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Emerald Group Publishing Limited
Copyright © 2003, MCB UP Limited
New product innovation is one of the main powerhouses of competitive advantage and growth. For both companies and nations, the money spent on research and development (R&D) is one key indicator of their faith in the future and their likelihood of being around and competitive for that future. Many of today's large, successful organisations owe that success to past investment in R&D and innovation. However, as these companies have got larger, and the world has become more competitive, the investment required to "stay in touch" continues to increase. It also seems as though success rates have got lower. This is why productivity improvements have been sought from process change rather than new products. Even the "traditional" investors in R&D – companies like BT, Fujitsu and Siemens – are finding it hard to match past payoffs from their R&D investments.
Back to process change! Many companies have come to the realisation that past models of R&D are no longer appropriate. R&D is still required – but it must be carried out and funded in different – more effective and efficient – ways.
One growth area over recent years has been that of outsourcing and collaboration – making use of synergies and economies via partnership. This takes place in many areas of business activity – and allows organisations to play to their strengths and to use others' strengths to fill knowledge and skills gaps, and to provide additional, more flexible resources.
This phenomenon is being extended to the field of R&D – with companies realising that other organisations have information, expertise and resources that can be very useful. These organisations include universities, suppliers, startup companies, science parks, etc. This realisation has led to a partnership approach to R&D that has become known as open innovation.
Such a partnership approach does not mean that in-house R&D departments should be disbanded – this is not a "make or buy" decision; to be effective, it demands a strong presence in-house working with the new external partners. It might also mean that the internal department moves from "R" to "D" – buying in the basic new technology/intellectual property and adapting it into an appropriate form
This spreading of effort and investment should also mean that a wider portfolio of innovation helps spread risk – among a greater number of product opportunities.
Moving out-of-house (even if only partly) might seem like an admission of failure – after all "we know our markets better than anyone else, don't we?" In reality, innovation has always demanded fresh ideas, new inputs, creative thinking. Using a wider source of such "inspiration" can only be beneficial. The term "open innovation" reflects both an opening of "the system" and the openness of thinking that this approach brings into the R&D process.