Currently, companies innovate via a top-down AND bottom-up process. A top-down approach is often seen when leadership set a challenge, and employees suggest ideas to overcome. A bottom-up approach is where employees drive the change from within, without prompting from management. Both methods can lead to successful innovative projects, however, these are limited to the confines of the organizational walls. This is where an open innovation funnel comes in.
What is an Open Innovation Funnel?
An open innovation funnel is a process that enables companies to source ideas from external sources, such as partner organizations, clients, and academic institutions.
Open Innovation, as coined by Henry Chesbrough, is ‘a more distributed, more participatory, more decentralized approach to innovation’. At its simplest open innovation is opening your current method of gathering solution ideas to external parties so that they can contribute to your challenges. It removes the walls that previously limited the scope of ideation and enables organizations to access external ideas.
For some organizations, this can mean gathering input from their customer base or inquiring with outside suppliers.
Open Innovation Funnel Explained
Here’s a diagram inspired by Chesbrough’s open innovation funnel:
Not only can ideas come from within the organization or externally, but they can also be realized internally or externally as well. This means that ideas are able to go wherever the infrastructure and resources are best suited to them.
In closed innovation, by contrast, ideas are gathered, validated, and realized solely within the company.
At edison365, we believe that innovation success relies on three stages within the open innovation funnel:
- Ideation – this is where ideas are gathered and triaged, with the best moving on to the next stage.
- Validation – also known as business case creation. Ideas are assessed in terms of their potential value, risk and cost as projects. Those deemed the most valuable move to the final stage.
- Realization – ideas become live projects and are turned into reality.
How Can Open Innovation Help Your Business?
Leveraging your internal systems to engage external resources can help manage costs and capacity. Research and Development teams can continue to focus on current products, whilst your customer base, stakeholders, and suppliers can look to solving your future challenges. Innovation spending is increasing; however, ROI has declined 27% over the past 5 years. Outsourcing the creation of ideas to those who are equally invested in the success of your organization can help to maximize your ROI whilst minimizing the spend on innovation.
Furthermore, due to digitization, disruption can come from anywhere and at any time. Preparing your organization for this has never been more difficult, as the vast amount of knowledge required to predict this disruption is nearly impossible to account for. The answer to innovation may not be within the closed walls of your organization, the open innovation funnel acts as the solution to this. Anyone invested in your organization (customers, client base, suppliers, students) will be able to comment, and offer a level of expertise that had not been considered internally. Whilst also allowing your innovation decisions to be more strategically aligned with your external network and create a greater level of engagement from stakeholders.
Whilst it may be a new form of innovation, open innovation is by no means as daunting as it seems. It is not an overhaul of your current innovation methods, but instead an extension of them to your external stakeholders. Structure and configure your challenges so that you are gaining the information you need from these new innovators. With this in place, you will enable engagement with those outside of your usual communication channels, and this ability to engage with those outside of standard communication channels is advantageous to any organization with a method that can be translated for a multitude of use cases.
Need to prove the value of your open innovation efforts? Read advice for measuring open innovation.
If you want to find out more about how edison365 Open Innovation can support your organization’s innovation efforts, then please visit our dedicated open innovation page.
FAQs: What is an Open Innovation Funnel?
What is open and closed innovation?
Closed innovation is where an organization only sources ideas from its own employees. Open innovation, by contrast, is where a business seeks opinions from external sources, such as partners, clients and academic institutions.
What is an open innovation approach?
Open innovation is the practice of opening your current method of gathering solution ideas to external parties so that they can contribute to your challenges. For example, by asking clients for ideas for new services, or collaborating with an industry body on health and safety innovations.
What is an open innovation platform?
An open innovation platform is a piece of software that allows organizations to source ideas externally. It provides a centralized area for people such as clients, partner organizations, and academics to submit their suggestions, which the company can then review and turn into successful projects.