Looking beyond the usual suspects
“If you are not open, you are closed”. It is with these words that professor Marko Torkkeli opened his speech on Open Innovation at a two day summit on Innovation in Financial services in Luxembourg. As a professor of Technology and Business Innovations at the Lappeenranta University of Technology (Finland), he enumerates a bunch of good reasons to invest in open innovation, such as gaining access to additional competencies, new markets and cost reductions.
In the view of Professor Torkkeli, open innovation means that companies, countries, individuals and teams would make much greater use of external ideas and technologies within their own business, while letting their unused ideas be used by the other companies. This requires each company to open up its business model to let more external ideas and technologies flow in from the outside and let more internal knowledge flow to the outside.
Professor Torkkeli believes that a virtuous circle has been broken. “In the past, the more you invested into research and development, the more breakthroughs you achieved in technology and the more products you sold. The resulting profits were ploughed back intoresearch in development again. This circle worked well for a long time, but things have changed in the last decade”.
Today, there is more venture capital available, people are highly skilled and there is a tremendous mobility in job market. He goes on to explain: “ When you have an idea, you can leave the company and go to a venture capital company. At the end of the day there are two outcomes: either you “rest in peace” (the product fails), which is most often the case, or you become super rich. But this money is often consumed: it has left the circle and is not reinvested in new research.”
Time to market is shorter
Open innovation makes innovation faster by relying on external companies or people. Another point made by Professor Torkkeli is that continuously working with the same team makes your learning curve go down. That is why it is important to find new partners and networks that help you innovate. At the same time, you gain access to additional competences and resources. He cites Procter and Gamble as a classical example of a company which commercialises products developed by other companies
Professor Torkkeli’s went on to speak about the reasons why companies fail in this area. “A company should neither be fully open nor fully closed but somewhere in-between. One of the biggest mistakes you can make is to copy/paste successful business models. You have to create your own way of implementing open innovation”.
A different mindset is needed nowadays in order to be ahead of the curve: old prejudices against external ideas – charicatured as the NIH (“not invented here”) syndrome and NSH (“not sold here”) - have become obsolete. That is why people who were successful in developing traditional business models in the past are often not the right ones to implement open innovation. Open innovation only makes sense when employees, customers and partners buy in to the new ideas.
Professor Torkkeli predicted that open innovation would move on from concept development to performance measurement. He concluded by saying that customers should be brought closer to the innovation processes and that a new set of skills was required to cope with open innovation. It is not a blank cheque for success.
The Innovation for Financial Services Summit is hosted by the Henri Tudor Public Research Centre, and organised in association with ISPIM (the International Society for Professional innovation Management). CW