Against Intuition: Transparency in the Innovation Process

Research on open innovation in the development of a new products or services has traditionally focused on the use of ideas and knowledge from outside the organisation. But openness can also play an important role within an organisation as Georg von Krogh, Torbjørn Netland, and Martin Wörter show in their research.

Intuitively, manufacturing companies keep process innovation activities under wraps because they fear that competitors might “steal” their ideas. And some of them have good reasons for doing this. If you have found a unique production process with which to manufacture a differentiated product, it can be wise to keep that know-how within the company as, in such cases, there is an obvious risk of loss of intellectual property.

However, the study suggests that for many manufacturers, such defensiveness is not always the best strategy. Walling off process innovations from the outside world can become a disadvantage because sooner or later, competitors usually catch up anyway. The researchers draw their conclusion from an analysis of nine years of survey responses from 1,000 Swiss manufacturers, as well as 200 interviews with personnel at the Volvo Group (AB Volvo), a manufacturer of trucks, buses, construction equipment, and marine and industrial engines that is based in Gothenburg, Sweden. ¹

From closed to open in six steps

It might feel counterintuitive, but many operations managers can build greater advantage for their company by following a policy of open process innovation rather than secrecy. However, how do you implement such an open culture in an organisation? A six steps plan is suggested:

1. Open up internally
2. Focus on the pace of process innovation.
3. Exploit connectivity technologies.
4. Improve your organisation’s ability to absorb and implement ideas from external sources.
5. Open up to the outside.
6. Utilise unconventional sources of knowledge.

How to Get Started

As product life cycles continue to decrease and demand for individualisation increases, companies that master the combination of superior product and process development will be better positioned. Opening process innovation is in line with this new world. However, the success of such an openness program depends on how well a company knows itself, i.e. managers have to ask themselves when external knowledge serves them best, how to combine the search for product and process knowledge, etc.

As with many organisational changes, open innovation is best begun gradually. The authors, therefore recommend switching from closed to open process innovation step by step. Furthermore, the bulk of the research indicates that the businesses that will be most successful in the future are the ones that master both the process and product sides of open innovation.

^{1 Note that AB Volvo, or the Volvo Group, is not the manufacturer of Volvo cars. Volvo Car Group is owned by the Chinese company Zhejiang Geely Holding Group Co. Ltd. One of the authors visited 45 Volvo Group factories around the world.}