Open Innovation stands for the conscious opening of organization borders for the innovation process. “Opening the borders”, however, frequently leads to reservations in established industrial companies: “Innovation is the most important factor for competition and safeguards the survival of my company. Why should I therefore share my innovations with the rest of the world?“ If Open Innovation approaches are falsely understood in this manner and, as a consequence, therefore not implemented, it can happen that companies lose their grip on the innovation ecosystems and thus also lose their ability to compete.
Open Innovation as a catalyst for the flexibilization of the value creation chain
The more services and products become globally available, the more important it is to be perceived as the best provider. What is the best for a customer, depends on his needs: Quality, price, time, place, ecological and social footprints are typical parameters in this regard. How these parameters are weighted, varies. For industrial companies it is significant that their value creation chain only consists of the best subcomponents. Which subcomponents are the best for manufacturing companies can change as a result of new requirements or new solutions. It is therefore essential that the subcomponents of the value creation chain can be flexibly exchanged, and can be replaced by the currently best ones.
At present many customers still prefer industry solutions from one source. In future, the focus will also be on the exchangeability of individual subcomponents, no matter which company or startup actually delivers them. Some customers will also wish to bring components into the ecosystem themselves. Those companies, which offer open platforms, which function as Open Innovation ecosystems, will have the advantage.
Modularization follows digitalization
In more complex value creation chains, the lock-in effect of established solutions is presently still too high for them to be simply exchanged. The ongoing digitalization and the coupled (de facto) standardization, however, will result in a further modularization and encapsulation of the individual subcomponents, which will ultimately lead to a complete exchangeability of subcomponents. In the consumer segment we are already familiar with this effect in terms of apps on our smartphones. In the industry, exchangeability will affect both, hardware (e.g. machining tools, automation systems) and software (e.g. procurement, planning, simulation, automation, optimization, operational and invoicing software) as well as processes and services (e.g. logistics, maintenance, integration). Digitalization technologies such as for example the digital twin promote exchangeability and/or make it even possible in this generalized form.
New business models and platforms, so that opening the borders is economically attractive
This is where Open Innovation has to focus. We must learn to collaborate beyond organizational borders, industries and disciplines and develop new business models and platforms, which subsequently make an opening of the borders attractive. Open Innovation does not imply giving everything away for free. Instead, Open Innovation means that one has learned to establish collaboration models in the sense that it is not clear right from the start, who will contribute which innovations over the course of time. Smartphone apps also serve as a good example in this regard.
Open Innovation is more than just innovation contests
It is important to understand that Open Innovation is more than just innovation contests. No Open Innovation expert will ever claim that open innovation contests are the sole solution for industry innovations. At present, industrial Open Innovation methods such as for example “Hackathons” and innovation marathons, co-creation, call for proposals, lead users, Startup Founder Spaces and crowd funding are already in use. In far too little cases, however, are hardware/software platforms and their ecosystems also perceived as Open Innovation methods.
In the industrial environment, Open Innovation enables SMEs and startups to participate in the innovation ecosystem.
The new Enlightenment: Trial-and-error instead of pure rationality
(Remark: “The New Enlightenment” was the general topic of the European Forum Alpbach 2016)
The new Enlightenment shines in a different light here: Successful is what is acknowledged as the best on the market, i.e. in the democratic sense, no matter whether it can be rationally explained or not. Here we can observe a – well-known innovation-facilitating – much stronger bottom-up trial-and-error approach than in centralistically planned approaches.
All Open Innovation approaches are important “warm-up exercises” in order to prepare for the future working world, which will be strongly determined by flexibilization. Those who think through to its conclusion, the trend of continuous replacement by the best, will understand what these major changes will bring for all of us.
This text was written as in input for the Open Innovation panel discussion at the European Forum Alpbach 2016