By: Seth Weiss
To succeed in a fast-paced competitive global economy, small and medium-sized entities (SMEs) are increasingly adopting Open Innovation (OI) management strategies. A lack of resources, however, frequently requires SMEs to implement OI strategies on their own without the assistance of a management strategy professional. This article offers clear, do-it-yourself steps to initiate an OI program successfully within an SME.
A winning OI program starts with a thorough “openness self-evaluation” of the company’s current open practices. Such an assessment likely will confirm that the company is already practicing some open approaches and will provide clarity as to how the company can benefit from increasing its openness. (This article is intended to be the first in a series of articles offering a pragmatic guide to implementing OI management strategies in SMEs.)
What is an open approach?
An SME planning to implement an OI approach must first understand what OI is about. OI is a management strategy by which companies go beyond their internal boundaries when designing, developing and distributing at least some of their products, services or experiences. Combining internal and external knowledge, skills and capacity appropriately, practitioners of OI work jointly with a number of collaborating partners. Collaborators may include customers, suppliers, manufacturers, distributors, technology centers and universities, and others. Organizing in a collaborative manner not only improves the results of shared projects but also enables an SME to spread risk among the collaborators.
Owners of SMEs likely are familiar with an OI management strategy. Some may know it by name and purposefully engage in it. Others may not know its name, but adopt its tenants out of necessity. Regardless of the business owner’s familiarity with the definition of OI, an SME can be more competitive by implementing a delineated OI strategy.
So What to Do?
The recommended self-evaluation has two distinct steps:
- Itemize the open approaches already used by the SME.
- Review the efficacy of the current open practices.
Step One: What Do We Look Like?
The first step in the openness self-evaluation is to gather several of the company’s decision-makers for the purpose of identifying current open approaches used by the SME. The team need not be numerous in members, three to seven people, but should be diverse in roles and responsibilities. Incorporating different perspectives from within the SME at this early stage ensures an accurate assessment of the company’s current open approaches.
The OI team should consider the following questions:
- Does the company rely on upstream partners, such as suppliers, designers, or research and development firms?
- Does the company rely on downstream partners, such as manufacturers or channel associates?
- Does the company use professionals to assist in its delivery of products, services or experiences, such as marketing and advertising personnel, attorneys, accountants, or IT specialists?
- Does the company integrate customer requests into its products, services or experiences?
If the answer to any of these questions is “yes”, the team should identify the partner and the role of each collaborator. Characterizing the contributions of collaborating partners provides two benefits. First, it clarifies what assistance the SME needs to commercialize its product, service or experience. Second, having identified its external needs, the strengths of the SME are highlighted.
I applied this self-evaluation methodology at an applied optics innovations company I started in 2006. This first step revealed important findings. The company designed and developed polymer lenses for use in security and authentication labels. While we were able to design our technology, we had to collaborate with upstream partners to program our software and to make tools and machinery. Similarly, we utilized a network of downstream partners to print the labels and provide access to market channels. Because many of our ideas were unique, we used other partners to help protect the technology through a family of patents. Further, we collaborated with the product’s end users, typically large multi-national companies, so that we could incorporate their specific design requests into the product. By “looking in the mirror” to assess our own capabilities and knowledge and what we needed from external partners, the company was well positioned to construct a clear path to market in a competitive landscape. Although the company’s concepts were novel and desirable, the company could not have commercialized its technology without an open approach.
As an SME, the optics company had to work with inherent shortcomings – funding, staffing, etc. — but by creating an inventory of our open approaches we also established a clear working document of our strengths. These identified strengths became our core business.
Step Two: Are We Effective?
Once its open practices are itemized, the SME begins the second stage of its openness self-evaluation — determining whether or not the current open approaches are meeting the needs of the company.
Questions for the OI team to ask include:
- Are our current processes sufficient to support OI?
- Do we have the right people in place to facilitate an OI approach?
- Are our existing OI practices aligned with our overall business strategy?
If an SME answers “yes” to all of these questions, it’s in a good place to move forward with an open approach. If, however, an SME answers “no” or “uncertain” to any of the questions, it is important to make internal changes before turning attention externally and moving ahead with a broader implementation of an OI program.
Returning to the optics business, we found that it was the second stage of our self-evaluation that needed a lot of work. We didn’t just have one discussion or a brief series of discussions about how effective we were being. We revisited this part of the self-evaluation on a regular basis, at least quarterly, even after we moved ahead and got increasingly involved with our external collaborators. In our early discussions, we realized that our processes lacked the requisite rigor to effectively support OI. For example, our internal R&D group maintained limited and largely cryptic records regarding testing. Further, the group tended to iterate based on intuition rather than data. When we realized this, we implemented a process to capture data that still afforded ample room to explore based upon one’s intuition. Our evaluations also demonstrated that our allocation of responsibilities did not always match an employee’s skills or knowledge. So, as needed, we revised responsibilities where we could, brought in new employees to assist when we had funds, and released people who were not a good fit for a company built upon an OI strategy. While we never explicitly acknowledged it, our meetings also ensured that our OI approach aligned with our overall business strategy so if we needed to course correct we could do so without significant disruption or lengthy delay.
The Self-Evaluation Is Done – What’s Next?
Effective implementation of an OI strategy requires a thorough “openness self-evaluation”. A hastily planned innovation strategy likely will end in failure. Proper early stage planning is invaluable. A self-evaluation can be used to define realistic end goals while illuminating a path to get there.
Only after completing the openness self-evaluation is an SME ready to move on to the next phases of OI implementation – identifying collaborators, evaluating collaborators, negotiating relationships, managing the network of partners, etc. During these phases, the company and its business model likely will evolve to emphasize core competencies focusing on how those abilities create and capture value through thoughtful association with collaborators.
By Seth Weiss
About the author
Seth Weiss educates, writes and speaks about innovation, collaboration and intellectual property. As an attorney and skilled practitioner of Open Innovation, Seth has extensive experience operating and consulting for SMEs. Understanding the unique and varied characteristics of SMEs, he designs pragmatic programs and strategies for effective open innovation implementation.
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