[#innovation - 03] Innovation in lean times.

In his article "How Open Innovation can help you cope in lean times", Henry Chesbrough says:

“Companies that continue to invest in their innovative capabilities during tough economic times are those that fare best when growth returns”

In challenging business climate, focus is crucial but it is short/mid-term tactic. How to maintain focus and manage costs tightly while keeping growth options alive for the future?

Short-term, cost cutting tactics require rigorous prioritization. The risk is high for a halt of potentially promising projects. Company’s ability to grow beyond its core business is threatened.

Strictly/rigidly just maintaining the focus for too long can become the enemy of growth: when the market recovers, the company lacks a foundation from which to rebound.

The approach Chesbrough suggests to reduce risk is Open Innovation [1]. It is based on the consideration that since information is easy and pervading, the old, closed model of developing innovation strictly inside the company makes little sense, because the risk is too high, time-to-market effectiveness is reduced, the potential for creating value is lower than it might be.

Chesbrough suggests that making the borders of the company permeable to information flowing will increase the possibilities of success of its internal innovation processes, taking bigger value.
The choice of information to be exchanged will certainly need to be pondered, not to put on risk any differentiating competitive advantage related to the strategies being set up.

The information flow should involve Intellectual Property, People and Ideas and should be bidirectional:

•         OUTSIDE-IN: it’s the most easy to be appreciated flow. It’s about spending effort and attention on valuable innovation paths outside of the company (technological incubators, research centers, start-ups, to name a few) to catch any remarkable business opportunity which might be considered complementary to the main stream and feasible (!).
•         INSIDE-OUT: this is less easy to accept. It’s about accepting the possibility that certain assets of the company might cross the borders and be managed outside, just because a third party, external actor can be more focused and effective on it. It’s also about considering the possibility to participate in the implementation of innovation projects with a secondary role, sharing risks, costs, competence. Which very well entails a reduction in benefit in case of success, but also raises the possibilities of success thanks to a different and more effective focus and to minor burden.

Chesbrough’s proposal is very prescriptive, suggesting a few moves:

1. Become a customer or supplier of your former internal projects
2. Let others develop your nonstrategic initiatives
3. Make your Intellectual Property work harder for you and others
4. Grow your Ecosystem, even when you are not growing
5. Create open domains to reduce costs and expand participation

The objective is to focus on company core operations today, while preserving growth options for tomorrow’s growth.

In my view the main challenge is internal. Since my first goal is to set up an innovation process in an established company from scratch, with the aim to get the biggest value from internal competence, I’m reasoning on how to get permeable to internal people’s contribution to innovation. I do believe fairness and democracy in will be key to set up a process, with a value proposition able to involve tho whole company's people.

Once you set up an innovation machine able to value any possible internal contribution from the inside (quickly and effectively), I think the management will be more willing to support the possibility to open to the outside world.

DP