A Short Introduction to Open Innovation

What is open innovation and how did it emerge?

Open innovation means systematically integrating external ideas, technologies, and partners into your innovation process. In the 20th century, most companies followed a “closed” model: R&D labs, patents, and secret internal projects were seen as the only real sources of competitive advantage. External actors were treated mainly as competitors or suppliers, not co-creators. From the early 2000s, however, rapid digitization, global competition, and the explosion of startup ecosystems made that model less realistic. Researchers such as Henry Chesbrough popularised the term “open innovation” to describe firms that learn from and work with their environment rather than hiding from it. Today, almost every company already practices a form of open innovation – using external software, data, and expertise – but only a minority does it intentionally, with a clear strategy and governance.

Why do companies need open innovation today?

Companies need open innovation because no organisation can keep up alone with the speed and complexity of change. Product life cycles are shorter, customers expect constant improvements, and technologies such as AI, advanced materials, and clean energy evolve too fast to be developed entirely in-house. In many industries, value now comes from combining hardware, software, and services in flexible business models. That requires partnerships with specialised startups, research labs, and technology suppliers. Open innovation helps companies access cutting-edge solutions faster, enter new markets, and share risk on uncertain bets. It also increases learning: by running pilots with startups or customers, firms get real feedback earlier, instead of discovering problems after a full internal development cycle. In this sense, open innovation is not only about cost or speed; it is a way to systematically expand the organisation’s intelligence and awareness of future opportunities.

How can leaders design a simple open innovation system?

A practical open innovation system starts with focus and process, not events. Firstly, leaders should define 2–3 strategic themes where external collaboration really matters: for example sustainability, industrial digitalisation, or new customer experiences. Secondly, they need a clear funnel: scouting relevant startups, selecting the most promising ones, running small proof-of-concept projects, and then deciding whether to scale, invest, or stop. Each step should have simple criteria, a decision owner, and an approximate timeline. Thirdly, the company must allocate a modest but visible budget for pilots; without dedicated funds, projects remain stuck in “nice idea” mode. Finally, communication is essential: explain internally why the firm is working with startups, what success looks like, and how employees can propose opportunities. A lightweight governance committee can review projects regularly, resolve bottlenecks, and ensure that pilots leading to impact are not lost in the system.

Which corporate functions play key roles in open innovation?

Open innovation works best when responsibilities are shared. R&D brings technical expertise and evaluates whether a startup’s solution is feasible and scalable. HR supports culture and skills, by training employees in innovation methods and using hackathons or innovation challenges as talent pipelines. IT ensures that digital platforms, security, and integration issues are addressed early, so pilots can connect to core systems. Legal designs simple, repeatable contracts that protect intellectual property without blocking experimentation. Procurement adapts supplier processes for young companies that may not fit classic vendor criteria but bring high strategic value. Marketing and customer-facing teams help test solutions with real users and turn successful pilots into compelling stories for the market. Rather than asking “Who owns open innovation?”, leaders should ask, “How does each function contribute, with which KPIs, and under which shared rules?”

Key takeaways

• Open innovation means collaborating with external partners – especially startups – as a core      part of corporate innovation, not as a side activity.

• The main drivers are complexity, speed, and global competition: no company can master all      technologies and markets alone.

• A simple system with clear themes, a pilot funnel, and dedicated budget is more effective than      scattered events and one-off projects.

• R&D, HR, IT, legal, procurement, and marketing all have distinct roles and should have      explicit open innovation objectives.

• Communication and storytelling around successful collaborations help attract better partners      and sustain internal commitment over time.

FAQ

Is open innovation only for high-tech industries?
No. Open innovation is relevant in any sector where new products, services, or processes matter – from manufacturing and logistics to banking, retail, and agriculture.

Does open innovation always require investing in startups?
Not necessarily. Many collaborations start as simple pilots, joint development projects, or supplier relationships. Investment is only one of several tools.

Is open innovation risky for intellectual property?
There are risks, but they can be managed with clear legal frameworks, staged disclosure of information, and well-designed contracts that define IP ownership from the beginning.

References

• Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology,      Harvard Business School Press.

• OECD, reports on science, technology, and innovation policy.

• European Commission, publications on corporate–startup collaboration and innovation ecosystems.