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Open innovation leads to fresh ideas

Update: November, 13/2014 - 09:13

Wim Vanhaverbeke, a professor of innovation management and strategy at Hasselt University in Belgium who is also a visiting professor at the ESADE Business School and National University of Singapore, spoke on how to manage the new trend in invention on the sidelines of an international workshop themed Successful innovation management models – lessons for Vietnamese leadership that took place in Ha Noi recently.

Could you explain the terms open and closed innovation?

Wim Vanhaverbeke

Closed innovation is simple. It means that innovation is done mainly within the company, including research and development on new products.. So, the company should have research and development laboratories. Engineers and commercialisation teams do the development internally.

Open innovation, on the other hand, means that you'll do parts of your innovation process with external partners. It can be done in the research, development, technology application and commercial stages. When you join external and internal knowledge together to bring projects onto the market, that is open innovation.

For big Western companies, closed innovation was paradise until the 1990s. More recently, they have moved towards the open model. Small and medium-sized companies without venture capital should use open innovation to realise their ideas and bring these ideas to the market.

Do companies need open innovation? If so, why?

Yes, they do. There are three main reasons. One comes when companies can no longer cope with the complexity of technology. Then you have to bring together competent parties from different companies, universities or research labs to develop the new project.

The second reason is speed. It's important to get products to the market quickly. If an enterprise creates a concept or develops technology another firm has already created, they are wasting time doing the research themselves.

The other issue is that of risk and cost of research. Some research is expensive and risky. So, it is interesting for companies to join forces to do part of the research and share results, rather than doing everything internally.

What should a company do to attract a lot of ideas?

I think we can do some crowd sourcing. Crowd sourcing is popular nowadays. You can use media and social networks to seek out new ideas. You can also hold contests to draw in new ideas.

If you know where to find the ideas, then you don't need to crowd source, because it is expensive. You can just call several universities, and then they will select one or two solutions for the challenge you have posed.

How can companies successfully use open innovation?

It is not easy to apply open innovation. First, you have to organise your company internally to ensure that your employees and managers can work effectively with outside partners. You have to know how to manage, organise and set up a network of partners.

This is very different from managing people in your company, because you have no hierarchical control over your partners. You have to make sure that open innovation activities are completely integrated into the firm's overall strategy. You have to know what you want.

You also need help from the top to open the company up to outside influence. If you do not have commitment from the top, it will be difficult to succeed.

What do you think about the Vietnamese market and how it is applying open innovation?

In Viet Nam, companies have been working with low labour costs. But in the last five years, it has lost its status as a low-cost country. It has been replaced by Thailand, Indonesia and some African countries. The transition from a low-cost-based economy to innovation-based economy has been slow in Viet Nam.

What is your advice for Vietnamese enterprises?

You have to innovate to make more high-quality, innovative products to sell for a premium price. You have to move away from traditional low-cost strategies and toward innovation that utilise the country's economic advantages.

Businesses also need to be managed in the right way and stay up-to-date. — VNS

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