5 min read

The 3 Forms of Open Innovation

The 3 Forms of Open Innovation
Maggie Franz

Maggie Franz

Photo by Photo by Startup Stock Photos from Pexels

And how to gradually utilize them to implement a full scale open innovation program.

Open Innovation is a broad topic, so much so that your employees might feel intimidated by the immense potential of ideas and projects.  Or, they might not know where to begin. Breaking it down into smaller concepts can help you and your team members find the right starting point.

If you look at your organization, and your current offering of products and services, as well as the business model or models that you have today as the spark or crux of all your innovation, we can break the broad topic of open innovation down into three different forms:

  1. Core Innovation
    2. Adjacent Innovation
    3. Transformational Innovation

The 3 Form of Open Innovation Explained

Core Innovation: adjustments or improvements to existing, otherwise known as legacy products and services, processes or business models.  

Ex: improving upon the packaging of a core product to reduce waste and save the consumer a portion of the current cost.

Ex: Refining an internal process, that results in better customer service.

These innovations are more incremental.  They serve to keep the current customer base engaged with your brand, and keep them purchasing your products or services.  These innovations tend to use less resources (time and budget), as well have shorter horizons for gaining a return on your investment, making them the easiest to implement.  Managers will have an easier time implementing an innovation if it takes less time and money away from their current goals, while also helping to improve on their ability to achieve those goals in the long run.

Opportunities for core innovations can be identified by engaging in team members from across your organization.  Sales team members receive customer feedback and ideas for improvements, while production specialists might have a creative idea for process or material improvement.  Giving all team members a dedicated place to submit ideas, like an innovation portal or platform, provides a means for them to communicate these idea with managers and executives while maintaining ownership of the idea, and gains them access to an improvement or refinement process.

Adjacent Innovation: a step beyond core innovation, adjacent innovations take an existing product or service, or existing knowledge and applies to to a new or emerging market.

Ex: Swiffer taking their patented dust and fiber locking technology, and marketing it to millennial pet owners.

Ex: HBO taking their cable service programming and offering it to millennials as a paid streaming service through Apple TV and other devices.  

Adjacent innovation takes a bit more work than core innovation, as it requires managers and executives to be a bit more forward thinking and watch for new or establishing markets.  Then, time and budget must be invested in researching and testing these markets for the viability of their products rather than making a blind leap of faith and assuming that the new target customers will purchase these goods or services.  Adjacent innovations have a bit longer of a horizon, meaning it will take longer to see if a company will achieve a return on it investment. As a result of the combined more intensive draw on company and departmental resources, and longer or riskier ROI, managers may be less likely to embrace this type of innovation and a company may need to utilize internal “diplomats” who can cash in on favors, or help managers see the rewards involved in the risks.

Transformational Innovation: the most radical of the three forms of open innovation, Transformation Innovation means creating new products and/or services for new markets.  

Ex: Xerox PARC creating a new computer designed for non-experts, ie the average consumer.  

Ex: Tesla and the fully electric automobile.

These are the most work intensive and risky types of innovation. They involve a heavy amount of research, testing and market validation before being fully implemented. Managers and executives will be the most hesitant about these types of innovation as they are the heaviest draw on departmental and company resources in the form of time, and budget. They also have the longest horizon for achieving a potential return on investment and therefore are seen as the riskiest.  

It’s a Balancing Act

When first embracing open innovation, it’s a safer play to focus on core innovations, those with the lowest investment, least risk and shorter time to recoup the investment made. As these types of projects achieve success and revenue increases, the company can grow it’s innovation budget, while building a culture of innovation.  
Idea Hunt offers a workshop application that makes it easier and more enjoyable to host as well as participate in innovation workshops.  With this tool you can involve more people into projects, host them more often, and capture more ideas while also training your staff in the open innovation process.  As you work to implement core innovations, and create a culture of innovation, this interactive free app can be used to engage your employees around the innovation program and involve them in it’s implementation, thus achieving more buy-in and participation.

As employees begin to learn and think more in terms of innovations, both for existing products and opportunities outside of the current product and target markets, the company can begin investing in adjacent innovation projects, while continuing to look for additional core innovations.  Then as new target markets are successfully acquired, they can begin to think about adding in some transformational innovations.

This gradual adoption of the three types of open innovation creates a shift in the company operational focus. It gradually shifts from executing, to the more dualistic executing while searching operational focus that successful innovative companies employ.  


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