging materials. 

Outlook and future challenges

While the benefits of open innovation are clear, many challenges still need to be resolved for its proper implementation and fine-tuning. The main hindrances are both operating and legal issues and cultural aspects.
If a company does not have a well-defined innovation strategy, it is hard to manage a partner relationship with third parties as this entails many changes at operating and structural levels. 
The legal aspects of a potential partnership need to be defined immediately to safeguard against possible negative aspects that could affect the project or the company’s brand reputation. The last and probably most critical issue facing open innovation is the lack of a collaborative and cross-departmental corporate culture. Some companies find it hard to accept ideas that come from outside as they are sceptical and fearful of new forms of innovation. 
 

People first, then processes and finally ideas for successful innovation