Why Corporations Should Embrace the Open Innovation Model

Matthew Bushery

The claim that there's one "right" way to bring new business ideas to market is one you won't see executives at leading corporations make today — particularly those who embrace open innovation.

Many large companies work with external partners to turn problems of interest into changes to their core products. The goal is often to address customer concerns and preferences.

Now, these scaled organizations are also developing entirely new startups with outside help, not just enhancing core business models.

Specifically, they're partnering with venture builders who help corporate partners (along with universities, states, and non-profits) and have proven startup-creation playbooks.

Venture builders are far from the only party involved in open innovation initiatives. But they are the forcing function that keeps corporate innovation programs moving full steam ahead.

The open innovation model: More than just for core business model improvement

“Most innovations fail. And companies that don't innovate die.”

This insight from "Open Innovation: The New Imperative for Creating and Profiting from Technology," the renowned book released almost two decades ago from University of California, Berkeley, Faculty Director at the Garwood Center for Corporate Innovation Henry Chesbrough, is spot on.

Taking chances on employees' ideas — ones either developed in R&D programs or brought forth by other teams — is a gamble for any scaled organization.

But open innovation isn't just a 'volume' game.

Rather, open innovation involves making bold bets on concepts that originated internally and/or externally that can potentially transform the primary business model to better serve existing customers or create products for entirely new markets separate from the core business altogether.

Consider how some companies use the approach today:

  • Some lean heavily on agencies to conduct audience research and consumer interviews to provide qualitative and quantitative feedback that can improve existing products.
  • Others crowdsource ideas directly from their customer and user base to get relevant and timely insights they can then share with their research and development teams.
  • And many work with consultants who can assess the current state of business operations, note inefficiencies and areas of opportunity, and prescribe optimizations.

Henry was curious enough to follow up on his open innovation theory 20 years later to see if corporate C-suites who welcomed the idea at their organizations saw their desired ROI from it.

The answer?

"We've seen some companies enjoy great success with this approach and witnessed the difficulties of others," Henry wrote for MIT Sloan Management Review in 2023. "One surprising insight 20 years on is that the biggest barriers to successful open innovation are inside, not outside, the organization."

Translation? Open innovation offers another optimal route to revenue growth and core business expansion. It also provides corporations the chance to test and validate company concepts at scale to create new startups that could be highly profitable. (Possibly even as much as the core business.)

"There are certainly circumstances when closed or internal approaches are absolutely called for, particularly when you are are innovating close to the core of the business and can rely on your own internal expertise and capabilities," said High Alpha Innovation Director Rob Kimball.

"Once you get farther away from the core business, though, dealing with new customers, markets, or business models, an open innovation model can invite new perspectives, identify and challenge deeply held assumptions, and uncover new, eye-opening insights."

A venture-building partner's role in your corporation's open innovation ecosystem

Time to market is a common metric for gauging the initial success of venture-building programs. As it should be.

Launching novel startups before competitors do is key to capitalizing on what could be a narrow window of opportunity to strike on an original, potentially groundbreaking idea.

Leadership is often fine investing in work outside the core business. But their patience gets tested when they don't see results — in this case, the creation of new companies — quickly.

As Tuck School of Business at Dartmouth College Professor of Strategy and Entrepreneurship Ron Adner wrote for Harvard Business Review all the way back in 2006, though, "Getting to market ahead of your rivals is of value only if your partners are ready when you arrive."

The purpose of an open innovation ecosystem is for internal and external stakeholders to collect, analyze, and act on data to explore opportunities and ideas.

Structure and speed are ideal for success. But it's really the level of collaboration that determines the effectiveness of partnerships between corporations and venture builders.

"[A] genuinely integrated innovation ecosystem not only develops individual connections to customers, suppliers, partners, academia, researchers, and the startup community, but it also looks to create a unified framework that involves, learns, and correlates the data across the entire structure," HYPE Innovation's Ludwig Melik recently wrote for InnoLead.

With a proven venture builder that has a lot of experience in launching new companies alongside corporate partners involved in your company-creation efforts, you greatly enhance your odds of startup success from day one.

And there are a few key ways a venture-building partner can turn your corporation into a more resilient, value-creation engine.

Shared insights from idea-sharing can lead to new revelations

At High Alpha Innovation, we're all about structured, expansive ideation.

We adopt an analytical mindset to helping corporate partners map out potentially revenue-generating opportunity areas outside the core business that could a) solve compelling problems, and b) prove profitable and scalable.

But it's only when partners openly share the issues they want to solve for and themes they want to explore that we can then thoughtfully research the challenges in question.

Once we know their problems, we can determine the viability of business ideas, then deliberate with our partners to plot a path toward bringing one of many ideas to market.

Stronger startup concepts from collaborative problem validation

After vetting and testing ideas and testing critical assumptions regarding them with partners for several weeks, while simultaneously speaking with potential customers and industry experts, our team moves into the Sprint phase with a couple ideas we and corporate partners agree are the most viable.

So long as we all have conviction that the concepts in question are likely the most fruitful ones that will have the desired impact in the industry/focus areas, our team has a playbook to expedite the business model-planning process for the finalists.

During this time, we assess the pros and cons of both options and look for areas to poke holes in (i.e., possible flaws with the business design).

Though exhaustive, this process — one many of our corporate partners find difficult to execute on their own — ultimately ensures the final chosen company option is a near-surefire bet to make a splash in the market and attract venture capital investment.

Support to turn the best concepts into sustainable businesses

The High Alpha Innovation team doesn't wash our hands of the open innovation process with corporate partners once a startup idea is picked.

We maintain a dedicated, hands-on approach.

We help our partners find the right founders to lead their tech startups, connect them with entrepreneur and channel partner networks, and assist with go-to-market planning to position the chosen venture as an attractive investment opportunity for VCs.

In other words? Open innovation partnerships don't end at launch.

It's an ongoing effort that doesn't end for High Alpha Innovation.

Founding teams eventually take the reins to run day-to-day operations. But our team offers regular guidance and direction to ensure the fruits of our collective open innovation labor are realized.

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