Time savings: reduction of time-to-market
The time of product development from the first steps to market launch (= time-to-market) is becoming increasingly important due to shorter life cycles and increased market competition. Open innovation can shorten the development time by handing over activities to innovation partners in the sense of a division of labour.
For example, Procter & Gamble has developed an innovative toothbrush in cooperation with a Japanese company. In this way, the development time could be reduced by half compared to an internal project. In addition, such partnerships enable companies to react more quickly and flexibly to new technologies and market requirements.
Tasks that require implicit knowledge of the customer can also be outsourced. The time-consuming trial-and-error process then does not take place at the manufacturer's, but at the customer's, who gradually approaches an optimal solution that meets his needs.
Open innovation communities in particular are based on this principle. In 2008, Tchibo launched the Tchibo online community, which has been extremely successful to this day. Customers can develop, discuss and evaluate innovative product ideas. Ideas with a very high rating are tested for their marketability and implemented after a positive review.
Cost savings: reduction of cost-to-market
In view of globalized markets and the associated price dumping, companies are striving to reduce the costs of the innovation process from the start of planning to market launch (= cost-to-market).
In addition, there are reductions in research and development budgets that further promote the trend towards open innovation. The previously mentioned division of labour reduces not only the development time of innovations but also their cost.
Cost savings are particularly noticeable where customers take on tasks that require the manufacturer to invest in certain resources, such as developing prototypes. The production of prototypes can be very expensive for the manufacturer, as several prototypes often have to be developed before a customer-accepted prototype is created. However, innovative customers often have resourceful minds in their ranks who are already working on prototypes.
The cooperation between customer and manufacturer offers advantages for both sides: The customer receives an innovative product that he can use for himself and the manufacturer saves costs.
Novelty level: increase of the new-to-market
Another central advantage of open innovation is the new-to-market factor. It describes the perceived novelty of an innovation for the consumer. In product innovations in particular, the degree of innovation is often low because only incremental innovations are produced. Existing products are only developed further from the traditional innovation process without creating functional added value. Innovations, on the other hand, which are created with the involvement of users and other external innovation partners, open up new functionalities and create new markets.
The sporting goods sector offers numerous examples of this. This is how the trend sport of kite surfing was born out of the need of surfers for higher and further jumps. Some surfers started to experiment with homemade combinations of surfboards and hang-glider sails and developed a completely new kind of sport equipment. Other trend sports such as skateboards and surfboards were not developed in the classic R&D departments, but can be traced back to user innovations.
Therefore, if a manufacturer succeeds in integrating particularly innovative users and innovation partners into the open innovation process, this can significantly increase radical innovations and thus the factor new-to-market.
Risk minimization: increase of the fit-to-market
A prerequisite for a high level of fit-to-market (market acceptance of a new product) is a product or service offering that satisfies the needs of customers. By integrating innovative customers (Lead Users) into the open innovation process, market acceptance can be significantly increased and the risk of undesirable developments reduced.
Linking of knowledge: Greater idea and knowledge base
Through open innovation, numerous external and internal sources of ideas and knowledge can be tapped and used to take innovation management to a new level. Around one hundred R&D projects are required to place twelve successful innovations on the market. The number of ideas needed to start 100 projects is much higher. Innovation therefore requires many ideas:
The best way to have a good idea is to have lots of ideas.
In addition to the integration of external innovation partners and own employees into the innovation process, Internet-based Open Innovation Communities are becoming increasingly important. The creativity of the Internet community is used to find ideas for innovative products, new distribution channels, new business fields and business models. The type of cooperation ranges from the submission of ideas to the community's evaluation of the ideas on the platform to the further development of the ideas by the community.
For example, the Italian car manufacturer Fiat used the creative ideas of the community to develop the Fiat 500 before it was launched on the market. 170,000 proposals submitted show just how much interest there is in such participation processes.
Further examples of crowdsourcing platforms are: ÖBB Open Innovation Platform, Unilever, InnoCentive, atizo, Quirky, Open Innovation Platform of the Federal Government.
Innovation through change of perspective
One of the biggest advantages of Open Innovation is the cross-linking of knowledge and know-how from different industries and areas, which opens up new perspectives. Solutions that are already successfully used in other areas can be transferred to own innovation projects. This makes it possible to develop ideas and solutions that nobody would have thought of before.
Conclusion: Why do we need Open Innovation?
Open innovation is the answer to changing market conditions and customer needs. In the age of digitalization, only those companies will be among the first few to actively access broad knowledge and thus provide better, faster and cheaper solutions than others.