- May 08, 2013 Bain & Company guide
Open Innovation applies the principles of free trade to innovation, advancing new ideas through the use of tools such as partnerships, joint ventures, licensing and strategic alliances. By collaborating with outsiders—including customers, vendors and even competitors—Open Innovation enables the laws of comparative advantage to drive the efficient allocation of R&D resources. By reaching beyond corporate borders, a company can import lower-cost, higher-quality ideas from a wide array of world-class experts to improve the speed, quality and cost of innovation. This approach allows the business to refocus its own innovation resources where it has clear competitive advantages. Ideas also are exported to businesses that can put them to better use.
Usage and effectiveness among survey respondents
How Open Innovation works:
Open Innovation requires companies to:
- Focus resources on its core innovation advantages. Allocate resources to the opportunities with the best potential to strengthen the core businesses, reduce R&D risks and raise the returns on innovation capital.
- Improve the circulation of innovation ideas. Develop information systems to capture insights, minimize duplicative efforts and advance teamwork.
- Increase innovation imports. Gain access to valuable new ideas, complement core innovation advantages, improve the company's collaborative abilities and build its reputation as an innovative partner.
- Increase innovation exports. Establish incentives and processes to assess objectively the fair market value of innovations. Carefully structure joint ventures and strategic alliances to protect the company's rights, raise additional cash and strengthen relationships with trading partners.
Companies use Open Innovation to:
- Clarify core competencies
- Maximize the productivity of new product development without increasing R&D budgets
- Decide quickly and efficiently whether to buy or sell patents and other intellectual capital
- Promote faster, higher-quality innovations
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