For the past decade or so, one of the most popular ideas in innovation has been around Open Innovation.
This is the practice of innovating and co-creation in collaboration with people outside of your company.
So instead of trying to do all of your innovation activities within your departments and only launch the final product to the market when it is ready, examples of Open Innovation may include:
- Setting challenges where external parties or individuals can suggest solutions
- Collaborating with a startup on a specific new challenge
- Hosting a hackathon and allowing external people to join and develop ideas and solutions
- Partnering with other companies, like suppliers or manufacturers, to innovate around integrating and optimising processes to make the entire supply chain more efficient
- Partnering with other companies, like retailers or marketing agencies, to gain insight into what customers might want
- Funding external innovation and technology development activities, with an eye on benefiting on any technology which is developed
However, one fundamental flaw with Open Innovation is that in most cases, the company still put itself at the center of the innovation activity in order to control it.
This is very similar to how companies see their position in their own vertical supply chain, where they will get materials or parts from one company, process them into their final product, and then send these products off to retail where customers can eventually buy them.
Of course, there are other supply chain models. Some companies sell directly to customers. Others do not manufacture anything themselves and use outsourced manufacturing partners to do this step on their behalf. And yet others have tried to integrate as many of these steps in the process into their own company as possible, whereas others have tried to outsource everything apart from management to external partners.
But in most cases, the shape of the business is like a chain, with links in the chain coming into and going out of the company.
In most cases, innovation at these companies still happens primarily in-house. And in the case of Open Innovation, the company might try to bring the external activity as close to their borders as possible to retain control. Or they might collaborate with one of their direct partners.
Yet this is where the next generation of innovation management becomes exciting.
None of the companies in these chains are in fact completely isolated from one another, and from other companies.
While your company may work with a small number of suppliers or distributors, each of them will also be working with other companies. They may be working with direct competitors, or companies in completely different industries from yours.
And when you map out the links between all of the companies, you no longer just have a chain … you have an interconnected web of interactions and relationships between companies.
You have an ecosystem.
And if each relationship between companies is an opportunity to innovate together between companies, you end up with an innovation ecosystem.
The beauty of thinking as an ecosystem is that not only can two companies in the chain together innovate together, instead it becomes possible for multiple companies to discuss and innovate together, using the network of each partner to work with other unexpected collaborators.
Sharing information on challenges and new technology also becomes advantageous in an ecosystem. If several companies can approach a challenge together, each bringing their own insights, expertise and technology, challenges can be solved much faster and at a lower cost for each party involved. Not only that, but research shows that collaborating with people outside your normal direct network can produce some of the most creative, valuable and differentiated results.
In some cases, companies which have traditionally been direct competitors may even begin to collaborate in order to innovate the entire industry together. There is even a word for this paradox of cooperating with your competition: coopetition.
And let us not forget, the ecosystem already exists through the business relationships between the network of companies. Every company is already part of the overall ecosystem of companies in their region, supply chain and industry. You don’t have to work with everyone single other company in the network, just the ones where it makes sense. But knowing who else is in the direct network will lead to insights from unexpected places as networks and even entire ecosystems find unexpected links between each other.
Finally, putting your company as one of the hubs of innovation within this innovation ecosystem can be hugely beneficial. It does not require significant investment to do this, as in practice the innovation ecosystem is made up primarily of relationships between people at these various other companies. Over time, the network of interested individuals can start off with simple workshops to see potential areas where the two or more companies could quickly try out small innovation sprints together. Growth and progress may then begin to build on itself, and combine with other sources of external innovation in unexpected and impactful ways. The overall innovation ecosystem may then grow as more companies begin collaborating with one another.
So if you are not sure where you currently sit in your innovation ecosystem, map out who you already do business with, who else you know, and begin to find out what innovative work is already being done.
A healthy ecosystem benefits everyone within it.
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