Digital technology is changing business and marketing in fundamental ways. However, the challenge of operating faster, smarter, and better isn’t limited to new software, hardware, and business processes. Today’s environment is forcing organizations to rethink the fundamental way they approach product development, marketing, and partnerships.
“There’s a growing realization that innovation can take place outside the traditional boundaries,” observed Jitendra Kavathekar, managing director of Open Innovation at Accenture Ventures, a division of business and IT consulting firm Accenture.
One concept at the center of this is open innovation. The idea–introduced by Henry Chesbrough, an adjunct professor and faculty director of the Center for Open Innovation at the Haas School of Business at the University of California, Berkeley–focuses on a more open and collaborative framework for developing products, services, and more. By plugging in outside ideas along with internal thinking, it’s possible to take innovation to a new and better level. In many cases, open innovation intersects with startups, business incubators, joint ventures, spin-offs, and even crowdsourcing.
“It’s about approaching the business ecosystem in a broader way,” said Kim Smith, chief digital officer at consulting firm Capgemini, in an interview with CMO.com.
For CMOs and other marketing executives, the concept isn’t the least bit abstract. As organizations large and small embrace open innovation and build communities, there’s a need to understand the motivations and pain points for potential customers, determine how best to position a product or service in the marketplace, and actively market it. As a result, marketing teams are an integral piece of the open innovation puzzle.
“As we see marketing embedded deeper into products and services, open innovation becomes more relevant,” said Scott Brinker, author of “Hacking Marketing” and the Chief Marketing Technologist Blog, in an interview with CMO.com.
What is the role of marketing in open innovation? How can CMOs and others maximize on the opportunity? And what challenges exist, particularly in an environment that requires greater transparency and sharing intellectual property? Although open innovation can prove complex and present roadblocks, it’s clear that it’s gaining traction. By some estimates, more than half of the Fortune 500–including the likes of 3M, GE, and Unilever–have actively engaged in open innovation projects, and the list is growing. Government organizations such as NASA are also tapping into the concept.
“It takes innovation beyond the ivory tower,” Kavathekar told CMO.com. "It opens up possibilities and opportunities.”
A New Model Emerges
The idea of embracing a more open business framework is steadily moving into the mainstream. According to Chesbrough, a Google search in 2003 produced about 200 links that referenced companies collaborating with others within an open framework. A decade later, the number of links had exploded to more than 483 million.
While different interpretations of the concept exist, Chesbrough said he believes it’s important to view open innovation as “the antithesis of the traditional vertical integration model in which internal innovation activities lead to internally developed products and services that are then distributed by the firm.” It’s also essential to distinguish it from open-source projects that typically revolve around software development.
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Of course, there’s no single way to tackle open innovation. Accenture Ventures’ Kavathekar said it can take different forms and follow different directions, depending on the needs of the organizations participating in the program. For a small startup, the goal might be to gain access to corporate expertise and funding, and perhaps even sell the startup to the larger firm. For a major corporation, the idea may be to incubate ideas, expose executives to different ways of thinking, and gain access to a more entrepreneurial business development pipeline.
Kavathekar pointed out that open innovation programs can touch academia, business consortiums, trade organizations, and many other groups. In some cases, it can wade into unfamiliar territory and create nontraditional enterprise partnerships.
One company that has built a business and marketing framework around open innovation is 3M. The company’s Drug Delivery Systems business increasingly relies on this concept to develop and market complex drug delivery systems and devices.
“Open innovation is critical to our future success,” explained Ingrid Blair, vice president for business and marketing of 3M’s Drug Delivery Systems Division. Increasingly, she said, the company taps into the knowledge and experiences of academia and key opinion leaders while partnering with customers to gather ideas, spur innovation, and create a more holistic framework for business. Marketing plays an integral role.
“Today, marketing touches almost every aspect of the business. It’s critical to understand and articulate customer needs and preferences, particularly for those serving patients with diseases,” Blair told CMO.com. “But marketers also have to understand the industry, trends, how research is evolving, and how to maximize opportunities to sell equipment and systems.”
As a result, marketing professionals are a part of cross-functional teams that work with groups inside and outside the company, she said. For instance, when 3M was developing a new product, an Intelligent Control Inhaler, marketing teams conducted studies, interviewed patients, interacted with outside academic researchers, and developed an overall marketing plan for the product. In the end, they helped connect the digital dots.
“They had a holistic, in-depth understanding of the problem, the patient, and the process with the customer. They were able to boost the value proposition,” Blair explained.
The motivation to develop products faster and better is prompting many other companies to tap an open innovation framework. For example, in 2014, GE launched a project called FirstBuild, which includes a “microfactory” and open innovation community comprised of students, engineers, and innovators at the University of Louisville in Kentucky. The project serves as a collaborative environment for the university, GE, and smaller firms. The goal is to cut through layers of enterprise bureaucracy and plug in new thinking so that the company can innovate and bring products to market faster than ever before.
So far, FirstBuild has led to new designs for everything from icemakers to induction cooktops, which are now commercially available.
Open innovation is founded on a basic but important belief, Kavathekar said. “The supply of innovation is growing very rapidly in the world,” he said. “We see a huge number of entrepreneurs and startups with novel and interesting ideas, and many are disrupting traditional approaches to business and technology. Who is better equipped to address these issues than an entrepreneur or startup?”
Accenture is living the concept, as well. It has forged partnerships with more than a dozen universities and looked to take a more collaborative approach to advancing its technology lab, he said. By marrying research, technology development, marketing ideas, and more, it’s possible to expand thinking to better match the requirements of today’s business world.
“The CMO is a key part of the conversation,” Kavathekar stated. As organizations look to adopt rapid and agile processes that tie into research and development, rapid prototyping, fast iteration, integrated channels and supply chains, mobile platforms, customization, and much more, marketing and CMOs are integral.
“The fact is that in today’s business environment, you can’t talk about marketing without talking about technology,” he said. “There’s a need to integrate processes, experiment, learn from failures, and move forward quickly. Marketing and CMOs are at the center of all of this.”
An open innovation platform, Kavathekar added, can plug in cutting-edge thinking and, in many cases, allow a larger enterprise to land on the leading edge of experimentation: “Many of these startups are experimenting with other people’s money, and they have very passionate people focused on important problems. There’s synergy for the organization and the CMO.”
Of course, open innovation isn’t without obstacles and challenges. Rick Ducey, managing director at retail consulting firm BIA/Kelsey, said that an initiative can go down in flames quickly if there’s a poor choice or partners, misalignment of goals, or breakdowns in strategy and processes. These initiatives, he said, are often extremely complex and require tight coordination across groups, departments, and functions. In a worst-case scenario, CMOs and marketing departments may be left with a mess.
“The goal of achieving synergy is too often overshadowed by the reality of counter-intuitive and bad partnerships or the lack of processes that lead to real-world results,” Ducey told CMO.com.
Nevertheless, Kavathekar and others say that co-creation represents the future of business. For now, organizations embarking on open innovation programs must ensure that they are working with respectable partners and have legal agreements and security protections in place–particularly in regard to protecting critical intellectual property. The end goal, he and other experts said, is to break down silos, rethink product development, and reinvent the way new goods and services come to market. In a faster and more demanding world, open innovation leads to greater agility and flexibility.
“It’s all about acceleration,” Kavathekar concluded. “If you do this well, you wind up with passionate entrepreneurs, capable teams, and a more sophisticated marketing function. You’re able to be truly disruptive and break through boundaries that limit innovation. When companies get the concept right, they become more wired into a digital business framework. It’s possible to put other companies’ money and thinking to work to your advantage.”