Twenty Years of Open Innovation

Twenty years ago, I introduced the concept of open innovation in an MIT Sloan Management Review article. Where do we stand two decades later? We’ve seen some companies enjoy great success with this approach and witnessed the difficulties of others. One surprising insight 20 years on is that the biggest barriers to successful open innovation are inside, not outside, the organization.

Open innovation emphasizes drawing on external resources — such as customers, startups, crowdsourcing platforms, and universities — to develop ideas for new products and services. More formally, it can be defined as a distributed innovation process involving knowledge flows across organizational boundaries, for both pecuniary and non-pecuniary reasons. To innovate, we need to move knowledge from where it resides to where it is needed. Often, this means moving people so that knowledgeable workers can collaborate together to create something new. At other times, it might require new workflows and structures to create incentives and procedures to move that knowledge. To achieve success with open innovation, organizations need the ability to mobilize and access their knowledge across all of their silos — whether functional, departmental, or geographic — to design, develop, and deliver the innovations that their customers want.

There’s much to celebrate about two decades of open innovation. Many studies have found evidence that it improves financial performance.1 National studies employing the Community Innovation Survey have found that organizations with more external sources of knowledge achieve better innovation performance than those with fewer sources, controlling for other factors.2 One survey of 125 large companies also found that organizations that employed open innovation were getting better innovation results.3

Despite this success, much remains to be done. For open innovation to succeed, it is not enough to identify possible useful sources of knowledge, access those sources, negotiate possible collaborations with them, and then incorporate that new knowledge into new innovative products and services. More in-depth studies find, in fact, that the biggest problems that organizations face in using open innovation often come from inside, rather than outside, their own walls. Collaborating and coordinating with external actors in open innovation often requires changes to organizational workflows and can trigger defensive responses from internal innovators.

A recent paper clearly documented the internal resistance to open innovation.