by Stefan Lindegaard
Open innovation at small and medium-sized enterprises (SMEs) presents both great opportunities and great challenges. Forming open innovation relationships can give a growing enterprise access to resources that might normally are beyond their reach with the potential for greatly speeding up time to market. At the same time, working with larger–and in some case much larger companies–is not without its perils.
Let’s consider a growing startup or a small company that is on its way to become a mid-sized enterprise. The early phases are very much about executing on single, great product, idea or technology. However, as the company grows focus tends to shift towards control rather than keeping the visionary thinking and bold approaches that build the company. This must be re-ignited. Open innovation can be the vehicle for accomplishing this objective.
Because of the high level of risk-taking involved with young ventures, leaders of entrepreneurial enterprises often have healthy or even outsized egos; it takes a certain amount of hubris to believe you can defeat the high odds against the success of a new venture. This can lead you to believe that you and your people have the best ideas. But in reality, there is a strong possibility that the best people and the best ideas are to be found outside your organization.
One key reason for Procter & Gamble to initiate open innovation programs was that they learned that for each of their 7,500 R&D people there were 200 people outside the company with equal skills and competences. An ignorant – and arrogant – company would ignore these 1.5 million people, arguing they do not matter as they do not work for us. P&G did not ignore this. They understood they should connect their own organization with the best and brightest from the outside world. Given the limited size of smaller companies, this mindset becomes even more important.
As I wrote earlier, SMEs often start with one great product or service idea and as they grow they might fail to recognize that innovation is about more than just bringing the core product or service to market. Innovation can occur at all stages of the business process, from the business model itself through to the customer experience. By broadening their thinking about what actually constitutes innovation, SMEs can more easily see the wisdom of open innovation, which can help them innovate in areas where they may not have internal expertise.
I will post more thoughts on open innovation for SME’s this week. Let me know if you have any comments on this or if you know of smaller companies that have adapted open innovation. It would be interesting to get to know more about their processes, failures and successes in order to get a better understanding of how this is different from large companies. Since small and large companies meet on open innovation, they need to start learning more about each other on this.