Fair open innovation

What is open innovation?

Open innovation is defined by opening the organizational boundaries of the company. This offers organisations the opportunity of an inflow of expertise from outside, or even the creation of new opportunities for use, not previously considered.

Open innovation - Firms´ boundaries become permeabel (onscreen)

Enhance in-house innovation processes

With outside-in innovations, the business opens its doors to external innovators or interest groups to obtain market information, ideas, solutions, technologies or feedback. The integration of external knowledge expands mental horizons in the interdisciplinary development of new solutions. Enhanced access to external resources also opens up opportunities to reduce innovation risk.

By involving customers, user experiences and requirements are gathered directly from the market. Solution orientation and development can therefore occur in close proximity to the market, thus increasing the chances of success.

Digital crowdsourcing platforms connect interested users, giving visibility of previously untapped knowledge, expertise and skills.

Ideally, this may even result in personnel recruitment measures.

Open innovation helps to positively influence marketing and the visibility of innovation initiatives by presenting new projects, for example, to various stakeholders.

New opportunities for in-house developments

With inside-out open innovations, the business attempts to share its existing internal knowledge with the external environment, to enable the identification of new external marketing opportunities for the application of its own technologies, or to make use of these technologies beyond the scope of the current business model. This can result in the establishment of spin-offs or out-licensing.

Inside-out open innovations can boost the growth of entire markets, which benefits all market players in that particular sector.

Innovation culture

A business’s innovation activity is determined, to a large extent, by a culture that supports innovation. This culture is particularly characterised by senior management, who can contribute a great deal to fostering an innovation culture by practising the business's values and providing resources. By capitalising on internal and external resources, senior management can strengthen the business’s integration capacity and accelerate the speed at which innovations are transformed into marketable products. A modern business culture permits experimentation as well as failure and can deal with uncertainty and mistakes, thus purposefully ensuring the profitable use of external knowledge.

Playing a crucial role in this endeavour is the way in which the business manages its own intellectual property, as well as that of its innovation partner. This must be clearly defined and made transparent for everyone.

Before introducing open innovation methods, the first questions should therefore be how appropriate is it to open up the innovation process and to involve external partners? How should knowledge be managed and what measures are required?

Is our business ready for open innovation?

Open innovation starts with the right attitude - success depends on having the right skills and tools.

  • Do the business model and statutory framework conditions permit the business to open up?

  • Does the business have a culture that is appropriate for a partnership approach?

  • Are the business’s internal guidelines and processes suitable?

  • Can employees and business resources support open innovation activities?

  • Can all partners profit from the success?

Questions like these help to decide whether open innovation methods can offer promising developments for businesses and where there is any need for adaptation.

Open innovation partners

In an efficient open innovation ecosystem, a multitude of diverse external partners can contribute to the innovation process:

  • Research institutions, such as universities

  • Customers

  • Suppliers

  • Individuals and former employees

  • Competitors

  • SMEs from a range of industrial fields

  • Start-ups

The open innovation ecosystem (onscreen)

All these partners can make valuable contributions through their collaboration in the development and market launch of new products or services.

Particularly at the start of a business’s reorientation, but also right through to open innovation processes, the relevant service providers and platform operators can provide the help that is needed.

Fairness in open innovation

The successful and sustainable involvement of external innovators requires fair and transparent framework conditions and appropriate recognition of the contribution to the competitive advantage achieved.

With open innovation collaboration, there is the risk that participants may feel that their contribution has not been adequately seen or acknowledged. It is therefore important to understand that open innovation is not a means of getting something without getting something in return.

One of the key opportunities for motivation and business loyalty is to acknowledge all contributions by means of “fair compensation” (“fair share”). However, the perception of fairness is also very significantly determined according to what is known as “procedural fairness”, which refers to the transparency and consistency of process design, such as the selection process, and “interaction fairness”, which refers to the speed, sincerity and respect of interaction with the community.

Fairness aspects of open innovation (Source: Faullant, Füller, Hutter, Gebauer, 2011; modified)

Distributional fairness is defined by the principle of justice, in which a person regards the ratio of his input to the output received as fair for himself.

Depending on the type of challenge of the innovation initiative, specific forms of compensation should be offered, such as, for example, cash awards, non-cash awards, internships, presentation of the winner’s name or an invitation to develop the idea or cooperation in the organisation. Making only small cash awards for pioneering innovations is clearly not acceptable.

Visibility in the community is also seen as a form of recognition of the user’s endeavours and promotes the appeal of the project. Depending on the target group, some participants feel that a career-related benefit is more rewarding and more motivating than a simple cash bonus.

As well as the benefit itself, the award process - procedural fairness - is another key determinant of perceived fairness.

Procedural fairness is the perceived fairness of the procedure, guidelines and criteria that are used by decision-makers in achieving the result. Key aspects of procedural fairness include the following:

(1) Consistency - selection procedures should be universally consistent,

(2) Lack of bias - the personal interests of decision-makers should not play any part,

(3) Accuracy - the goods, the information and criteria used in the selection process,

(4) Correction - the opportunity to correct unfair decisions,

(5) Representation - requirements, values and perspectives of all parties affected by the selection process should be represented in the process,

(6) Ethics – selection must be consistent with the basic moral and ethical values of the observer.

Interaction fairness refers to the human aspect, the fairness of communication undertaken between the various parties, and depends on interpersonal behavioural elements such as politeness, honesty and respect. This form of fairness is supported if decision-makers treat individuals with respect and sensitivity and provide a detailed explanation of the reasons for their decisions.

[Graphic and quotation translations from Faullant, Füller, Hutter, Gebauer, 2011; modified]

Further reading and sources

 

What is open innovation?

 

Open Innovation Readiness

 

Fairness in Open Innovation

  • de Beer, J., McCarthy, I., Soliman, A., Treen, E. (2017): “Click here to agree: Managing intellectual property when crowdsourcing solutions”, Business Horizons, Volume 60, Issue 2, March–April 2017, Pages 207-217
  • Faullant, R., Füller, J., Hutter, K., Gebauer, J. (2011): “Fair Play: Perceived fairness in idea and design contest communities and its behavioral consequences” Paper presented at 18th International Product Development Management Conference
  • Faullant, R., Fueller, J., Hutter, K. (2017): “Fair play: Perceived fairness in crowdsourcing competitions and the customer relationship-related consequences”, Management Decision, Vol. 55 Issue: 9, pp.1924-1941, Online: https://doi.org/10.1108/MD-02-2017-0116
  • Franke, N., Keinz, P., Klausberger, K. (2013) “Does This Sound Like a Fair Deal?”: Antecedents and Consequences of Fairness Expectations in the Individual’s Decision to Participate in Firm Innovation, Organization Science 24(5), pp. 1495–1516
  • Fair Crowd Work - Gewerkschaftliche Informationen und Austausch zu Crowd-, App- und plattformbasiertem Arbeiten“, Online: http://faircrowd.work/de/