Open Innovation: Leveraging external sources for innovation
One of the key principles of open innovation is that great ideas can come from anywhere, not just from within an organization.
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By Lourival Monaco
Open innovation can be defined as “A paradigm that assumes that firms can and should use external ideas as well as internal ideas &paths to market, as the firms look to advance their technology”1. It refers to the concept of using external resources and ideas to drive innovation and achieve goals. Rather than relying solely on internal research and development, open innovation encourages companies to seek out and collaborate with external partners, including customers, suppliers, and even competitors, to share knowledge, expertise, and ideas.
One of the key principles of open innovation is that great ideas can come from anywhere, not just from within an organization. Entities that practice open innovation are more willing to engage with external partners and stakeholders to identify new ideas, technologies, and markets. This approach can help them to gain a competitive advantage by accessing resources and expertise that they may not have in-house.
This idea aligns very well with the concept that companies have their resources, processes and values, and those are very particularly aligned with what makes them successful in their markets. These are usually not the same resources, processes and values that will help companies innovate. This is the famous “Innovator’s Dilemma”. Therefore, leveraging external sources can greatly improve their innovation processes.
This concept has been successfully applied in many different ways, in distinct industries. One well-known example is “Lego Ideas”, an initiative that was based on the open innovation model, where customers share their ideas on possible new products, enter contests and vote for the ideas that are most liked2. Another great example is the Mercedes-Benz Corporate Accelerator, where partnerships with academia and industry were created. In this initiative they were able to bring together multiple sponsoring companies, leading to a more attractive space for start-ups. Some of those startups are then selected to partner with Mercedes or others sponsoring entities and provide solutions to their internal needs3.
Open innovation is similar to other related concepts, such as crowdsourcing and collaborative innovation, which also involve working with external partners and stakeholders to generate new ideas and solutions. However, open innovation is distinguished by its emphasis on collaboration and the sharing of knowledge and resources, rather than simply soliciting input from external sources. In many ways, this multidirectional flow creates value for everyone involved, which in turn makes collaboration more interesting and attractive, allowing for a broader innovation ecosystem. Lean startup and design thinking are also complementary concepts, and can be used together to create successful new products and services.
For example, open innovation and the lean startup framework share a focus on rapid experimentation and iteration. In the lean startup framework, companies use a "build-measure-learn" cycle to quickly test and validate hypotheses about their product or service4. Open innovation can support this process by providing access to external partners who can help to generate new ideas, provide feedback on prototypes, and share expertise and resources. By using open innovation to collaborate with external partners, startups can accelerate the development of their products and services and increase their chances of success.
Design thinking is a human-centered approach to innovation that involves empathy, ideation, prototyping, and testing, prioritizing customer needs and insights5. Open innovation can support this process by providing access to external partners who can provide customer feedback, contribute to ideation sessions, and help to prototype and test new products and services. By using open innovation to collaborate with external partners, companies can gain a deeper understanding of customer needs and preferences, and design solutions that are more likely to be successful in the market.
Here we only named a couple of concepts involving startup creation, which are complementary and can be used together to drive innovation and create successful new companies, products, and services. By leveraging the strengths of each approach, a studio like DIAL can accelerate its development processes while also ensuring that our startups and their solutions are customer-focused, iterative, and grounded in real-world insights.
These are some, but not all, ways the open innovation process can improve the startup creation process.
· Needs assessment: external partners can help shed light on important challenges or needs observed by them, but necessarily obvious to startup builders. Creating this clarity makes the venture creation process more focused and diminishes the chances of creating solutions that no one truly needs.
· Idea/solution generation: The startup studio model relies on generating new business ideas, and open innovation can be used to source ideas from external partners, such as customers, suppliers, or experts. This can help to broaden the pool of potential ideas and increase the chances of identifying successful startups.
· Validation: Once an idea is identified, open innovation can be used to validate the idea by gathering feedback and insights from potential customers, partners, or other stakeholders. This can help to refine the idea and ensure that there is a market need for the proposed product or service.
· Team building: The startup studio model involves building teams to launch and grow new startups. Open innovation can be used to attract and recruit talent from external sources, such as universities, hackathons, or startup competitions. This can help to bring in new perspectives and expertise to the startup team.
· Co-creation: In the startup studio model, the team works closely with potential founders to develop and launch new products or services. Open innovation can be used to collaborate with external partners, such as suppliers, customers, or research institutions, to co-create and test new products or services. This can help to accelerate the development process and increase the chances of success.
For these reasons, DIAL Ventures chose the open innovation model for its innovation and startup creation process. We leverage our heritage from Purdue University and our connections to the agriculture and food industry to understand not only the most relevant problems affecting this industry, but also the ideate around potential solutions for these challenges. Additionally, by leveraging the open innovation concept and bringing together this exciting ecosystem around DIAL, we can generate potential customer demand for the startups created (and the solutions they offer) since they will target the same entities that help develop them.
This is how DIAL Ventures applies open innovation:
Each of these steps is done with the help and input from many different sources, such as Purdue University, Industry Partners, and many other entities, putting the theory into practice and creating impact at scale.
References
3 - BETTENMANN, D., GIONES, F., BREM, A., and GNEITING, P.(2022). Break Out to Open Innovation. MIT SLOAN MANAGEMENT REVIEW.
1 - Chesbrough, W. (2006). Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business Review Press.
4 - Reis, E. (2011). The Lean Startup. Crown Business
2 - Lego. (2021). Lego Ideas. Available at: https://ideas.lego.com/howitworks.
5 – IDEO Design Thinking. (2023) Available at: https://designthinking.ideo.com
By Lourival Monaco
Open innovation can be defined as “A paradigm that assumes that firms can and should use external ideas as well as internal ideas &paths to market, as the firms look to advance their technology”1. It refers to the concept of using external resources and ideas to drive innovation and achieve goals. Rather than relying solely on internal research and development, open innovation encourages companies to seek out and collaborate with external partners, including customers, suppliers, and even competitors, to share knowledge, expertise, and ideas.
One of the key principles of open innovation is that great ideas can come from anywhere, not just from within an organization. Entities that practice open innovation are more willing to engage with external partners and stakeholders to identify new ideas, technologies, and markets. This approach can help them to gain a competitive advantage by accessing resources and expertise that they may not have in-house.
This idea aligns very well with the concept that companies have their resources, processes and values, and those are very particularly aligned with what makes them successful in their markets. These are usually not the same resources, processes and values that will help companies innovate. This is the famous “Innovator’s Dilemma”. Therefore, leveraging external sources can greatly improve their innovation processes.
This concept has been successfully applied in many different ways, in distinct industries. One well-known example is “Lego Ideas”, an initiative that was based on the open innovation model, where customers share their ideas on possible new products, enter contests and vote for the ideas that are most liked2. Another great example is the Mercedes-Benz Corporate Accelerator, where partnerships with academia and industry were created. In this initiative they were able to bring together multiple sponsoring companies, leading to a more attractive space for start-ups. Some of those startups are then selected to partner with Mercedes or others sponsoring entities and provide solutions to their internal needs3.
Open innovation is similar to other related concepts, such as crowdsourcing and collaborative innovation, which also involve working with external partners and stakeholders to generate new ideas and solutions. However, open innovation is distinguished by its emphasis on collaboration and the sharing of knowledge and resources, rather than simply soliciting input from external sources. In many ways, this multidirectional flow creates value for everyone involved, which in turn makes collaboration more interesting and attractive, allowing for a broader innovation ecosystem. Lean startup and design thinking are also complementary concepts, and can be used together to create successful new products and services.
For example, open innovation and the lean startup framework share a focus on rapid experimentation and iteration. In the lean startup framework, companies use a "build-measure-learn" cycle to quickly test and validate hypotheses about their product or service4. Open innovation can support this process by providing access to external partners who can help to generate new ideas, provide feedback on prototypes, and share expertise and resources. By using open innovation to collaborate with external partners, startups can accelerate the development of their products and services and increase their chances of success.
Design thinking is a human-centered approach to innovation that involves empathy, ideation, prototyping, and testing, prioritizing customer needs and insights5. Open innovation can support this process by providing access to external partners who can provide customer feedback, contribute to ideation sessions, and help to prototype and test new products and services. By using open innovation to collaborate with external partners, companies can gain a deeper understanding of customer needs and preferences, and design solutions that are more likely to be successful in the market.
Here we only named a couple of concepts involving startup creation, which are complementary and can be used together to drive innovation and create successful new companies, products, and services. By leveraging the strengths of each approach, a studio like DIAL can accelerate its development processes while also ensuring that our startups and their solutions are customer-focused, iterative, and grounded in real-world insights.
These are some, but not all, ways the open innovation process can improve the startup creation process.
· Needs assessment: external partners can help shed light on important challenges or needs observed by them, but necessarily obvious to startup builders. Creating this clarity makes the venture creation process more focused and diminishes the chances of creating solutions that no one truly needs.
· Idea/solution generation: The startup studio model relies on generating new business ideas, and open innovation can be used to source ideas from external partners, such as customers, suppliers, or experts. This can help to broaden the pool of potential ideas and increase the chances of identifying successful startups.
· Validation: Once an idea is identified, open innovation can be used to validate the idea by gathering feedback and insights from potential customers, partners, or other stakeholders. This can help to refine the idea and ensure that there is a market need for the proposed product or service.
· Team building: The startup studio model involves building teams to launch and grow new startups. Open innovation can be used to attract and recruit talent from external sources, such as universities, hackathons, or startup competitions. This can help to bring in new perspectives and expertise to the startup team.
· Co-creation: In the startup studio model, the team works closely with potential founders to develop and launch new products or services. Open innovation can be used to collaborate with external partners, such as suppliers, customers, or research institutions, to co-create and test new products or services. This can help to accelerate the development process and increase the chances of success.
For these reasons, DIAL Ventures chose the open innovation model for its innovation and startup creation process. We leverage our heritage from Purdue University and our connections to the agriculture and food industry to understand not only the most relevant problems affecting this industry, but also the ideate around potential solutions for these challenges. Additionally, by leveraging the open innovation concept and bringing together this exciting ecosystem around DIAL, we can generate potential customer demand for the startups created (and the solutions they offer) since they will target the same entities that help develop them.
This is how DIAL Ventures applies open innovation:
Each of these steps is done with the help and input from many different sources, such as Purdue University, Industry Partners, and many other entities, putting the theory into practice and creating impact at scale.
References
3 - BETTENMANN, D., GIONES, F., BREM, A., and GNEITING, P.(2022). Break Out to Open Innovation. MIT SLOAN MANAGEMENT REVIEW.
1 - Chesbrough, W. (2006). Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business Review Press.
4 - Reis, E. (2011). The Lean Startup. Crown Business
2 - Lego. (2021). Lego Ideas. Available at: https://ideas.lego.com/howitworks.
5 – IDEO Design Thinking. (2023) Available at: https://designthinking.ideo.com