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What are the risks?

In this video, Dr Christos Tsinopoulos discusses the risks of engaging in open innovation and how they might be mitigated.
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So far we have been discussing about open innovation from a relatively positive angle. We have been discussing about sharing ideas, integrating, working with customers and suppliers, as a good thing. The argument of the assumption, if you want, is that integration with customers and suppliers potentially alludes to performance improvement. Yet, if you look around, you will see that this does not always happen. If you look around even further, you probably find that famous cases where there was some sharing of ideas somewhere along the line, ended up with significant disputes between large organisations.
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Famously, the Apple and Samsung cases, which is an ongoing case, indicates the degree to which, for instance, an idea shared between two organisations can lead to significant legal disputes.
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So what I would like to do in the next few minutes is to discuss in a little bit more detail, some of the high level risks associated with openness and integration, because of the little bit what can be done, and to link it with some of the exercises you’re going to have to do as part of this course. So one of the obvious, more apparent, high level risks associated with open innovation is of course, associated with intellectual property. Now, a key premise of open innovation is that innovations, ideas, external technologies, and so on, are shared between different parties across the supply chain. However, this is potentially a very highly risky process.
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Companies can be, and often should be, protective of their IP. You can consider, for instance, an organisation investing a lot in the development of a new technology, or some new research, or some new development. They might not be willing to share with another organisation, not least because they invested in it to make money sometime in the future. Famously, the case, the dispute between Samsung and Apple was basically sourced down to that problem. Another associated risk is effectively the outcome of the success of open innovation. You could, for instance, consider that if you do open innovation well, if you engage with open innovation well, you might result with a significant number of ideas.
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Potentially, there are a very high number of, for instance, options for the development of your product. So decisions on which one to pursue may be very difficult, and in fact, if you make the wrong decision, that might lead to the wrong directions. A high number of potentials might potentially encourage you to support the wrong ones. And the third high level risk of open innovation is associated with the degree of trust between a customer and supplier, or supplier suppliers. Now trust, of course, is a good thing. But open innovation and integration between customers and suppliers does require an element of trust in the sharing of ideas between the different parties. But it doesn’t require trust in only that.
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It also requires a degree of trust between the supplier and a customer in the way they conduct business. So for instance, if a supplier is willing to share some sort of idea or the development of a new technology with a customer, they are probably doing so in the hope, or probably in the certainty, that they are going to win some business from them in the future. Now though that’s principally a good thing, what that can result in is a locking in the relationship, and it can make either party stop thinking creatively.
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So if you consider, for instance, that suppliers develop some sort of new idea in the certainty that their new idea is going to be purchased by a customer, then there is potentially the risk of them stop thinking as creatively for the solution, or indeed for the problem, that the customer might have. And then finally, the slightly– the darkest side of open innovation, in this particular thing, in integration, is it may be seen as an opportunity to exploit one another. If you know you’re locked into, if you’re even in a contractual relationship, between a customer and the supplier, the supplier might see that as an opportunity to do something which is not necessarily at the best interest of both parties

So far we have been discussing the positive aspects of open innovation.

These have popularised the concept and in recent years several research institutes have tried to understand it, on the one hand, and apply it on the other.

Yet there are several risks that such openness can bring.

In this video we’ll be looking at some aspects of this – for example the risks in sharing intellectual property – and then we will be exploring whether and how they can be mitigated.

We mention the widely reported dispute between Apple and Samsung in the video. You might like to look into this in more detail to gain a greater insight into how some of the risks can play out in practice and to think about how they might be avoided.

Further information

Durham University has created a video about intellectual property which you might also find useful.

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