Why most “open innovation” strategies fail

We helped launch, fund, and grow startups. This is what we have learned, and how we pass that knowledge on to companies.

May 7, 2020
  • Open Innovation
  • Startup
  • Corporate Accelerator
  • Innovation Strategy

The ever-evolving market and the emergence of increasingly complex scenarios are forcing organizations to adapt rapidly and build sound innovation strategies to grow and differentiate themselves on the market.

 

To innovate, companies can invest in internal R&D or open up to the market and adopt innovative processes that involve third parties.

 

The idea of open innovation is not new. The first mention of it in relevant literature dates back to 2003, in the book “Open Innovation: The New Imperative for Creating and Profiting from Technology” by Henry Chesbrough. Yet, the core principle of moving from closed to open innovation is much older than in the 21st century.

 

For instance, in 1714, the British Parliament issued the Longitude Act, by which large payouts were awarded to anyone capable of correctly and reliably measuring the longitude of ships. No one’s solution was deemed satisfactory, however, and so the British Government continued to collaborate with third parties for over thirty years. In those times, the first marine chronometer was developed.

 

When we talk about open innovation, our minds immediately picture a funnel through which ideas from the outside flow into the company — as to demonstrate that fresh opportunities can indeed come from external clients or providers — and those from within the firm can go outside and benefit others.

The term is often overused, but actual open innovation can indeed be a profitable and impactful way to innovate. For one, it makes things faster. It speeds up the time to market, it bolsters market differentiation, and it quickly generates new revenue streams for a company. Open innovation is also accessible. It can help companies create new skills and adopt new technologies that would be too complex to develop internally or find elsewhere.

 

The idea of open innovation reflects a company culture that’s innovative, of course, which essentially means open, collaborative, fast, and experimental. That’s why developing open innovation projects should be a top priority for companies seeking to remain competitive in the market.

 

Companies are under pressure to rethink the methodologies and fundamental processes through which they generate ideas and bring them to market. And while the theory shows the numerous advantages of this approach rather clearly, the implementation is not as simple. There are three elements of complexity we always keep in mind in our open innovation projects.

 

 

1. Open innovation is just the tip of the iceberg

To emplace successful open innovation processes, a company needs a clearly defined innovation strategy, which must be aligned with the overall strategic plan and an internal structure that fosters collaboration between business units. Excessively stiff internal processes, rigid company culture, and misalignment of internal strategies are among the top reasons why open innovation projects fail.

 

At H-FARM, we have a deep understanding of the complexity firms and their innovation departments need to wade through. And so, leveraging multidisciplinary know-how, we launch co-creation projects that help companies to take on more responsibility inside innovation processes, enable creativity, reduce risk, accelerate the decision-making process and promote transparency.

 

 

2. Open innovation is not rocket science

Finding the right business partner can be similar to finding a life partner: it is often necessary to get to know many people before finding the right one; there needs to be a roughly equivalent level of maturity and some common, shared goals; and most of all finding one in the least expected places is far from unheard of. We, as H-FARM, understand this fragile yet powerful relationship — it’s in our DNA. We started this journey fifteen years ago as an incubator; then we invested in emerging startups, built an international portfolio, and managed acceleration programs.

 

 

3. Each company is different and requires an ad-hoc strategy

We believe that understanding a company’s unique traits and finding the right strategy to open up internal processes to external collaboration is critical to a successful open innovation strategy. Our method combines research that’s highly focused on the human impact of technology with a co-design methodology, access to an extended network of startups, and quick prototyping skills that give meaningful, concrete answers: from a people-focused strategy all the way to market-ready solutions.

 

The experience we gained in the global startup ecosystem has allowed us to design a robust methodology we keep experimenting with and improving every day. Our role in facilitating the relationship between a company and a startup is similar to a baker. We know how much water and yeast are needed for each kind of flower based on the number of proteins; we know how much time and energy are necessary to knead the dough; and we know when and for how long the dough needs to rest and proof to be worked on at a later time.

We are now offering this service to companies’ open innovation programs, including scouting, management of acceleration projects, and creation of entirely new business models.

 

How is this done? A starting point is a search for inspiration from the outside, in the market, in the hope of catching existing, concrete solutions. We have worked on hundreds of open innovation projects, and know how to bring our fresh perspective to the challenges companies are facing. We don’t have conceptual barriers born out of the context we operate in, and as we face diversified challenges, we know how to join the dots — innovative events — in new ways.

 

The first things we do are listening and exploring. The right solution may already be out there, and simply require slight adjustments. We adopt a practical approach through our network, and back the exploration phase with preliminary research, both internal and external, to identify the correct areas of opportunity.

 

Starting with the brief, we search and analyze the best solutions on the market and inside our international startup network. We contact and meet startups, understand their solutions and their added value, and ultimately create the link between them and the company, promoting collaboration opportunities.

Then, together with the startup and the company, we define a perimeter for the first proof of concept and design a collaboration path that leads to an actual test of the partnership. We guide both the startup and the firm from the pilot through the final solution’s roll-out, and give our clients tools and methods to validate and deliver the project.

We believe the final output of an open innovation projects consists of three elements:

  • a project, i.e. a concrete and tested business opportunity;
  • a methodology, along with the tools needed to face future challenges and embark on further open innovation projects independently and using a solid structure;
  • an impact on the company’s mindset, culture, and value, to make them learn and think like a more agile startup.

 

After years of collaboration with startups (not to mention that we have been a startup ourselves), we understand their flexible, constantly changing nature, and can help more structured companies navigate those uncharted waters.

 

A mixture of knowledge of the client, understanding of the startup world, and the lean methodology we adopt allows us to fill the gap between the traditional work environment and the innovative, dynamic one of the modern world. We create new meeting points between different realities and transform those open innovation experiments into new and successful practices that ultimately give birth to concrete solutions and have a tangible impact on the client’s business.


To learn more about our thoughts on open innovation projects:

innovation@h-farm.com