Open Innovation Also Means Engaging the Inside

By: Gianluigi Cuccureddu

An article on the Financial Post website triggered me to write this article. A lot is being written about open innovation and much of them focus on, as the article says “spurring innovation by bringing the outside in”. Why should you engage your employees? They are the beginning of the equation that results in profitability and happy shareholders. Michael Porter said that employees are the major source for a company to increase competence and profits. Take care of your employees, they will take care of your customers and your profits. Open innovation can be the ‘mechanism’ to do so.

The Financial Post articles elaborates:

“Hundreds of companies are pursuing open innovation strategies (OI) to kick start creativity and crack difficult R&D problems.  OI is a relatively new approach to fostering innovation.  Instead of relying solely on internal R&D, OI programs help firms leverage expertise and resources outside of the company.  In many cases, this has proven to be a smart and cost-effective way to become more innovative.”

The challenge is exactly this, relying solely on internal R&D. Why not apply open innovation in the internal organization?

The article says that open innovation (getting the outside in) is a smart and cost-effective way to become more innovative. I’d say that organizations can get even more innovative in a faster, smarter and cost-effective way by involving employees.

The profitability equation

In another article I elaborated on the basis of an Economist research why it is important to begin with the employee. According to The Economist, 84% of senior leaders say disengaged employees are considered one of the biggest threats facing their business. However, only 12% of them reported doing anything about this problem. When companies focus first on their employees, customers are likely to be satisfied. This results in profitability, which then makes shareholders happy. Things can go very wrong if employee focus is not at the beginning of this equation.

From this perspective open innovation acts also as a mechanism –for employee engagement- rather than only a more distributed and decentralized innovation approach.

Two advantages of internal open innovation

First advantage of opening up innovation to all employees is that an organization can test processes internally, create the right practices and tactics before going to the outside and creating chances that it openly backfires. This is in line with the Financial Post:

“Opening up your innovation strategy to outsiders is not always easy nor does it always pay immediate dividends. Managers seeking to maximize OI’s potential should first look to establishing the right management practices and program tactics.”

The second advantage is that by involving employees, it acknowledges the employees’ importance. It spurs employee motivation and cohesiveness. Through this involvement employees feel more bonded with the brand, are more committed to the organization, which is important in an age where job-hopping is a big challenge.

It takes away a potential feeling of disadvantage. This disadvantage is an important to understand.

One recent example is Lufthansa Cargo’s supply chain open innovation challenge. This challenge is for customers or anyone who thinks they know at supply chain, to submit creative, exciting and out-of-the-box ideas about improving customer service in the air freight industry.

In reply to my question if employees could participate, the answer was:

“@damarqueviews Employees of Lufthansa Cargo may participate in the contest but are unfortunately not eligible to win any prizes.

— Air Cargo Challenge (@LH_Cargo) October 9, 2012”

 This can create disengagement, what about all those employees that work already many years for a company, but do not have the means to express their ideas in relation to a certain problem?

They have a different perspective on things than outsiders, they know the business, they know the market and many of them are in contact with customers, making this a very good starting point to build up rich internal collective intelligence.

Open innovation as a mechanism

Why is it a mechanism? The following counts  of course for all co-creators, the most valuable information is locked in tacit knowledge, knowledge that is very hard to ‘write down’. It is very contextual, for instance in scenario X, when Y happens and Z is the effect, than 1,2 and 3 are possible solutions.

Open innovation, through challenges or very concrete questions can unlock this knowledge. I mention this because organizations cannot expect from employees to  just give their experiences and knowledge if there are no appropriate means or mechanisms that enable them to describe it in context.

The interesting thing is that these means are being provided to the outside but much less to the inside. Enhance your open innovation efforts, involve both internal and external stakeholders and empower the complete equation, so both employees (and business partners) and customers to achieve growth.

By Gianluigi Cuccureddu