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Implementing and measuring open innovation

In this video, Dr Christos Tsinopoulos considers what processes can support the implementation of open innovation and the challenges of measuring it.
So far, we have discussed aspects of the benefits of open innovation. We have also explored some aspects of the– if you want more theoretical elements of open innovation, such as the organisation’s absorptive capacity and the impact that the network can have on the organisation developing products. What I would like to focus on in the next few minutes is the more specific processes that actually need to be in place for open innovation to happen. And what I would like to conclude with is by exploring the challenges associated with measuring open innovation and its impact on performance, competitiveness, and so on.
Now, when an organisation cooperates with external parties to acquire information and R&D to commercialise its innovations, it would be reasonable to presume that it engages in open innovation. So applying and, subsequently, measuring open innovation would require the implementation of processes that support corporations with external parties on the one hand and acquire information and R&D on the other.
Now, what we have done in our research is that we have actually focused on three different groups, or types of processes, associated with open innovation. The first kind of group of processes that we have focused on relates to the use of information from external parties. So, I’m referring here to bits of information such as market data. The second group of process we have focused on relates to the cooperation with external parties. So for instance, a proactive collaboration with a supplier on the development of a new product. And the third group of processes that we have focused on relates to the acquisition of external R&D.
So for instance, the acquisition of intellectual property on a process or a product developed by a third party. For instance, acquiring IP from a university.
Now, the use of information or the group of activities associated with the use of information are relatively more, what we refer to as, passive. They are passive sources. So for instance, when an organisation is looking on the internet for new ideas, for new products, for instance, that we refer to as use of information, which is relatively more passive. And there are several such opportunities to do that. A very good example is the use of reviews for a product, for instance. Although these might be relatively evaluative, they can provide an evaluation or criticism of a product. At the same time, they can provide for opportunities for improvement. Ideas for how to improve a product that is already out there.
So it isn’t just about evaluation but it’s also about engaging and finding information which will lead to improvements.
The second group of processes we have looked at relates to the corporation with external parties that’s more proactive. And it refers to cooperation with customers, suppliers, and other members of the network. And what these are trying to do is that they’re trying to share processes, investments, idea generation, and so on. So they’re proactive processes aimed at engaging with the customer and the supplier. And what they do with the result– what they result in– is feedback loops, which effectively lead to learning. And because they lead to learning, they’re more likely to increase the awareness of technology trends, market changes, forthcoming market changes, and so on.
And the final group of processes that we have looked at is that of the use of external R&D. And we refer to here knowledge developed for research purposes by a third party. And it can take many forms. It can be, for instance, the equation of a technology asset. It can be some sort of licencing agreement or a contract for a blueprint. Or it may have no explicit involvement from an innovator, for instance, freeware software. All of these things, indeed, all of the process that we referred to can lead to relational capabilities, which effectively can help cover any knowledge gap that the organisation might have.
Which leaves us with the final point. How do we actually measure the impact of those processes on performance and competitiveness more general? Well, you may recall that we had said that integration between customers and suppliers is likely to depend on this organisation. Therefore, the measurement is likely to depend on different organisational capabilities, processes, and so on. It will depend on the dimension of engagement, the type of processes which are in place, the organisation itself, and finally, the ultimate aim– what is it the organisation is actually trying to achieve from open innovation?
We have explored the benefits of open innovation and some of the factors that enable it in weeks 1 and 2. In this video and later on this week, we will be discussing the importance of processes as a key factor. We will be exploring what the key processes are that an organisation would need to implement to enable the acquisition and integration of ideas developed externally.
Later we will expand on this by exploring the kind of culture that’s needed for achieving open innovation.
As you go through this video consider how the three outlined processes can be fully developed into organisational routines that everyone can follow. Think about how these processes can support the development of absorptive capacity as explained during week 2. In addition, try to consider how these processes can lead to wider organisational learning.
Given the uniqueness of the processes involved in open innovation, measurement may be a difficult thing to achieve. Yet we have come across several activities throughout this course which may have some measurable output. For instance, you could measure the number of ideas that originate from outside an organisation’s boundaries, eg customers, lead users and suppliers. Similarly, you could measure the number of partnerships the organisation has developed along with their impact on product and process development. Finally, you could try to measure attitudes towards open innovation, for example by exploring the degree to which a team would like to work with its partners to learn new things and subsequently develop its absorptive capacity.
Although there is not one way of doing it, a combination, which takes into account some of the organisational context, could be the best way forward.
Think about how such approaches could be used to convince managers and shareholders about the practical impact of open innovation on performance.
Tsinopoulos, C., Sousa, C. & Yan, J. (2017). Process Innovation: Open innovation and the moderating role of the motivation to achieve legitimacy. Journal of Product Innovation Management.
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