Excellence: Principles and practitioners of “Open Innovation”

Today more than ever, innovation is a top priority. Sixty-two percent of executives questioned in a recent Accenture survey noted that their business strategy is “largely” or “totally” dependent on innovation. Nowadays, however, companies don’t only need to innovate, they also need collaborators—partners—to help make innovation happen.

Not only that, they need to focus their innovation energies on business processes, technology applications, and customer engagement strategies, as well as on new products and services. These are the basic principles that define “Open Innovation,” a concept introduced by Henry Chesbrough in 2003. According to Dr. Chesbrough, innovation is most fruitful when collaboration extends beyond company walls to other companies and business partners, as well as individuals—experts, retirees, end consumers—and research organizations—universities and private labs.

Innovation and the supply chain
Not long ago, Accenture and the i7 Institute for Innovation and Competitiveness set out to learn how companies perceive and apply Open Innovation. Twenty companies were studied, with case studies written to profile each organization’s innovation journey.

Supply chain management was one of the research effort’s centerpieces. A good example is the procurement function that, according to researchers, frequently takes the lead in Open Innovation initiatives. Since 2007, General Mills has used Open Innovation to introduce more than 40 products. Yoplait Smoothies—kits with real frozen fruits and frozen Yoplait yogurt chips, blended with milk to make a smoothie—were the result of long-time supplier collaborations.

Manufacturing and distribution also ranked high on researchers’ Open Innovation list. Logoplaste, a Portuguese manufacturer of plastic packages for food and household products, embraced Open Innovation after several years of exposure to customers’ online Open Innovation platforms. Logoplaste has established plants near customer sites so that logistical issues can be minimized and Logoplaste’s products can be incorporated easily into customers’ manufacturing processes.

Logoplaste also works with customers to develop innovative types of packaging. In 2007, one customer, Arla Foods, won two Food Manufacture Excellence awards and Logoplaste’s contribution to reductions in packaging volumes was a key factor.

In a similar vein, Danone Baby Nutrition worked closely with one of its packaging suppliers to develop “eaZypack”—a composite box that includes a double compartment and an integrated spoon in the lid. This enables a parent to portion the infant formula while carrying his/her baby in one arm. eaZypack’s UK launch with the Cow & Gate brand was a success and the concept has since been rolled out in many countries.

Open Innovation’s value in product design came to the fore when Kimberly Clark de Mexico worked with Velcro on an innovation for Huggies diapers. The two sides developed a second fastener for a closing system. Both companies dedicated a team to the project for two years. The partners were safeguarded by a non-disclosure agreement and both brands were advertised on the final product packaging. In addition to benefiting from increased sales, Kimberly Clark de Mexico acquired new know-how, while Velcro gained valuable exposure to a new market.

A final Open Innovation example is the Total Appearance Research BYK-Gardner AkzoNobelMerck (TARBAM) project. The mission here was to develop a product for precisely measuring the color and texture of a car’s paint. AkzoNobel provided color and texture matching, BYX brought paint and coatings experience, and Merck contributed specific quality control and texture-measurement expertise.

The collaboration resulted in a portable device that does multi-angle color and texture characterization, color measurement, and evaluation of visual sparkle and graininess. All three companies benefited by acquiring new skills for reducing design and production costs, slashing time to market, and boosting sales.

Doing your best by working with the best
More and more rewards are accruing not just to premier innovators, but to exceptional collaborators. And the benefits enjoyed by these practitioners of Open Innovation are as varied as the relationships they’ve launched:

• Shorter times to market.

• Lower development costs.

• Improved ability to manage and even mitigate risk.

• Better intellectual property protection.

• New opportunities to pursue and promote sustainability.

And of course, Open Innovation can enhance companies’ bottom lines. After all, rapidly producing high-quality, customer-relevant products has a way of hiking revenues, increasing margins, and raising overall profitability.