Open Innovation (OI), a well proven strategy for CTOs, marketing and R&D, is now gaining advocates amongst the CIOs, strategic business planning teams and CFO level financial management inside Global 500 companies.

Changing culture and the way organizations have always done things is a leader’s greatest challenge and I’m anxious to assess how well corporations can adopt OI across the customer facing operations side of the business.

I believe that the opportunity to quickly acquire new knowledge for services, business process, CRM (Customer Relationship Management) and new business models can exceed the value or competitive market share gain from OI for a new product.  Costco can adopt a Bank’s branch office customer service ideas or automobile manufacturers can adopt a new business process model from Starbucks for the automobile dealerships service department.  And the software to support the processes and assess business metrics for the CFO can be acquired as well and implemented by the CIO.

In some cases a business offering services is competing against a business providing products.  John Deere and other equipment manufacturers could begin losing lawn care product sales as the lawn care service provider sells lifestyle choices and long term cash flow as a reason to not buy the new mower.  John Deere needs to look outside the manufacturing industry for the next innovation to win market share from the lifestyle choices available to their customers.  And, what industry would John Deere look to for managing the financial risk issues in the transition process?  Perhaps the automobile manufacturing industry that adopted Starbucks business process model for auto services.

I had an interesting phone conversation earlier this week as I was planning for a panel discussion that I will be hosting at the Front End of Innovation conference in May this year.  I was talking with the to-be panelists, Blaine Childress of Sealed Air, Graham Mott of Philips, and Tom Esselman of Hallmark, to plan for the session, which will be on the topic of Increasing Value Through Continuous Open Innovation Improvement.  Each panelist was asked to participate because of their advanced capabilities in the open innovation space, knowing that each would have very interesting stories to share with the audience.  As we were reviewing potential topic questions, the discussion started to shift, as we began to hear about the uniqueness of each company’s progression towards achieving open innovation effectiveness.  Not only did we suddenly realize how different each company’s path was, but also what the term “open innovation” meant to each company.  The differences were astonishing.  Since this phone conversation, I had discussions with several other companies just to hear about their experiences and perceptions, only to discover even more differences!

In order to trace each company’s experience, I used a simple two-dimensional model, consisting of an Engage axis (symbolizing the extent of a company’s reach into the global innovation community) and an Enable axis, which represents the level of a company’s readiness and ability to assimilate new knowledge that it receives from the outside world (see model below).  I was unable to find any two companies that took the same path.  Looking at it from an Engage perspective, most larger companies have a broader pool of resources to draw from, including other internal R&D departments, supplier networks, project-specific eco systems, and intermediaries, such as NineSigma, while smaller companies relied more on the use of intermediaries, because of their limited internal and close-in resources.  While tracing the Enable progression of each company, it was interesting to see the different approaches that companies were using to manage both internal and external innovation resources.  Results ranged from disparate databases to more formal scouting networks, knowledge management systems, managed supplier networks and ecosystems, as well as embedded open innovation processes and organizations.

While most early adopters of open innovation started on the Engage side of OI, we are now seeing many new adopters jump right into the Enable side, strategically deploying their people, processes and technologies before Engaging.  Whether starting out by dabbling with open innovation via an intermediary, or taking a more strategic approach, the results will inevitably be the same.  You will ultimately increase your innovation capacity, while reducing overall time to market and cost.