20th February 2019
Want a high performing culture? Make way for open innovation!
Are today’s enterprises approaching innovation in the healthiest and most efficient way? If enterprises are to stay relevant, it’s time to retire outdated approaches to product & service development and embrace open innovation – by which we mean opening up the innovation process to open source solutions and a collaborative approach rather than in siloed environments behind closed doors. So where are you on the innovation continuum?
Across industries and across the globe, enterprises are coming under unprecedented pressure to innovate. And innovation works: new products, unique delivery models and novel concepts in customer service can deliver profits, new revenue streams, and media attention for the companies who get innovation right.
The pressure to deliver new ideas runs right through the organization, from the CEO’s office through IT and beyond, but it is up to the company leadership to ask itself the hardest question of all: is the organization getting innovation right? If product & service development has always been an aspect of the enterprise’s activities, is the approach it follows still the best approach as the world races toward 2020?
Let’s take a look at how this race to innovate has picked up the pace and 5 ways you should approach open innovation in your organisation to help make it happen.
Why do enterprises need to innovate?
However it delivers on its innovation agenda, the enterprise must bring new ideas to market. Here are some macro pressures that turn up the heat even further on the enterprise and its IT team:
- Gartner says global IT spending in 2019 will total $3.8 trillion, with spending on enterprise software in particular increasing by 8.3%. Companies are betting on IT to deliver their vision, which pressures IT, teams, to innovate better.
- Customers’ service expectations are high and growing, and enterprises are winning (and losing) on the basis of their customer experience. They’re hoping technology will enable not just better experiences, but better insights and data, to facilitate a more personalised service.
- The average lifespan of a company listed on the S&P 500 index has decreased by more than 50 years in the last century, and it is estimated that the average tenure will shrink to just 12 years by 2027. Enterprises must do more to stay relevant.
Don’t let ‘Not Invented Here’ kill your Innovation
Traditionally, innovation within the enterprise happened behind sealed doors, masterminded by R&D teams who were themselves siloed within the organization. Think about the traditional R&D “division” – even the wording is divisive.
This feeling of separateness pervaded the entire ideation process. Those siloed teams quietly built proprietary intellectual property portfolios that were considered the organization’s crown jewels, protected in many cases by patent and presented as a fully formed piece of brilliance that both colleagues and the market would love. The ‘Not Invented Here’ mindset was also a way of protecting the organizational ‘immune system’ against the threat of ideas from the outside, avoiding risk.
Except it hasn’t always worked out that way. Open innovation comes to the fore partly due to the gradual realization that a swollen patent portfolio does not always equal profitability. Open innovation is, in IT terms, about embracing open source software, open standards, and collaborative processes, but it is more than that. It’s about recognizing that valuable new ideas emerge through open interactions, partnerships, and conversation — not solely with IT and product development colleagues, but with other divisions, with customers, with suppliers & partners.
A pioneering set of experiments looking at innovation in textiles, plastics, and food carried out by Paul Lawrence and Jay Lorsch in the 1960s examined the extent to which differences between functions had an influence on how long it took to get new products to the marketplace. Those groups with multiple integration mechanisms fared better, sharing ideas, defusing tensions, and working together towards the common goal.
Much has been written about the importance of having an open or learning culture in the enterprise, and open innovation fits directly into that. Think of organisations who find innovation most difficult: they are likely to be those where the culture punishes risk-taking. From its leadership down, that kind of organization sends a strong signal that failure is unacceptable and ideas from the outside are unwelcome.
The organization that embraces open innovation feels and operates in a more creative, empowering way, acknowledging that great ideas can come from anywhere. This open culture is about mindset as much as anything, and the signal sent from leadership is one of encouragement, collaboration and support. Google famously empowers its developers to devote 20% of their time to projects they’re curious about, which led to Gmail, Google Maps and more – but Twitter, Groupon and countless other game-changing concepts also sprang from side projects that some developer, somewhere, was simply curious about.
5 ways to think about open innovation
Access to new IT skills
Bravely call out your technology skills gaps ASAP, regardless of how much you’re already investing in plugging those gaps. You may need to skill up faster than you think. This can come through training or by bringing in outside specialists, but it needs to be addressed as soon as it spotted. If open source software has never been part of your innovation process, there’s a wealth of code, developer talent, and community goodwill out there ready to help your IT team tackle the software aspects of transformation initiatives you’re considering which you will have access to if you embrace open innovation.
Access to new perspectives
If your development teams are brainstorming and delivering on business requirements, co-creating with others can bring not only new product ideas but new ways of thinking, new approaches and new toolsets. And don’t forget open innovation’s secret power: it expands your perspective without expanding your costs. There is real value in the insights you gain from professionals who bring their own set of experience and skills – often from other industries and from industry disruptors who already think differently. There’s only so much insight your team can get from listening to themselves: expose them to new ideas, approaches and methodologies, and you may just find your next Eureka moment.
Focus on performance
Focus not on the speed but on the effectiveness of your innovation work. When you take an open innovation approach your innovation activity is more effective, that allows you to do other things faster (like bring new products to market). Taking small steps toward a bigger vision can often translate into better performance. Taking small steps can also help to make the transition more comfortable for existing teams.
Retain the talent you have
Co-creation and collaboration are one of the most satisfying experiences you can give your IT team, which means your most valuable technical staff may be more likely to stay with you. One reason Microsoft is once again said to be a great place for developers to work is its approach to open innovation, with its hackathons, Garage and so on. Personally, I’ve found co-creation projects incredibly rewarding, seeing the code I’ve written be used in amazing ways that I could never have anticipated. Let your developers be creative (not just among themselves, but with colleagues – even in other industries) and the results may surprise and please you both.
Distinguish the areas where risk should be and where it is not. Risks in discovery, in developing new solutions to customer problems, for example, are risks worth taking and should be regarded as a safe zone for innovation unlike those that have a significant & immediate financial impact.
Open innovation: this is how we do it
At NearForm we are often brought in to help organizations tackle thorny problems with software aspects of business transformation programs. We’ve worked with developers all over the world, literally in every time zone, across a wide selection of industries.
It’s not always a comfortable position to be in at first, either for ourselves or the developer team we meet: how can we collaborate and tackle the problem at hand without leaving anyone, on either side, feel sidelined or undervalued? I suppose the secret of how we’ve managed to help so many companies get significant transformation projects over the line is that we truly don’t think in terms of “sides.”
A good case in point is a technology company we have worked with extensively. While their technical team has deep domain knowledge relating to what their core product is designed to do, they were bumping up against the edges of their ability to implement at scale. This limited their ability to deliver new features as fast as customers want, and competitors were threatening to lure those customers away. The NearForm team stepped in to help, partnering and openly collaborating with the technical team to fill those gaps. Be sure to take a look at our case studies, to see in more detail, some of the companies we’ve helped.
To ensure success, we cannot enter an engagement with the attitude that we are the experts and we know all. We have as much to learn from our customers as they do from us, and only through establishing a functional collaborative partnership can we truly drive things forward.
To establish such a relationship, it is critical to demonstrate competency immediately, but in a respectful way that helps upskill the customer’s team. We listened to the customer, we took the time to learn their domain and identify the issues they were facing. We didn’t just parachute in with a one-size-fits-all miracle cure. We began co-creating together, optimising the architecture and implementation to first give a solid foundation upon which to build before starting to expand their product’s features.
Truly, the companies we work with are in such a range of industries that we could never hope to have the domain knowledge they possess. We do quite a lot of listening – more than talking – and recognise that the ideal final result is if we can help expand the skills base of the technical teams we work with so they can continue to add more value.
This means we’re also helping expand the population of talented open source developers who will, in turn, contribute usefully to the well of knowledge everyone draws value from, NearForm included. It really is a win all around.
|Closed Innovation||Open Innovation|
|Place of Innovation||within the company||Inside & outside the company|
|Philosophy||Innovations emerge from the company’s internal resources||Conscious import and export of knowledge to improve and accelerate your own innovations.|
|Source of skill-sets||Closed Innovation places very high demands on a fixed set of employees – the company should always strive to hire highly qualified employees.||The company works with bright minds inside and outside the organisation. There is less emphasis on hiring but having access to qualified skillsets.|
|Role of Customer||Passive recipients||Active co-innovators|
|Product development bias||Uniqueness||Action, Speed|
|Competitive advantage||To lead the competition, it is necessary to offer the best ideas. The winner is who brings the innovation to market first||Making the most of internal and external ideas gives a competitive advantage. The winner is who delivers a scalable sustainable model, a user-centric approach and can adapt to change.|
|Intellectual Property||The own know-how is treated confidentially in order to protect it and to avoid free rides by competitors.||The shared know-how is available to build on by third-party contributors.|
We partner with organisations across the globe to help them achieve sustainable, open innovation through the design & delivery of open software, methodologies and technologies. If you’d like to understand how we can help you stay relevant & scale to demand, contact us for an exploratory review and feel free to connect with James on LinkedIn.