When manufacturers develop a process innovation, they frequently seek to keep it under wraps. But that’s often not the best approach.
Most research on open innovation has focused on the use of ideas and knowledge from outside the organization in the development of products and services. But openness can be useful for process innovation, too. Our research shows that manufacturers can benefit substantially when they look for ideas beyond the factory gates, especially when their operations are already advanced.
We often meet managers in manufacturing companies who keep process innovation activities tightly under wraps. Some see their processes as a source of competitive advantage that should not be shared with anyone. Others consider them organizational knowledge that could be detrimental to expose to outsiders.
Some companies have good reasons for keeping process innovations concealed. For example, a combination of process and product innovation often jointly results in competitive advantage for a company. If you have found a unique production process with which to manufacture a differentiated product — for example, a new metal alloy or a medicine — it can be wise to keep that know-how within the company. In such cases, there is an obvious risk of loss of intellectual property.
However, our research suggests that for many manufacturers, such defensiveness deprives companies of a valuable source of ideas for productivity improvement. We draw our conclusions from an analysis of nine years of survey responses from 1,000 Swiss manufacturers, as well as 200 interviews with personnel at the Volvo Group (AB Volvo), a manufacturer of trucks, buses, construction equipment, and marine and industrial engines that is based in Gothenburg, Sweden.1 One of the authors also visited 45 Volvo Group factories around the world. (See “About the Research.”)