– Originally appeared on Social Media Today.
Building your ‘relationship capital’: open innovation as a strategic business imperative
New technologies have sparked a rapidly evolving business culture, forcing organisations to re-evaluate their established processes: they must innovate or miss out on gaining a competitive edge. Companies have traditionally focused their internal innovation resources on the limited aim of enhancing a specific set of core products, rather than the broader goal of ingenuity for its own sake. This endeavour would require a holistic, boundary-less innovation strategy. In order to mesh disruptive innovations into an existing business culture, these processes must be quick, effective and accepted internally.
Open innovation (OI) is a paradigm in which companies source ideas from a large pool of resources internally and externally of their organisation. This model can lead to solutions that might not otherwise have been considered. This group of people may come from different disciplines, backgrounds and skills not present in the company. In a knowledge-based economy, businesses need this cognitive diversity.
However, the big question that companies immediately face when considering such a programme is where to start. Top leadership could focus on efforts to accelerate their internal innovation pipeline through such methods as customer satisfaction surveys, traditional R&D, or ideation from their employees (such as allowing them more time to pursue their own projects). However, these strategies lack essential perspectives: external resources, ideas and expertise.
OI provides access to a large pool of human capital in a highly efficient manner. There are four ways that organisations have traditionally accessed human capital: their employees, their customers, their competitors and their consultants. OI provides yet another alternative – in fact, one can think of OI as a ‘financing’ mechanism for human capital. Just as a CFO may make a decision not to attract internal investment, but rather utilise a line of credit with a bank to access external financial capital, OI provides a route to access external human capital.
Most companies simply don’t have the budget, resources or time to retain significant amounts of human capital dedicated to innovation. By embracing an OI platform, top leadership can utilise more human resources more efficiently.
Senior management often favours introducing ‘best practice’; they are comfortable implementing a solution that another organisation has used successfully. Therefore, the thinking goes, the model seems to guarantee positive results. However, ‘best practice’ may actually confound business goals. A process that succeeded for a different company may prove to be dependent on that organisation’s specific culture or market position.
In order to promote ideation – from inside and outside of the organisation – top leadership must focus on managing their ‘relationship capital’. Innovation requires co-creation with employees, external resources and customers each having a stake. The collective input of external creativity, combined with internal market knowledge can transform an idea into a successful commercial product.
However, how do companies manage their ‘relationship capital’ within the organisation, with customers and with external entrepreneurs?
OI intermediaries serve as a point of contact with the external innovation community. Intermediaries’ platforms can effectively manage these relationships and leverage them to source ideation. Having this external resource on hand can remove the burden of having to invest in the internal development of these services.
These intermediaries act as an exchange between the ideas (employees, customers and external talent) and the end result. As a result, sourcing an original vision, developing it, and bringing it to market is faster and more effective.
This model is challenging traditional R&D by opening ideation to a wider community. Companies need to embrace the method of collective intelligence quickly, or miss out gaining a competitive advantage.