Why Open Innovation is Not for Small Companies

by Stefan Lindegaard

Why Open Innovation is Not for Small CompaniesIt is difficult to find good cases on how smaller companies have engaged with open innovation. It is also difficult to give strong advice on how such companies should engage with open innovation.

I have reflected much on this and I am approaching a conclusion that is slightly provocative: Open innovation is for big companies; not small companies.

Let me provide some reasons for this:

  • Small companies are most often based on one product, service, technology or platform. They are bound to find partners around this in order to prosper let alone survive. This is, however, not open innovation in my mind. This is simply entrepreneurship.
  • Small companies are not big enough to engage with open innovation, which I view as more of a mindset in which they innovate across many types of innovation and business functions. They just don’t have the organizational infrastructure – and need – to engage with open innovation.
  • Small companies have a role to play in open innovation ecosystems, but they get the backseat. The big companies take the driver’s seat. In open innovation, companies either control the projects or they contribute to them. Big companies prefer projects where they are in control whereas smaller companies do not even get a choice unless they have something unique that allows them to run an ecosystem.

These are just some of my reflections on an important topic. It would be great to hear your views on this and also on how you would suggest small companies should embrace open innovation. That would be interesting for a follow-up post on this topic.


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Stegan LindegaardStefan Lindegaard is a speaker, network facilitator and strategic advisor who focus on the topics of open innovation, intrapreneurship and how to identify and develop the people who drive innovation.

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  1. If open innovation is a term restricted to innovation for NEW projects then this may be right. I work on innovation processes only for small business, startups and non profit organizations. the process used is based on using “only existing resources” and working on innovative solution design for specifically “challenges that are admitted and placed on the table”. The deliverable is known BUT the process and solution are not and must be innovative. They are considered innovative when existing, hidden, wasted resources are used to create NEW added value, and can be implemented within existing infratsructure. The closed world model is closed only because there is a lack of external resources BUT the process of innovation is OPEN.

  2. As an adviser of inventors and innovative start-ups in the UK, I find your comments accurate, succinct and refreshing. Open innovation is essentially a fad for people cocooned inside large firms, universities and government departments. Small firms and individuals are much safer sticking to traditional practices that actually work.

  3. Stefan, I actually disagree with you, which surprises me since I often have to say “get out of my head Stefan.” This unusual occurrence motivated me to respond in this lengthy manner.

    I think that OI is can, and effectively does, create huge value for small organizations when the leaders recognize that they can solve their own problems from taking solutions from outside. This doesn’t mean that they bring in new products from outside: solving technical problems using externally derived technology also leads to innovation.

    Take, for example, a small company that makes a successful line of plastic branded consumer goods that sell well in a number of big box stores. They have found that they need to get their costs down substantially, and understand that increasing the filler level in their products can accomplish this goal. Changing the filler level is not a trivial issue, however, and much technical expertise must be applied to reach a satisfactory result. They can do the work themselves using a salaried Ph.D. polymer scientist (at a full boat headcount of > $100K a year), or they can recognize that other industries have the same problems and can seek outside their company for the information they need–which will give them the desired result faster, cheaper and, likely, better than the solution they will be able to come up with from their own silo of experience.

    Why do I think this type of activity falls within the rubric of OI? As someone who spent years in the consumer goods and chemical industries, I now realize that what appeared to be research and development at my many clients really was often reinventing the same or similar wheel over and over again. These clients–which were both large and small companies–always thought that they were the experts in particular area so they had to solve the problems themselves. A 30,000 foot objective view would demonstrate that they were really solving the same problems as occurred in adjacent industries and technologies.

    Certainly, it can be enticing to say that “OI is for big companies” because we see so many signals that large organization are getting smarter and going outside to solve product issues. It is problematic, however, if we exclude smaller organizations from the OI conversation because it exalts semantics over what is actually happening to, I believe, potential negative effect. If we broadly define OI as a concept, we will see more recognition that it is already likely occurring broadly today but it is just not being called “OI.” It will be better for everyone. In other words, if we say you have to be big to be part of the club, we are excluding organizations that are effectively “singing from the same hymnal” that would otherwise be great teammates. I like to say to folks “you’re already doing OI, you just don’t call it that.” Inclusion can be a very powerful force for transforming processes and bringing people together.

    I don’t want to hijack this thread, but I did want to say that the point I think you are trying to make is that there needs to be a process in place for OI to work. Large organizations are more likely to be process directed, so they will be more likely to be able to adopt and see success in OI. But, as stated above, many are already doing OI, but they don’t call it that.

  4. Hi Graham,

    I appreciate that you agree with my points, but unfortunately I cannot agree with yours 🙂

    I do not believe that open innovation is a fad. It is a paradigm shift that will continue to grow over the years. It is controlled by large companies, but small companies definitely need to get into the game. If they stick to traditional practices they will soon be overtaken by competitors that see the benefits in open innovation. A key challenge here is to build a better understanding of what open innovation means to small companies and provide them with better insights on how to extract benefits out of this. I hope the innovation community can deliver on this.

    @uday, appreciate your comments…

    You can also join/follow a great discussion on this on this link: https://www.15inno.com/2010/11/09/notforsmallcompanies/

    Stefan

  5. Jackie, I don’t think we disagree that much. As I mentioned in my last comment here, the innovation community need to develop a better sense of what open innovation is for small companies. It is quite different than what it is for big companies. Nevertheless, the two world’s already meet each other and we need even more of this. Discussions like this can help us make this more manageable and thus help everyone reap better benefits.

    Stefan

  6. stefan, i am knowledge exploitation director for a 500+ staff knowledge/research organisation and we struggle all the time trying to find and adopt effective processes to both stimulate and track ‘innovative ideas’. we do this because we fear we are missing something potentially important that may get lost in the organisation. None of the books/case studies i have read on innovation management seem to work for organisations like ours where the product is essentially what our staff know and can then successfully sell to customers to help solve their problems. what can you suggest as a starting point for good practice?
    deborah

  7. Deborah, can you elaborate a bit more on your challenge? My e-mail address is stefanlindegaard@me.com if you prefer to use mail instead.

    Stefan

  8. In regards to Deborah’s point about ‘trying to find and adopt effective processes to both stimulate and track ‘innovative ideas,’ this is the exact reason why a group of innovators in the UK launched Creative Barcode (a not for profit organisation) in Sept 2010.

    In speaking with big organisations as well as smaller ones, we have found that tracking who contributed what and when is difficult for everyone involved in the innovation process.

    Innovation will play a major role in growing businesses out of the current economic troubles and meeting the environmental, etc challenges we as a global community now face. I think that’s why open innovation is finally getting the attention it deserves.

    We need to work together to develop simple processes that will make open innovation a option for all.

    In spite of the negativity I see in the media, I think there is hope for this world. I agree with Stefan that a paradigm shift is taking place. It’s going to be a roller coaster ride but hey, the alternative is even worse!

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