The Side Effects of Open Innovation

Open is a new paradigm shift that has been steadily gaining attention from executives in the past few years. Successfully adopted by companies such as Procter & Gamble (PG), General Mills (GIS), and Intuit (INTU), open innovation is about bridging internal and external resources and executing on the innovation opportunities that arise from this combination.

Open innovation will not only lead to new ways of making innovation happen; there will also be side effects. As an open innovation advocate, I think most of these effects will be positive. But it's also reasonable to expect that some will be mixed or perhaps even negative. Here, then, is a handy checklist of some of the possible ramifications from adopting and executing open innovation.

Open innovation is about managing change. While some executives are open to change, most seem to prefer to keep things just as they are. A risk of disturbing the status quo is inherent in the open innovation process—and should be recast as opportunity. The winners will be the companies and executives that are best at handling this.

As a company matures, executives often end up focusing more on internal needs than on those of the market. Before long, that focus can turn a corporation into its own worst enemy. Innovating with partners can remind corporate leaders to keep their eye on funneling resources toward serving real commercial needs. This mindset can be helpful way beyond the innovation process.

Beyond the benefit of ensuring that companies remain focused on the marketplace, working with external partners means executives become familiar with other ways of getting things done. Open innovation also allows corporate leaders to evaluate their practices in light of other real-world examples. Then they can gauge whether (and how) to adjust their processes or perhaps even develop entirely new ways of doing things.

Increased focus on customers can be harnessed through open innovation and can lead to better relationships with them. Sure, there are dangers in listening too closely to existing consumers, who might just ask for an improvement to an existing product or service rather than imagining a new way of doing something. But closer ties to brand evangelists can change the role of sales and marketing units. Those groups need to be involved with innovation initiatives, too, so this is a healthy side effect.

When corporate executives accept that experimentation and a fair amount of failure are an important part of innovation, they will begin to understand that it delivers best when different business functions—and external partners—come together. Then they can develop products, services, solutions, and processes that meet the needs of users and customers. Tools and solutions such as LinkedIn, Twitter, blogs, and other social media tools can be useful here.

The increased number of stakeholders afforded through open innovation provides new ways for people to be creative. It also, of course, increases the level of complexity in place throughout an organization. Figuring out a way to relinquish top-down control while maintaining efficiency within an organization is a key challenge for those looking to embrace open innovation.

As open innovation becomes more prevalent, the functional, divisional, or matrix organizational structures we know today will change. Perhaps they might even break down altogether. What will replace them is unclear, but new systems will be a clear side effect of these types of initiatives.

New relationships built with the multiple stakeholders of the open innovation process are complex. Executives need to be sure to develop an overarching strategy that can be clearly articulated to all employees and participants. Everyone needs to understand what is expected from them, or frustration will bubble up. Prolonged periods of frustration can hamper organizational effectiveness and even result in the flight of smart and creative people.

The key to managing open innovation initiatives successfully is to be flexible enough to deal with issues as they arise. Have you experienced other side effects? How did you or management deal with them? Do post in the comments and let me know.

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