Innovation is probably one of the most overused buzzwords in business today. It might be used in many conversations, but one cannot highlight how important innovation is to any organisation. It is the lack of innovation in business that has resulted in some massive corporate collapses in recent years.
Stefan Lindegaard is a Danish author, speaker and strategic advisor who has a particular focus on the topic of open innovation, innovation culture and communication for innovators. He has written several books on innovation and travels the world consulting and talking about how open innovation can revolutionise your company. I had an opportunity to sit down and talk to Stefan about the importance of open innovation in an organisation. At the end of the article, you’ll find information about this year’s South African Innovation Summit, which I strongly recommend you attend if you’re interested in making innovation a key business process in your organisation.
What is the definition of open innovation?
Open innovation is the framework of how a company can change its innovation efforts to become more transparent and not only include internal innovation, but also bring in external processes. Open innovation is about connecting the dots. It is about merging the internal and external resources to bring about better innovation faster. It is also about changing the mind-set and philosophy as well as creating the right culture within the company.
How does a company go about creating a culture of open innovation?
Firstly one needs to be quite clear that not everyone is going to win with open innovation. In any given industry you have two to four big players and only one of them will become the clear winner. A company needs to start off by understanding what open innovation is and what is at stake. The reality is that if you start falling behind one of your competitors, you will have fewer innovation opportunities to grow. You need to start by building the perception that you are the preferred partner of growth and also have the foundation to be able to deliver in those innovation partnerships. Once you understand what open innovation is you need to start upgrading the innovation mind-set of the key people within the organisation and then filter this down to the rest of the workforce. It is not an easy process and it does take time. Those who invest in these programs early on will be the winners as it is very difficult to catch up once your competitors have already opened up that open innovation process.
You talk about how smaller companies had the agility in the past decade to outperform larger more established businesses when it comes to innovation. But this is slowly changing.
Yes absolutely. The power is shifting back to the bigger companies because they have started to change their thinking on innovation. When you look at some of the advantages smaller companies had in the past for example, they would have an idea and in a short period of time get the money, build the concept and take it to market much faster than a big organisation. Today this has changed. Transparency of knowledge has changed this whole process, enabled by the increasing connectivity provided by wireless internet, social media and communication platforms. Take Silicon Valley, for example, when an idea is born in Silicon Valley it spreads to other parts of the globe very quickly.
Early innovators and investors might be first to market with an idea but the speed of bringing a product to market has now been eliminated because big companies are now starting to understand the game of open innovation. It used to be with the theory of disruptive innovation that smaller companies would eat from the bottom up. The big companies in the past allowed them to do so with the thinking that they are going for smaller markets and they would in turn concentrate on the bigger customers. Today big business understands this disruption and the damage it can cause when you grow so rapidly from the bottom up.
Give us an example of a company that has taken this approach and is starting to succeed from open innovation.
In the FMCG market, Procter and Gamble were one of the pioneers of open innovation and they started this journey 12 years ago. Their stock price at the time was not performing well and they were seen as companies that weren’t innovating with new products. Their CEO started looking inward and made some internal assessments on the workforce. They had 7500 scientist and R&D employees working across Procter and Gamble. They did some research and they found that for every one of the internal 7500 skilled workforce there were 200 people outside of the company with the same skills. A ratio of 200 to one translated into 1,500 000 people on the outside. An arrogant company would have said, “So what. Those 1.5 million people are not on our payroll so who cares”. Procter and Gamble took a different approach.
They decided to embrace those external skills and merge them together with their own. P&G setup a unit called C+D (connect + develop) moving the mind-set away from using research as terminology. By adopting this new methodology they changed the way the company innovated. Fresh ideas poured in and P&G flourished again.
What is it about Scandinavian countries? They are always up at the top when it comes to innovation. What is the secret?
I come from Denmark. For many decades Denmark and Sweden led in innovation because they understood what the customer wanted and provided the service levels to match. The problem today is that they have not embraced open innovation, especially Denmark. From a work ethic and corporate point of view it is very much a societal and cultural thing. Danish people by nature stick to themselves and it takes a long time for Danes to feel comfortable working with other cultures.
In the fast paced business world that we live in today you don’t have one or two years to get to know people. The Danish toy manufacturer Lego is a classic example of this. For many years they lost focus on what was happening on the outside. Only when they embraced open innovation did they better understand what their customers wanted. Lego customers demanded that they wanted to be part of the product and service development that was happening. Companies today have no choice. They have to open up their innovation efforts to the outside world if they want to succeed in a competitive business world.
The South African Innovation Summit brings together companies, tech entrepreneurs and investors from around the world to take part in debates and showcases around innovation. The Summit will take place in Cape Town between 11 and 13 September at the Green Point Stadium. Tickets for the event can be purchased online.