In 2003, the world of corporate research and development (R&D) took a giant, if somewhat quiet, leap forward. That year, Henry Chesbrough announced in his book that we were experiencing a Kuhnian Paradigm Shift. The kind of shift that is only recognized when the current principles can no longer explain what is happening. The kind of shift that is so important that it’s named after some philosopher dude. The old paradigm, Chesbrough dubbed “closed innovation” – and the new paradigm: “open innovation.”
In the closed innovation world, everything is done inside the building. You place your employees within the four walls you have built and they do everything. They think of the product. They keep it a secret. They research it. They build it. They test it. They bring it to market. They service it. They think of improvements. And they update it. And this all keeps going in a circle until, for some reason, customers stop buying your products.
Open innovation looks outside the four walls of your building for both the R and the D. It brings ideas from the outside and allows you to mix them with your internal ideas and knowledge to build products. And it provides a channel for you to build ideas in house and sell them to others.
This seems obvious now – almost second nature – especially with everyone becoming electronically networked. But it went completely against the grain of the most successful and famous companies on the planet. Every company thought that they had hired the best, trained them the best, and that their employees had all the answers. They only internalized ideas that came from employees they controlled, which makes the universe of creative minds very small. And what do outsiders know anyway?
They know a lot.
Several societal changes have taken place that pushed us into this paradigm shift.
- Information and knowledge are now more widely spread out. Skilled employees have more mobility to go from one company to another. This makes company secrets more difficult to keep in-house.
- There is an increasing number of college graduates and skilled foreign workers. And people can live and work from almost anywhere. There are more people who can solve complicated problems and they are more spread out.
- Increased access to venture capital means that things can move faster. The time it takes to get a product to market or even to change it after it is already out there has been shrinking at a thrilling rate. And the shelf life of technology has been getting shorter and shorter.
All these changes mean that closed innovation is not sustainable for most, especially small, companies.
It’s not that Chesbrough invented the concept. Proctor and Gamble started its open innovation initiative back in 1999. But Chesbrough’s book drove a giant thumbtack into the R&D roadmap of every company. There is now a stark noticeable difference between closed and open innovators. You can tell an open innovator by their agility, notoriety, and the love of their customers. And while some closed innovators still thrive, they are now outnumbered.
With the advent of the lean startup movement pioneered by Steve Blank and Eric Reis, building a startup product or service is about getting feedback from customers and potential customers. The customer is involved early and constantly. This provides businesses mobility that they never had before. If businesses can get customers and potential customers thinking about what problems they need solved and sharing those thoughts, the business can make moves within the industry faster, with more confidence, and with a higher success rate. A company that builds products based on the educated guesses of their own employees cannot keep up with an open innovator. It’s not (just) that employees make mistakes, it is that their thought process becomes constrained to trying to please their boss rather than the customer. Between crowdsourcing, crowdfunding, and the agile development/customer development stack, a startup or new venture cannot get off the ground without open innovation.
All this open innovation gets complicated for the customer and the business. We think the conversation between a business and its customers and other creative individuals should be simple and available to everyone. And that’s exactly what we have done. If you’re excited about collaborating to create tomorrow’s best products and services, wait until you see what we have in store. When we get going, we will go from experiencing a paradigm shift to having experienced it.
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