· 2 min read · Features

Open innovation: A brief history

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The history and future impact of open innovation

Benjamin Reid, principal researcher at innovation charity Nesta, explains the story of open innovation, and its implications for the future of UK innovation.

"Few would now question the importance of innovation to company growth and long-term performance. Nesta’s research on high-growth firms suggests that more innovative companies on average grow almost twice as fast as those that aren’t innovating. But innovation itself is changing – it is becoming more ‘open’.

While the term ‘open innovation’ was only popularised in 2003 – by Berkeley professor Henry Chesbrough, based primarily on technology firms – the broader dynamics of the ‘open’ shift have deeper roots. Many global pharmaceutical companies began to look externally for product innovation in the 80s and 90s. Today, a far wider range of organisations are explicitly embracing open innovation, and many are prepared to

attribute part of their success to open innovation strategies.

There’s no hard and fast definition of open innovation – and flexibility is one of its strengths – but we can frame it with examples. It can be contrasted with ‘closed’ innovation, where large firms own and manage the whole innovation process. Open innovation suggests working in partnership with those outside the organisation.

It needs an element of reciprocity. Simply calling a customer suggestion box, or making new demands on suppliers ‘open innovation’ would render the concept meaninglessness.

A widely-used definition is: innovating with partners by sharing the risks and rewards.

Aggregate numbers on the benefits of open innovation are difficult to come by. But it has taken hold in some industries – a recent Big Innovation Centre study suggested both Unilever and GlaxoSmithKline now have open innovation elements in over 50% of their R&D projects and are actively developing their open innovation processes.

There is also evidence that open innovation has a performance effect – research by Accenture finds open innovation is related to reduced time-to-market for new products and increased the number of recognised innovations from large organisations.

From narrow beginnings, open innovation itself is now far more open. The approach permeates all industries and sectors, and has expanded its scope to encompass all kinds of external collaborations across the innovation ‘ecosystem’: including partnerships with universities, networks of SMEs, Government, or with social enterprises.

Examples include hedge fund Man Group’s long-term collaboration with Oxford University, or Barclays’ ‘Corporate Accelerator’ to develop cohorts of small financial technology business. Structured crowdsourcing of ideas is now widespread and sophisticated.

Many open innovation initiatives were led by R&D or innovation professionals. But it’s now recognised that developing a successful open innovation programme is people-driven and needs the engagement of people management professionals.

At its most extensive – and most successful – open innovation has a profound effect on the skills required of managers and leaders, on career paths, and on performance measures. HR’s ability to support these ‘open’ requirements is vital to an organisation’s ability to successfully develop open innovation.”