How industries influence the implementation of open innovation
Many organizations are not only leading the way in open innovation but also influencing the implementation and processes of open innovation through their approaches, timelines, and types of collaborations. Their strategies and procedures have a great impact on SMEs, individuals, groups, national institutions, universities, etc. because of their connections.
Open innovation relies on the interdependence of all these organizations in order to function. As industries implement open innovation, they utilize different strategies, which in turn changes the way organizations work together for one common goal.
In this blog, we’re going to take a closer look at how different industries influence the implementation of open innovation.
The context defines implementation
Major industries, such as the chemical, automobile, service and manufacture, and financial services, influence the implementation of open innovation. However, more importantly, the type of industry and the partnerships they form can show us various decision-making processes in implementation.
This shift towards open innovation is not a synchronous process across industries. Various organizations prefer different features and practices, corresponding to the context of their industry.
There are 3 contexts to look at when comparing sectors and their implementation:
- Degree of competition
- Goods vs. Services
Implementation of Open Innovation
Open innovation doesn’t work without bringing external competences and resources into the innovation and creative processes. Creating a large network of partners allows organizations to leverage knowledge so they can innovate better and faster.
However, when looking closely at the complex nature of these partnerships, the actual implementation of Open Innovation raises some unanswered questions (which can also include clients, suppliers, R&D public, and private centers, etc.).
Implementation consists of a cross-functional process that includes diverse departments, such as procurement, supply chain/logistics, marketing and sales, R&D legal, finance, etc. Nevertheless, the department that leads the process is dependent on the company culture.
The adoption of open innovation is not influenced solely by any one type of corporation. It can depend on various factors, such as innovation requirements, organizational culture, the timeline of implementation, the country, the industry, etc.
Useful insights: OPEN INNOVATION FUNNEL - A look at the numbers→
Comparison of industries
Organizations address practices in open innovation and challenges from implementation in various ways. The following industries can give us some insight into these differences in implementation.
We’ll take a look closer into the chemical industry, automobile industry, service and manufacture industries, and the financial services industry.
But first, let’s note the 3 major challenges for these industries when implementing open innovation:
- Management of internal organization
- Management of external relations
- Marketing efficacy
The chemical industry is process dominated, and most of these companies operate in the B2B sector. Process innovation can’t be easily protected by patents. Therefore, they experience difficulties in IP protection.
Some companies have implemented open innovation activities, such as expert workshops, patent analysis, customer visit teams, and collaborations for new product development and new markets exploration.
Innovation challenges are rarely used in this industry. They primarily take part in organized joint projects and collaborate with universities or research institutes. Here are some companies who are currently carrying out the implementation of open innovation:
Open innovation is a great approach for the automobile industry, but most automotive companies favor the closed innovation approach. Recently, however, we have begun to see an increase of open innovation in this industry in response to technological intensity and the increasing relevance of new business models.
Customers are the main source of innovation for the automobile industry. However, governmental regulations also play a role and provide sources of innovation. They also innovate by utilizing knowledge from other companies and have financially helped start-ups.
The automobile industry also takes part in other open innovation activities, including product presentations, reverse engineering, innovation intermediaries, crowdsourcing, collaborative research projects, scouting, and passive web-based methods.
Service and Manufacture Industries
It is important to understand the service industry’s R&D processes due to their influence on economic growth. Given that these industries deal with physical goods, they tend to outsource R&D or in-source new technology, such as venturing activities. They focus on standardization as a means for finding new collaborative innovations.
Consumers are their most significant source of innovation followed by competitors and suppliers.
On the other hand, manufacturing companies are much more technologically intensive, operating in large geographical industries, which means they outsource R&D and carry out IP in-licensing.
The manufacturing industry is adopting more open innovation activities than the service industry, by implementing collaborations, standardizations and outside technology acquisitions more vigorously.
Both of these industries are affected by globalization and require more attention in R&D whether internal or external.
Another important aspect to note is whether a company is high-tech or low-tech. High-tech industries are implementing open innovation by carrying out IP in- and out-licensing and collaborating with external partners
Financial Services Industry
Open innovation hasn’t been applied in the financial services industry as much as it should be. Even with worldwide financial crises, financial organizations have not completely opened up to the idea of open innovation.
Clients looking for new services and opportunities have begun influencing this sector. To keep clients interested, the need for new and improved services and products proposed through the use of open innovation are increasing.
One of the main reasons why companies in the financial sector have started using open innovation is to assist in their digital transition. They have to adapt to changes: new technologies, new regulatory constraints, and new customer expectations.
Banks and financial companies are mainly implementing open innovation through collaborations (Fintechs, Startups, Incubators, or accelerators). Another way innovation can be stimulated in this sector is through Innovation Contests, where winners can be rewarded with a monetary prize or partnership.
Developed industries have implemented some open innovation initiatives, such as the food, software development, telecommunication, and pharmaceutical industries. The industries in this article have shown us how open innovation can be slowly implemented into a business strategy. Every industry has its own characteristics and practices in the implementation of open innovation. However, it is clear that the intensity of open innovation implementation is based on the type of industry as well as the various sources and collaborations they choose to pursue.