Since the turn of the current century, product developers have increasingly looked to new processes to improve the likelihood of a successful launch. Some of these upstream processes include market research, which taps into everything from geographics and demographics to psychographics. Other midstream processes include co-creation and open innovation to spark the design of new concepts. Finally, downstream processes, including Lean Manufacturing, Six Sigma and Kaizen, have been adopted to reduce costs and improve efficiencies in manufacturing. The loop is then closed with market research reappearing as a commercial process at launch through post-launch. Of course, what happens at every stage is important but it can be argued that what happens in the middle stages is the most critical. Here, we will focus on co-creation vs open innovation and highlight some benefits, risks and examples of each methodology.
What is Co-Creation? What is Open Innovation?
Co-creation is a shared process by which customers, suppliers, retailers, designers and other relevant third-parties work together with the company to generate ideas towards a mutually valued endpoint. Each party represents their unique perspective in the product relationship ranging from buyer to developer and, via the process, is encouraged to communicate their thoughts around things that work, things that don’t, areas of need, opportunities for improvement and more. These discussions continue from product inception through launch. Co-creation sessions are typically lively with each party fully engaged as each party is regarded as equally invested and equally important. This is a hallmark of co-creation.
Open innovation, according to the founder of the movement, Henry Chesbrough, Ph.D. and author of “Open Innovation”, is “equal parts philosophy and process.” It is a corporate mindset that embraces external thinking and recognizes that great ideas are not exclusively generated internally within the company. Specifically, Professor Chesbrough, states “Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation.” Similarly to co-creation, open innovation as a process can be applied at any and throughout all phases of product development.
How are Both Development Processes Used?
Co-creation can be executed as a simple process of gathering around a table for a discussion with a group of internal and external experts, including customers, who have an opinion on the product or product need being discussed. Co-creation can be as elaborate as having product designers and marketers do double-duty as furniture delivery people so that they can go into consumers’ homes. For IKEA, this clever process allowed them to make observations and engage homeowners to understand why they purchased and what product they wish they could buy but can’t yet find. In a similar fashion, Lego® encourages its customers to engage and develop new designs and upload them to the website where customers vote on the designs. Once a design gets 10,000 votes, Lego® brings the design, and designer, internally through its stage-gate co-creation product development process.
Corporations with successful product track records, such as Siemens™, Apple®, GE®, P&G®, J&J® and so many others, apply open innovation daily, in every aspect of product development. At J&J, the philosophy/process is so entrenched that it is actually called out in the company’s credo which is the essence of the brand. GE literally hangs a sign in every building lobby professing open innovation as its manifesto, “We believe openness leads to inventiveness and usefulness”. Today, companies commercialize combinations of internal and external ideas together with in-house and third-party pathways to market.
Co-Creation vs Open Innovation: Benefits, Risks & Examples
Forbes goes so far as to call co-creation the “secret sauce to success” and “the future for all of us”. Perhaps this is due to a shared outcome where every party is made to feel like they are an equal contributor (as they truly are) and hence, equally invested in the outcome. In today’s age of customer-centricity, it is tough to conceive a more intimate way for a consumer to connect with his/her brand. Co-creation affords companies with enormous benefits including the following.
- You are dialed into the consumer need and expectation
- You can build brand loyalty and champion from Day 1
- You can return to your audience at any time to check in.
- You have access to real-time information on demand.
- Co-creation can be readily deployed regardless of the complexity of the product.
New pharmaceuticals, for example, (which, require a regulatory review process) can benefit from co-creation early in the process. Specifically, interested people can use their home computers to
In the 1990’s, when closed innovation (seeking new ideas exclusively from internal sources) was the norm at the dawning of the tech revolution, Lucent Technologies was poised for tremendous success with the acquisition of Bell Laboratories (a patent powerhouse in its day) given the break-up of AT&T. Lucent took an unusual step at the time, they began looking externally, globally, to source novel raw materials and state-of-the-art components to accelerate their development efforts in a process not yet recognized as open innovation. In parallel, a newcomer, Cisco®, was also embracing open innovation by partnering with startups and acquiring those that had already developed prototypes or working products not well commercialized. In essence, they bought their R&D and accelerated development, ultimately leapfrogging Lucent. Here, the risk of open innovation was looking at the wrong problem. Another risk of open innovation is that it is not embraced top to bottom as a philosophy within the company: when this is the situation, new ideas are unlikely to progress forward due to political, not technological reasons.
Which Methodology Is Right for Your Business?
Both co-creation and open innovation can be and are routinely used interchangeably. In our experience, co-creation offers a combination of market research, brand loyalty, product champions, insights on demand and a host of other benefits that provide value at every step of the way along the product development process. As such, co-creation may have great relevance and appeal to a wide swath of business functions. Open innovation, on the other hand, may be a better solution for addressing deficiencies in in-house expertise, addressing supply chain problems and the like.
In the end, both processes bring enormous value to the companies who utilize them. Co-creation and open innovation each have their own benefits, risks and numerous examples of successes as well as failures. When in doubt, consult the experts like KL Communications with their proprietary CrowdWeaving® solution for co-creation which has been employed by countless successful product developers.