In a recent online discussion at an open innovation blog, one of the contributors suggested that open innovation does not work for medium and small companies. Our team decided to take this question to our customers and colleagues to gauge their opinion.
Our discussions with innovation practitioners indicate that historically there is a 20% success rate for new products and services. Approximately eight of every ten products sales fail or do not provide sustainable results for the company. As such a holistic open innovation process that includes the acquisition, development and commercialization of technologies it’s essential for a firm that wants to improve their innovation success rate.
Roundtable discussions with colleagues highlight the power of open innovation and how it helps to decrease the time-to-market, and development and commercialization costs, while increasing the innovation budget. An open innovation model coupled with constant interaction with customers and technology providers can deliver superior return on innovation.
The following are two real cases showing this approach. The first a global multinational and the second a newly created two-person start-up both leverage open innovation networks to enhance their internal innovation programs.
The multinational is a European public firm, approximately $4.5 billion dollars in sales and 42,000 employees. This company on average dedicates between 6 to 7% of sales towards innovation projects. Through the use of open innovation the firm has been able to leverage their internal innovation budgets and global position to triple their budget through the development partners and funding channels. They are able to bring two dollars of external funding for every dollar they put on their innovation projects.
Through the use of their holistic innovation process they can offer development and/or commercialization support to technology providers. The firm has developed a network of over 200 partners worldwide to acquire and commercialize technologies. Generally these partners are research institutions or small businesses that have significant access to government innovation budgets and contracts, but lack development and commercialization capabilities. This process guarantees a multiplier effect on their budget supporting providing lower technology acquisition and development costs, some of the expenditures and development and share with the partners.
The startup is a newly created material science company manned a physicist and a metallurgist. They are developing next-generation nano-material additives for castings to enhance material properties. While they are able to create their carbon nano-materials at their laboratory and at significant low-cost, they lack access to a foundry process development equipment and a testing facility.
They entered into an open innovation alliance with a national foundry that provided the development equipment and the testing facility at no cost. This partnership saved the two scientists significant development dollars and time on the development and validation of the cast material. Furthermore the foundry was one of your potential customers so they also positioned themselves to lower commercialization costs of time-to-market.
A total innovation process inclusive of technology acquisition, development and the commercialization supports shorter time-to-market, lower development costs and leverages innovation budgets to enhance over all investment, is a win-win to small and large firms.
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