Why Corporations Should Embrace the Open Innovation Model

Matthew Bushery

The notion of a "right," singular path to bring new business ideas to market is thankfully one you won't see espoused by executives at many leading corporations today — particularly those that have adopted open innovation.

Many large-scale companies now consider external support for turning internal ideas, issues, opportunities, and intellectual property into changes to their core products and services that address customer concerns and desires.

However, a number of enterprises are also developing entirely new startups with the aid of outside sources.

Notably, they're leaning on leading venture builders who have long participated in the open innovation process with corporate partners and have vast innovation networks of entrepreneurs and investors who can set spun-off startups up for success well before they go to market.

While far from the only party involved in open innovation initiatives (more on that shortly), venture builders are the key cog that acts as the necessary forcing function to keep corporate innovation programs moving full steam ahead.

Understanding the open innovation model: How more corporations are facilitating internal and external knowledge flow

“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, may seem paradoxical.

The truth is it's spot on. Taking chances on ideas brought forth by in-house staff members — ones either developed via internal R&D programs or brought forth by top performers with aspirations of advancement — is a gamble for any 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 firms utilize the innovation method:

  • Some corporations lean heavily on outside agencies to conduct audience research and consumer interviews to provide qualitative and quantitative feedback that can be used to augment existing offerings.
  • Other enterprises crowdsource ideas directly from their customer and user base through various incentivization methods that can provide relevant and timely insights to their research and development teams.
  • And many large-scale businesses liaise with consultants who can closely assess the current state of business operations, pinpoint inefficiencies and areas of opportunity, and prescribe optimizations to boost.

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 — as well as the chance to experiment with and validate NewCo concepts at scale to, in time, create offshoot ventures that could end up just as profitable as the main 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."

What a proven venture-building partner can bring to the table for your corporation's open innovation ecosystem

Time to market is a common metric for gauging the initial success of internal innovation strategies. As it should be. Launching novel ventures 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 innovation teams who work outside the constructs of the core business. That is, as long as the fruits of their labor — advancements to current products or the quick formation of an entirely (hopefully prosperous) new business — come fairly quickly.

But as Ron Adner, professor of strategy and entrepreneurship at the Tuck School of Business at Dartmouth College, wrote for Harvard Business Review all the way back in 2006, "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 within one's organization is to collect, analyze, and take action on a variety of data sets as a team (i.e., both internal and external stakeholders) to ensure the right emerging opportunities and cutting-edge ideas are evaluated and acted on.

"[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.

Arguably the most important external stakeholder to loop into your open innovation program very early on in the process of brainstorming new business ideas is a proven venture builder with years of experience creating co-advantaged startups alongside corporate partners.

Here are a few key pros of working with a trusted venture builder like High Alpha Innovation to unlock innovation hidden inside your organization, turn your ideas into profitable businesses, and — as Henry shared in his book — turn your company into a "value creation engine."

Shared insights from internal and external idea sharing that 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 remunerative opportunity areas outside the core business that could a) solve compelling problems, and b) prove profitable and scalable.

But it's only when our corporate partners openly share the issues they want to solve for that our team can conduct thorough research on the subject(s) in question, determine the viability of businesses in the niche area in question, and deliberate with innovation teams at our partners to plot a path toward bringing one of possibly dozens of ideas to market.

Stronger startup concepts following collaborative problem validation sessions

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 practicable and prospectively lucrative ones.

So long as we all have conviction that the ideas in question are prospectively the most fruitful ones that will actually make a positive impact in the area of focus, our team has a playbook to expedite the business model planning process for the finalists so we can appropriately compare them.

It's following this sprint stage that we carefully 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 not just execute, but also expedite efficiently in-house — ultimately ensures the final chosen venture option is a near-surefire bet to make a splash in the market and attract venture capital investment.

Support to turn the best ideas from open innovation projects 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 execute on and amplify awareness of tech ventures, 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 venture launch.

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

Founding teams eventually take the reins to run day-to-day operations, but our team regularly offers guidance and direction to ensure the fruits of our collective open innovation labor come to fruition.

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