Choosing the right innovation model is important for businesses. This involves deciding between a closed model, which relies on a confidential research and development (R&D) department, and an open model that looks outward to form industry partnerships thriving on collaboration.
Both open and closed innovation come with their own sets of advantages and challenges. Knowing which of these approaches is right for your business could be the factor that sets your company on a path to long-term success. Let’s break down these two approaches to learn more!
What Is Open Innovation and Why Is It Important?
Open innovation is the practice of looking beyond your own team to collaborate with external experts, researchers, and customers to innovate and develop better solutions.
In business, this means coming together with several companies to work on a joint venture. Each company brings its own unique expertise and resources to the table. For instance, one might provide advanced technology, another could offer a comprehensive distribution network, and yet another might contribute market research data. This type of collaboration enables you to execute projects more efficiently and effectively by pooling together ideas, resources, and technology to achieve something greater than what could be done alone.
The advantages of open innovation is obvious with companies like LEGO, who launched a co-creation platform in 2008 with CUUSOO to tap into the collective creativity of LEGO’s customer base. Known as LEGO Ideas today, this online platform encourages fans to submit and vote for new set designs. Highly-voted designs that pass LEGO’s official review process will then be turned into actual LEGO sets, complete with credit and a percentage of sales given to the original designer.
LEGO’s example demonstrates that open innovation offers the following benefits:
Open innovation can also bring with it certain challenges:
What Is Closed Innovation and Its Benefits?
Closed innovation is when a company relies solely on its own R&D. Everything is in-house, from idea generation to product development, and commercialisation.
In certain companies, closed innovation looks like restricted access with only a select few knowing what’s happening in the R&D department. This department is given all the resources it needs to develop new products while the broader company waits in anticipation for this team to unveil innovations that will enhance the company’s competitive advantage.
Apple is a prime example of a company that thrives on a closed innovation model. Let’s take the development of the original iPhone, for instance. With Steve Jobs wanting to create a product that would redefine what a phone could be, this project had extremely tight security measures. It went by the code name “Project Purple” or “P2”, and Steve Jobs had development teams scattered across Apple’s Cupertino’s campus so that even the company’s own employees would be unaware of the scale and scope of the project. Everything about the iPhone was developed in-house, with Apple controlling every aspect of the product from conception to market launch.
Like Apple demonstrates, there are advantages to keeping innovation tightly under wraps:
However, closed innovation is also known to have potential drawbacks:
Deciding Between Open and Closed Innovation
Choosing an innovation model is not a coin flip. Rather, it’s a decision that requires you to consider your industry, size, and culture.
Firstly, the nature of the industry you are in is a significant determining factor. If you are in a fast-paced environment that requires quick injection of fresh ideas and rapid development cycles, an open model will serve you better. However, if you are in an industry like pharmaceuticals where IP protection is important, a closed model will make more sense.
Secondly, your company’s size and resources also play a big role. Smaller companies may find the shared financial burden of open innovation more manageable, while bigger companies may prefer the control that a closed model offers.
Lastly, assess your company’s culture and flexibility. A dynamic, collaborative culture that is agile and receptive to change will serve as good grounds for an open model. However, if your business values control and has systematic ways of doing things, a closed model will align better.
The Hybrid Innovation Approach
Think both an open model would work for you, as well as various aspects of a closed approach? This is common! Many businesses are increasingly adopting a hybrid or mixed model to combine elements of both open and closed innovation. For instance, while Apple largely uses a closed model, the company is not averse to acquisitions and partnerships when it makes sense. This hybrid approach offers the flexibility and advantages of both models while giving your business the agility to adapt in an innovation landscape that never stands still.
How MRANTI Supports You in Your Innovation Journey
MRANTI is committed to supporting your innovation journey, regardless of whether you choose an open or closed model. If you are adopting open innovation, MRANTI helps you to validate your ideas, develop research prototypes, and get MATCHed for mutually beneficial partnerships. On the flip side, if you are practising closed innovation, secure IP protection for your game-changing ideas with the help of MRANTI.
So, ready to elevate your innovation game? Find out What’s Next for you and how you can turn your ideas into real-life impact.