As with any other business activity, the bottom line of open innovation always comes down to sales.
Beyond staying ahead of the competition and progressing on the path of digital transformation, innovation activities need to lead an enterprise to new markets and/or new revenue streams in order to pass the test.
The potential for revenue ultimately drives the conversation about any open innovation collaboration, whether the goal is short-term incremental innovation or long-term radical innovation.
This article showcases how open innovation increases sales and how your company can realize the ROI potential of open innovation.
What is Open Innovation?
Open innovation is a decentralized approach to corporate innovation, defined as collaborating with companies other than your own that have the knowledge and/or capabilities your business needs to innovate.
The long-term problem with keeping innovation entirely in-house is that trying to transform a system from within is extremely difficult, if not impossible, because daily tasks and responsibilities hinder follow-through.
With open innovation, however, collaborating enterprises and startups provide unique perspectives that complement each other in the journey toward something entirely new.
To borrow the old saying, you don’t know what you don’t know. For truly boundary-pushing improvements, enterprises need to look outside of their ecosystem toward startups and other collaborative partners to find the knowledge and/or capabilities necessary for innovation.
Once a company has embraced open innovation, the next step is to maximize its effectiveness.
How Do Companies Measure the Impact of Open Innovation?
Sales revenue is one of the most common metrics used to quantify innovation success. 85% of companies that measure innovation use revenue as one of their metrics, and 69% of companies overall measure innovation by sales results.
While sales is a common measure for open innovation success, it is important to remember that it does not paint the entire picture.
You also need to take into account the process that led to those sales results: How much time and money was spent looking for the right startup to collaborate with? How many proof-of-concepts did you need to run to find the right solution for your innovation needs?
An innovation that has generated sizable revenue cannot necessarily be deemed a success if the initial discovery, testing and evaluation costs are too great.
This is where open innovation really shines. It saves time, money and resources by allowing companies to come together, each bringing their respective advantages and expertise to the innovation table.
Ways to Increase Sales with Open Innovation
Collaborating with external vendors keeps large companies moving forward by pushing them into new markets, opening new revenue streams and improving processes.
Here are three examples of large companies that benefited from open innovation.
Find New Market Exposure
Breaking into a new market is a lot like starting from scratch. One way enterprises can ease the pain of this process is to collaborate with smaller, more specialized companies.
Working together with outside technology companies allows enterprises to shorten the new market learning curve and offer innovative technologies at a quicker pace. On the flip side, tech companies can take advantage of an enterprise’s experience and resources to bolster their visibility and reach.For truly boundary-pushing improvements, companies need to look outside of their ecosystem toward startups and independent software vendors. Click To Tweet
One interesting recent example of this type of partnership is Amazon’s checkout-free grocery experiment, Amazon Go. Currently only open in Seattle, the web giant’s first foray into brick-and-mortar retail purports to offer “Just Walk Out” technology, which forgoes traditional cashiers and lines, allowing customers to instead simply pick up what they want and leave.
Amazon tracks customer selections through a combination of computer vision, artificial intelligence analyses and collaborative sensory data.
By working with specialized technology vendors who have expertise in these areas and synthesizing a new use for the technology, Amazon is now able to innovate in the retail and grocery space quicker than any of their competitors, forcing companies like Microsoft and Wal-Mart into a partnership to stay competitive.
Open New Revenue Streams
New products on the market mean new earnings, and one way for enterprises to jumpstart product innovation is to partner with up and coming tech trailblazers in order to help them realize their new ideas.
Samsung, traditionally known for consumer electronics, is hoping to make deeper inroads in HealthTech by fostering these mutually beneficial collaborations. For example, they partnered with a team of researchers looking into the efficacy of wearables for detecting serious health conditions.
The team found that one issue with the accuracy of wearables is that along with health data readings comes quite a bit of other useless noise that affects accuracy. As a result, the team, along with Samsung, are developing an app that filters data from wearables through deep learning algorithms.
Many enterprises have worked with AI vendors to make their processes more efficient, to the benefit of both the company and the consumer.
Chatbots, the Internet of Things and big data technologies streamline enterprise workflows by accessing and processing mass amounts of data faster than any person could, and presenting these data in a useful and actionable format.With the pressure to innovate being stronger now than ever before, innovation shouldn’t be a complicated process. Click To Tweet
Time is a valuable thing, and paying employees to sift through thousands upon thousands of legal documents can cost a bank quite a bit of money. JPMorgan Chase recently commissioned a program called Contract Intelligence (COiN) that uses AI algorithms to sift through massive amounts of contracts and other legal documents, pulling out salient information for review.
On the client-facing side, financial institutions have embraced chatbots as a way to improve customer service. For example, Capital One has implemented a chatbot called Eno, which helps customers manage their accounts through their mobile phones, and they also developed a voice app that can be used through Amazon’s Alexa.
By partnering with innovative vendors, these enterprises have been able to speed up their internal and external processes, saving valuable time and improving their overall efficiency and customer experience.
How to Make Open Innovation Easier
With the pressure to innovate being stronger now than ever before, innovation shouldn’t be a complicated process.
Using a proof-of-concept platform makes the open innovation process as frictionless as possible. Companies that use a PoC platform to centralize and streamline their process will make more qualified connections, receive better and more actionable data, and find themselves with more innovation opportunities.
A simplified PoC process ultimately offers more chances for innovative partnerships that will increase revenue streams, open up new markets, improve processes and ultimately take your business to the next level.