By: Chuck Frey
When you apply such a broad definition of open innovation, which can be summed up as the opposite of doing everything yourself, you also get the sense that open innovation is actually much more about mindset than processes. You also understand that almost every company already applies some kind of open innovation today. To prove this point, let’s take a look at these quite different examples from GE Capital/Hyundai, Coca-Cola and LG.
In previous blog posts, I have stated that open innovation is a process in which your company works with external entities during the innovation process. It goes deeper than just involving others in the idea generation phases; the contribution from outside your company must be significant. It is also more than just a partnership where you pay for specific services.
Everyone involved in an open innovation process focuses on problems, needs and issues and work them out together. Open innovation is also tied to the 10 types of innovation as developed by Doblin instead of just being limited to products and services.
When you apply such a broad definition of open innovation, which can be summed up as the opposite of doing everything yourself, you also get the sense that open innovation is actually much more about mindset than processes. You also understand that almost every company already applies some kind of open innovation today. To prove this point, let’s take a look at these quite different examples from GE Capital/Hyundai, Coca-Cola and LG.
GE Capital and Hyundai learn new skills in Korea
An interesting article in BusinessWeek – GE Brings A New Strategy To Life – gives us an example on how companies can get involved with open innovation in the financial industry. The background is a merger of activities between GE Capital and Hyundai in which Hyundai originally sought an investor to make up for losses in it’s credit card business while GE Capital entered the joint venture to break out of a period of zero growth in market share.
In the article, Hyundai acknowledges that the capital injection was the smallest of the benefits as it turned out that the risk-management and financial knowhow skills brought to the table by GE Capital really made a difference. On the other hand, GE Capital learned from Hyundai’s marketing skills, which included involving top designers to work on the look of their credit cards and the design consultancy IDEO to revamp and simply the bills and the website.
The result has not only given great financial results to both companies; they have also opened up to learning even more from each other – and in the long run probably also from other companies.
Coca-Cola brings us an unlimited choice of pop
In another example, Coca-Cola brings micro-dosing technology used to measure precise amounts of dialysis and cancer drugs, a smart phone operating system from Microsoft Corp. and style tips from Italian auto designers together in its latest attempt to revive falling sales of fountain drinks.
This new self-serve beverage dispenser can pour as many as 120 drinks while using 40 percent less storage space than traditional six- or eight-tap fountains. The development team grew from seven full-time employees to 50, with another 50 employees contributing time so it is fair to say that Coca-Cola spent significant resources on this project. Besides having their own big budget and bringing different components together in the machine itself, Coca-Cola also worked closely with existing customers such as McDonalds, which helped guide and test the fountain.
Although some analysts argue that this investment might be difficult to bring home as Coca-Cola needs to convert Pepsi-exclusive restaurants through this new offering, we should bear in mind that the dispenser could also work as a marketing machine helping Coca-Cola expose new soft-drinks to customers. After all, Coca-Cola holds trademarks for more than 450 sparkling and still brands globally.
I do not have much background information on how Coca-Cola worked with partners to bring this together, but it shows how complex our world has become and that open innovation-like initiatives are needed to bring out the full potential in your business.
LG designs with consumers
Marketplaces such as Innocentive and NineSigma are becoming increasingly important players in the open innovation community. LG has just initiated a partnership with a related player called CrowdSpring which is a marketplace for creative services. They have developed a competition in which consumers have the chance to design their vision of the next LG phone and compete for more than US$80,000.
You can argue this initiative only brings external input to the early idea- and design phase rather than the entire innovation process and it is also most likely that such a competition works best on the marketing front. However, it is interesting to see how large companies begin to partner up with the online marketplaces. It should also be noted that LG recently did some interesting projects with Netflix and I look forward to follow future open innovation initiatives of LG.
I think these examples although being quite different in terms of industries show that open innovation works well when you apply a holistic approach to innovation. Let me know if you hear of other open innovation initiatives worth mentioning in the blog world. The more we can learn from and inspire each other the better.