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ARTICLE SEPTEMBER / OCTOBER 2014
 
Franz Bailom on...
 

OPEN INNOVATION – FOR REAL

Or: Why innovation needs
renewed understanding

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When searching for innovative ideas, concepts or solutions, many companies rely heavily on in-house expertise. A look inside is of course vital since the goal here is to discover a company’s true competencies and skill sets. But looking within is not enough! To generate ideas you also have to look outside of the company. In addition to exploring the internal and external workings of an organization, it is also important to focus your ideas and ultimately to network intelligently. Then comes the question of business logic! But let's not get ahead of ourselves...
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Many established independent business research institutes in Europe, the USA, South America and Asia reckon nearly unanimously with little or no growth in Europe, diminished growth in emerging markets, increased scarcity of resources and unresolved environmental and social issues. At the same time, our various studies have clearly shown that:

  • the main markets for over 50 percent of companies are mature or even shrinking markets in which intense competition has reigned supreme for many years now (quality pressure accompanied by sinking margins)
  • more than 23 percent of the companies surveyed have experienced falling sales in their main markets over the last three years. That is, stagnation is already a reality and nearly 30 percent of companies are barely growing at all
  • and over 60 percent of companies have come to the conclusion on their own that they have no portfolio for innovation that will open new growth opportunities for them.

In all likelihood, we can confidently assume that many companies will be faced with immense and perhaps even existence-threatening challenges to survival. Many firms will be very dependent on their ability to innovate.

Which (thought) patterns hinder innovation the most

Taking a closer look at the innovation logic of companies we see that given current market conditions there are two fundamental thought patterns that form a real barrier to successful growth:

  1. The lion's share of companies chooses evolutionary innovations focused on improving what already exists. These innovations are certainly necessary. But this type of innovation in mature markets is not able to produce the level of differentiation necessary to inspire truly dynamic growth.
     
  2. When searching for innovative ideas, concepts or solutions, many companies rely heavily on expertise from within the organization. You not only run the risk of limiting the search field when looking for ideas because of the company's finite base of experience, but you also often commit yourself to the creative potential of a very small group of people. Radical approaches typically remain the exception in such situations.

What you need to know about successful innovation

Many examples and the latest studies illustrate that

  • radical or even disruptive innovations are often the real drivers of growth
  • these innovations are often taken from new "interpretations" of existing core competencies
  • these innovations are always developed with a corresponding business model, with the appropriate added value, marketing and profit logic.
    and last but not least
  • many success stories emerge as a result of integrating external (!) know-how throughout the various phases of the innovation process.

An (open) innovation approach that poses many questions

Based on the findings we just briefly outlined, the immediate question arises of which underlying process logic makes sense when attempting to implement innovations that will drive growth? Based on a great many innovation projects and the constant exchange of ideas with top scientists, we have developed the following step-by-step approach:

1. REFLECTION:
Discovering the true competencies and abilities of a company


Contrary to what many assume, existing know-how can often be a very valuable resource for radical or even disruptive innovations. The fact is, however, that true competence, i.e. those abilities or skill sets at a company that have the most potential, are often hiding below the surface. Companies are quite obviously not even aware of their own strengths. An in-depth exploration of these proprietary capacities in combination with external partners, customers, researchers, etc. can reveal a lot of unexpected things. Assumed strengths may disintegrate. On the other hand, some abilities and skills that had previously been given too little attention gain massively in importance. Open innovation – phase one!

2. OPENING UP:
Generating special ideas by opening your company to internal and external discovery

At its core, the goal is to think laterally based on these "new" competencies – and to let others think with you! When creating new space for growth we should therefore not rely too heavily on just our own creativity. And we should definitely avoid a purely technological view of the world. It is also very exciting to identify experts for each area of competence or skill in order to then develop "crazy" and "unique" ideas based on those newly found strengths. Open innovation – phase two! You'll be surprised not only which doors but also how many doors are fundamentally open to your company.

3. FOCUSING:
The value of filtering

During this phase it is particularly important to ensure quality over quantity. The art of this lies in organizing the first batch of exciting concepts into a sensible structure before selecting three to five of them for the next step. As far as content is concerned, during this filtering process it is vital that the following logic is applied to the analysis of your ideas:

  • What is the core of each idea?
  • Which players will you be confronted with?
  • What roll can we play in the game (market)?
  • What rolls and activities produce what benefits?
  • Where do our current abilities provide us with the most assistance?

The decisive factor in the filtering process is not how attractive an idea may be or even its potential. What is more important is understanding where the different opportunities exactly lie.

4. NETWORKING:
Enhancing and qualifying ideas using intelligent networking

With a significantly reduced number of options we then go to the next phase of open innovation – phase three! This time it will be with completely different people and a different goal. The challenge here is to identify potential users and industry experts who can focus your understanding of the market dynamics and customer benefits of your ideas. This once again requires intensive discourse, not individual conversations. The real process of qualification begins once the discussions and reflection in a group with multiple EXTERNAL experts has commenced. Focus must be placed here on the networking. At this stage you have much more than an idea, but it is still a long way from becoming a business logic. That requires a very successful round of innovation work.

5. BUSINESS LOGIC:
From innovation to business success

Now that our idea is HIGHLY qualified and our innovations have been outlined in detail, the next step is to gradually work out which dimensions are needed in order to ultimately be able to speak of a unique, coherent and sustainable business logic. This requires in-depth development of a clear concept based on the following elements of a business model, in particular...

  • Positioning: What does this innovation stand for and in which market segment?
  • What you are offering: What do we want to provide and what special benefit does the customer get excited about?
  • The underlying added value: What do we do ourselves and where do we need partners?
  • The market approach: What path or what niche will we carve out to get ourselves to the market?

But there is also this…

  • Profit logic: How can we make money doing this?

In conclusion, everyone involved should be clear about one thing. Innovation doesn’t fall from the skies. It needs good preparation and requires a lot of energy. Half-baked in an "open approach" doesn't mean half the result. It means no result! //
 

 
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IMP Strategy Days 2015 will focus to a great extent on a new understanding of innovation.

IMP Strategy Days
Innsbruck-Igls

GROWTH THROUGH DIFFERENTIATION
Better? Different?
Better completely different?


INFO | REGISTRATION >

CONFERENCE 
LANGUAGE: GERMAN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Already read?
Book tip

THE INNOVATOR'S DILEMMA

Why established companies lose the battle for
pioneering innovation

 

Christensen, C. M.; Matzler K.; Friedrich von den Eichen, S., Vahlen Verlag, 2011
 

MORE INFO AND
ORDER >


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Franz Bailom
Innovative Management Partner



IMP Managing Partner
IMP Austria


CONTACT
Angelika Moser
a.moser@imp.at
+43 (0) 512 580010

 

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