Why is it that some companies benefit greatly from their Open Innovation activities while others fail to do so? What is it that distinguishes successful from less fortunate Open Innovation pioneers?
Answering these questions is not easy at all, since there might be many different factors in place that affect an organization’s ability to benefit from opening up innovation processes. However, latest scientific literature emphasizes the importance of attuning the company’s business model with its Open Innovation strategies. In their recent paper “Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions”, Tina Saebi and Nicolai J. Foss describe four different Open Innovation strategies and link them to four generic types of Open Business Models.
The “Efficiency-centric Open Business Model”
This type of business model is for companies that acquire external knowledge through the market, e.g., by means of IP licensing or R&D outsourcing. The major advantage of such “market-based innovation strategies” is a reduction in transaction costs by decreasing complexity, uncertainty, information asymmetry, and coordination costs. Consequently, the focus of “Efficiency-centric Open Business Models” lies on cost savings, faster innovation processes, and shorter times to market. To achieve these goals, companies need to redesign the job descriptions of their R&D staff. Instead of acting as producers of knowledge, R&D staff should develop the capabilities to identify, evaluate, and integrate valuable external knowledge into the corporate innovation processes.
The “User-centric Open Business Model”
Some Open Innovation Pioneers adopt crowdsourcing strategies, i.e., they approach the large crowd of highly heterogeneous (internet) users in order to gain a wide range of different ideas. For these companies, user communities become a key resource and the interaction with those communities a key activity. As a result, “crowd-based innovation strategies” call for new governance forms to be introduced into the business model. The probably most important aspect here are adequate incentive systems that trigger the willingness to collaborate among both, external stakeholders (e.g. users) as well as the company’s employees. In addition, companies need to develop routines helping them to assess large quantities of external information that is collected throughout activities like innovation contests.
The “Collaborative Open Business Model”
“Collaborative Open Business Models” are designed to facilitate “collaborative innovation strategies”. Those can come in different forms, Saebi and Foss refer to strategic R&D alliances and lead user projects as examples. What those activities have in common is that the company chooses a designated knowledge partner for mutual development. Furthermore, such strategies usually require close interaction and collaboration to allow for the exchange of relevant information. “Collaborative innovation strategies” affect the value proposition of a company’s business model since they usually aim at coming up with radically novel and disruptive innovations. They also call for an adaptation of the company’s structure – there is a significant need to establish formal linkages with the external R&D partner(s).
The “Open Platform Business Model”
Companies following a “network-based innovation strategy” might need to develop what Saebi and Foss call an “Open Platform Business Model”. In order to deeply integrate a large number of highly heterogeneous external partners into their core innovation processes, companies need to build some kind of platform that is closely tied to the their business model. Apple and its App Store serves as the perfect example here! From a design perspective, “Open Platform Business Models” require almost all of the features and adaptations that have been discussed above.
I really enjoyed reading this paper! It delivers a highly important insight by stressing the role of business models in maximizing a company’s benefits from its Open Innovation activities. Furthermore, it contains some hands-on advice for managers on how to redesign their organizations…
In order to learn more on this matter, go and get the article:
Saebi, Tina, and Nicolai J. Foss. „Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions.“ European Management Journal 33.3 (2015): 201-213.