Innovation Needs Open Systems

Struggling with a new innovation initiative in your area. Read this article and take a few notes.

Since the days of Thomas Edison’s Invention Factory, new product innovation has been the engine of long-term growth and a buffer in times of economic weakness for world-class companies. Yet even respected research powerhouses like British Telecom, Siemens, and Fujitsu are today finding it more difficult to make their innovation investments pay. There is too much piling up on the shelf, and there are too few breakthroughs that lead to new markets and higher growth. In short, R&D labs once prized for their independence and proprietary research find they’re having a terrible time extracting value from their own work.

To increase the return on their R&D, successful innovators are finding they must complement their in-house R&D with external technologies and offer up their own technologies to outsiders. R&D at large companies is shifting from its traditional inward focus to more outward-looking management — open innovation — that draws on technologies from networks of universities, startups, suppliers, and competitors.

Until recently, private R&D labs wouldn’t have dared try open innovation; R&D was viewed as a vital strategic asset and, in many industries, a barrier to competitive entry. Research leaders like DuPont, Merck, IBM, GE, and AT&T did the most research in their respective industries — and earned the most profits as well.

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