In the current business scenario, innovation is one of the key and most effective ways to succeed in the market for the contemporary business organizations. Thus, majority of the contemporary business organizations are opting for enhancing their generation of innovative ideas. However, various business organizations especially the startups may not able to afford the cost involved in research and development required for generating innovation. Thus, in his case, they can opt for open innovation. Open innovation refers to the business concept where the business organization will have the access to the outside or external innovations to improve their products or service. Thus, it is the process of sharing of internal and external ideas to generate innovation. This concept is being penned by Henry Chesbrough.
Advantages for open innovation
One of the key advantages for open innovation is the reduction in cost. Business organizations especially the startups will find it difficult to invest huge amount in research and development. Thus, initiation of the open innovation will help them to have the access from the external source without being incurred cost for the internal research and development. Thus, the developmental cost for the particular product will get reduced. Another benefit for open innovation is gaining of competitive advantages. As discussed earlier, in the current business state of affairs, innovation is the key source to gain competitive advantages in the market. Thus, with the help of the open innovation, business organizations can have innovative products and services to offer in the market, which will help them to gain competitive advantages.
For instance, Samsung got the huge market share in the global Smartphone market due to the operating system being gained from Google. This is due to the reason that, with the help of having android in their Smartphones, Samsung able to enhance the convenience of the customers along with providing them latest services and technologies. Thus, the path of open innovation between the Google and Samsung helped to popularize both Android and Samsung Galaxy Smartphones in the market.
Another advantage for open innovation is the reduction in the associated risk with innovation. This is due to the reason that, as discussed earlier, initiation of internal innovation in the organization will involve a huge cost and other resources. Thus, if the innovation cannot get succeed in the market then the business organization will have to bear the loss. On the other hand, in the case of open innovation, the cost involved will be much less compared to internal innovation and various third parties will be involved. Thus, the associated risks will also be lower and divided.
Limitations in initiation of open innovation
Apart from the above discussed advantages of open innovations, there are various limitations also for this concept for the business organizations. One of the key disadvantages is the disputes regarding the patents. This issue was being emerged between the Samsung and Apple. They both filed lawsuits against each other over the violations of patents. However, due to the initiation of the open innovations, any business organizations can have the access to the latest technologies. This will in turn reduce the competitiveness of the organizations in the market. Thus, any startups opting for accessing the latest innovations with the help of the open innovation may not gain the desired outcome in the market due to the reason that, the particular innovations have being accessed by other organizations also.
Another limitation of open innovation is the lack of understanding the exact need and requirement of the customers along with the delay in bringing the end product. This is due to the reason that, open innovation involved various internal and external stakeholders, which creates barriers in effective generation of the innovative ideas. Generation of the innovation requires effective determination of the need of the target customers. However, in the case of the open innovation, there is a lack of customer focus and it caused further delay due to changing more frequently. For instance, Boeing initiated the policy of open innovation for producing their 787 dream liner aircraft. Due to this, they have involved their partners and suppliers in providing their ideas. However, though the end result is positive but it caused several delays in commercializing the product in the market and that too cannot meet the requirement of their client. Thus the idea of open innovation failed in the case of Boeing.
Thus, it can be concluded that though there are various advantages of the open innovation, but there are still some limitations of this concept for business organizations. Thus, it is important for them to enhance the effectiveness of the open innovation along with reducing the key adverse implications