Quick guide to the advantages of open and closed innovation for your company

Innovation is necessary to survive in today's market. There are two widely used models, but one stands out. See which is the best for your company.

The world is increasingly competitive, at breakneck speed. Big companies have never been so big and there has never been so much opportunity to start small businesses with the help of technology.

What makes all of this grow exponentially, generating more opportunities for many people, but increasing competitiveness, are the technological tools available that lead to innovation.

When we thought about the reality of products and services 20 years ago, we might not have imagined that there would be a new way of accessing entertainment (Netflix, Amazon Prime), staying (Airbnb), getting around (Uber) and ordering food at home ( iFood). These are the most palpable and eye-catching examples of technological innovation that we have access to.

However, much of what we don't know is the innovation research efforts carried out by companies, institutes and investors in order for these technologies to become reality and continue to evolve. And, for that, there are two forms of Innovation: Closed Innovation and Open Innovation

The traditional model of closed innovation

When we talk about closed innovation, we are talking about using our own resources for specific technology solutions for the company that invests in that research and development (P, D & I). This means that, in order to find solutions for your market, your company allocates resources to find solutions internally and often confidentially, without having an open dialogue with other companies, sectors or entities.

As a result, solutions are often very expensive, as resources for this purpose take time and need support for testing and validations. Not to mention that the chances of success are proportionally smaller due to the smaller number of options developed and tested.

For example, it was as if you had a bakery and had to create a special kitchen to discover a new way of processing wheat to make bread more profitable: a lot of investment of time and money without guarantee of success due to lack of expertise needed.

This model has always been widely practiced by mega companies that have their own laboratories and more resources available for innovation and, therefore, more freedom to risk.

Open innovation: the innovation of innovation

Open innovation, on the other hand, is a broader concept that prioritizes the sharing of efforts, investments and projects for a specific solution, but which can serve other markets either completely or with parts of the conclusions of these projects.

Through this model, there is an exchange of experiences and an open dialogue with other areas of the company and other parts of the ecosystem such as suppliers, customers, research institutes, universities and other companies.

The main result is that the resources are optimized, because there is a real collaboration between more areas of knowledge and sectors that have the same objective: to find better ways to do what is already done or to create something new.

Thus, new companies and startups can receive investments from other companies interested in their technology or solutions to solve a specific problem, helping the market as a whole. Likewise, large companies can create ‘arms’ of their products that become other companies linked to it, but independently.

With open innovation, there is an acceleration in the development of new solutions, as there are more people collaborating for different purposes, which can reach different solutions that can be used by several companies, differently from the closed model in which this could be discarded.

Hackathons, for example, are part of the open innovation model, as a company that needs a specific solution brings together a series of researchers and developers in order to reach a solution. The best, has your idea hired or purchased by the company and the others can sell their solutions to other companies or improve them to capitalize on them in another way.

Exemplifying again with the bakery: now that you know open innovation, you know that you can talk to other bakeries, food engineers and chemists in research institutions and, together, find a better solution for everyone. The by-products of this innovation can also be capitalized on.

Which innovation model is the most advantageous for my company?

Startups and companies of any size have a lot to gain from the open innovation model, which presents itself as the future already present in innovation. Models of exclusively internal research continue to have their spaces, but they are yielding or coexisting more and more with collaborative models.

The situation we live in 2020, caused by the pandemic, shows us that the future is definitely collaborative and it is necessary to join efforts so that we can think and develop new forms of production and consumption.

Today we can already say with conviction: open innovation is more efficient and cheaper, because it allows it to evolve more quickly, with more diversity and with shared costs and risks. The future may be uncertain, but it will certainly be agile, technological and shared.