The Role of Top Management in Open Innovation

By: Innovation Management

Implementing open innovation requires a shift in mindset and a change in culture. It requires individuals to be open for external ideas and to share knowledge. This is not the way innovation is managed traditionally. For individuals to behave in a way that fosters open innovation, support from the top management seems to be crucial. Is this really the case? Or are top executives too far away from the action when it comes to innovation and open innovation?

What does the literature say?

“What advice do you have for other companies thinking about starting an Open Innovation program?” “Senior management support of an OI initiative is crucial to allocate resources and ensure there is both motivation and a mandate for culture change.”
Helen Rutledge (Head of Open Innovation at GSK)

The support of top management is absolutely essential and we have it on a daily basis [Thoen, 2011]

Senior leaders must understand and apply open innovation [Slowinski & Sagal, 2010]

Executive-level leadership is required, as is constant focus to reinforcing the message, and a clear understanding of the stakes [Bingham & Spradlin, 2011]

Top management gives a fundamental push to establish an OI implmentation tam, and its support is instrumental in achieving OI rollout across the whole organisation [Mortara et al., 2009]

Executive sponsorship needed (remove roadblocks and mandate participation) [Sloane, 2012]

Top management as a prerequisite for open innovation

The quotes above indicate there is strong support in the literature for top management as a key enabler in the early-and mid-stages of open innovation adoption. By demonstrating commitment and support, top management is a key factor in overcoming the resistance from those who challenge the introduction of open innovation (Mortara et al., 2009; Thoen, 2011). When open innovation becomes “the way we do things around here,” then there is less need for a single head of OI. Rather, it is likely to be integrated in another function of the company. At that stage there is still a need for an OI center of expertise, but less need for the political power.

According to Chiaroni et al. (2011), the role of top management in the early- and mid- stages is seen as a prerequisite for the implementation of open innovation, whereby commitment and support from top management is considered to be essential. Mortara et al.(2009) echo this thought: the shift towards open innovation requires the direct involvement of top management.However, Interventions of top management can have an impact only after operational staff is convinced of the need for change. Since changes in the innovation process have to be executed by operational management, attention to the role of top management is too constricted. Mortara and Minshall (2011) observed that in FMCG organizations, a top management change and reorganization fuels the adoption of open innovation.

Although top executive commitment and support are considered key factors for the successful adoption of open innovation, it would be naïve to assume that top management will easily back open innovation initiatives. Lindegaard (2010) summarizes several reasons why top management frequently fail to walk the walk when it comes to decision making necessary to adopt open innovation. Top managers do surprisingly little to build (open) innovation cultures in their companies. He summarizes these reasons in the following way:

• inclined to favor short-term gains
• missed out on innovation education
• risk-averse, given the short term pressures from shareholders
• control freaks
• lack a holistic vision
• lack of understanding of why networking culture is important for open innovation
• too far away from the action.

Therefore, he suggests that innovation leaders in a large companies focus on the following points when they intend to pitch open innovation to top management:

• try to stretch the mindsets of top executives
• help them understand that innovation strategy has to be embedded into the overall strategy
• understand what rally matters to them
• leverage the power of corporate communications
• start a few, well targeted initiatives and get some small wins early on.

Tasks of Top management in open innovation

Besides acting as a driver for change, top management is required to take actions aimed towards developing and exploiting innovation activities (Huizingh, 2011).

The tasks of top management can be summarized as follows:

1. developing a clear vision and strategy for open innovation
2. defining how the company will identify and generate value from innovation
3. choosing an organizational model that supports open innovation – support for the open innovation team
4. budgeting and allocating resources,
5. identifying and tackling obstacles
6. monitoring and evaluating results.

In addition, top management is required to provide commitment, budget and support to the open innovation implementation team (Mortara et al., 2009).

Another practical implication for top management, described by Bigliardi et al. (2011), is the changing roles of personnel in R&D due to the introduction of open innovation. There is evidence of this in industry, such as the T-man role introduced at P&G. Management is required to take actions to identify and introduce these roles. Finally, top management is also responsible for the establishment of an OI team (Mortara et al., 2009).

Culture is an essential element in open innovation and will be discussed separately during one of the coming webinars.

Direct involvement of top management often translates to a shift in organizational culture (Mortara et al., 2009). Culture is an essential element in open innovation and will be discussed separately during one of the coming webinars. The connection between cultural change and top management is clear in the literature, since an accepted perspective of organizational culture maintains that it is leadership that creates and manages culture.

In sum, the literature provides evidence that top management is crucial to introduce open innovation successfully. Although it is obvious for most industry observers and practitioners that the mandate and support of top management is essential to succeed.They also emphasize that it is not easy to get top management aligned to support a switch to open innovation.

Some takeaways from the discussion on the topic on the MOOI-forum

A great thread of thoughts on the subject has been developed recently on the MOOI-forum. Ten experts further explored the role of top management in open innovation.

Forum members agree that the support from top management is a prerequisite and therefore essential to open innovation. Furthermore, top management should not only give the fundamental push but also retain momentum in the implementation of open innovation together with the OI team.

It is somewhat naïve to assume that the CEO – the busiest of all – will do more than give a mandate and a budget to the OI-team.

A sobering observation is that top management of companies is composed of individuals, all of whom are extremely busy with their specific areas of responsibility. Therefore, it is somewhat naïve to assume that the CEO – the busiest of all – will do more than give a mandate and a budget to the OI-team. The forum members developed interesting thoughts about who should be responsible for the open innovation activities in a company: should that be the someone with a specific position (e.g. VP OI but it doesn’t matter how you call it) or may it be one of a few responsibilities of a member of the top management. In case the company chooses for a separate position, should it report directly to the CEO or are other arrangements acceptable?

The Forum members converged on a number of conclusions. First, there is no general, one-size-fits-all solution to involve the top management in launching and supporting open innovation. This clearly depends on the company, its size, industry and culture. Second, the role of top management depends on the stage of the OI-management in the company. The intervention of top management is especially required during the launch and early stages of the OI-implementation. Three, there should be one manager who is responsible for OI: It is desirable to have one person in the company who is accountable for the outcomes of OI initiatives. Top management should avoid appointing figureheads in this position of an OI officer, since they lack the authority and budget to really force business units and R&D heads to make open innovation a priority. Hence, in the case a special position is created, it should have a clear mandate from the top and a budget dedicated for specific OI initiatives.

It is interesting to realize that budgets for OI cannot be compared directly to other in-house R&D budgets. OI funds leverage investments in competence already made by external partners and therefore don’t need the same investment.

The critical question is why top management has a part to play: What can they do uniquely, that others cannot? Things that top executives can do are:

• articulate a comprehensive vision for the company’s innovation strategy and the nature of the ambition related to achieving that vision;
• identify the proper organization for the jobs to be done:they have to assign organizational responsibility and resources to the core group to manage the OI activities;
• initiate and manage change:top management has a unique level of authority to initiate change and provide resources and will power;
• manage shifts in organizational structures: introducing OI requires a shift in culture, and will most likely succeed under the drive of the top management;
• create incentives:top management can signal what the desired OI activities and behaviors are;
• increase budgets for projects that include external partners.

Top managers should not have the skills of an OI practitioner, but they should appreciate and understand the skills and needs in these people they are asking to run OI. They should understand what OI is and what the potential and risks are if the company moves in that direction. Furthermore, they need to ensure that the organization knows they think open innovation is a priority and an essential part of the strategy.

These are just a few of the thoughts that have been developed and discussed by members at the interactive MOOI Forum. Other threads of thoughts are not exactly pointing at the role of top management in OI but are at least as interesting. The forum shows that high quality discussions can be generated online between knowledgeable people that share the same passion.

By Prof. Henry Chesbrough, University of California, Berkeley &ESADE,
Prof. WimVanhaverbeke, Hasselt University, ESADE& National University of Singapore and
Dr. Nadine Roijakkers, Hasselt University.

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References

Bigliardi, B., Galati, F. and Petroni, G. (2011): Collaborative modes of R&D: The new challenges for personnel management. International Journal of Business management and Social Sciences, 2(3), 66-74.

Bingham A. and Spradlin D. (2011): The Open Innovation Marketplace
Huizingh, E. (2011): Open innovation: State of the art and future perspectives, Technovation, 31, 2-9.

Igartua, J. I., Garrigós, J. A. and Hervas-Oliver, J. L. (2010). How innovation management techniques support an open innovation strategy. Research Technology Management, 41-52.

http://www.slideshare.net/StefanLindegaard/open-innovation-summit-stefan-lindegaard-presentation-2645946

Lindegaard, S. (2010): The open innovation revolution, Wiley, Hoboken, NJ.

Lindegaard, S. (2011): Making Open Innovation Work

Mortara, L. et al. (2009): How to implement Open Innovation

Interview Rutledge H (Head of OI GSK) (2012)

Sloane, P. (2011): A guide to open innovation and crowd sourcing

Slowinski, G. and Sagal (2010): Senior Management Roles in Open Innovation

Thoen, C. (P&G) interview by Shaugnessy (2011)

https://innovationmanagement.se/2011/04/21/procter-and-gambles-chris-thoen-on-open-innovation/

https://innovationmanagement.se/2011/05/06/chris-thoen-on-open-innovation-part-ii/

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