In the module, we will review:
- Myths about open innovation
- Case study about managing external and internal resources
- Main uses of resources/IP
Myths about managing internal/external Resources for open innovation
Recent years have seen a trend towards the loosening of ties between organizations and the key resources that provide the main inputs to innovation. The trends of downsizing, flexible employment practices, vertical disintegration, outsourcing, and the increasing dependence on external complementary assets all reduce the direct control and ownership which organizations have over these resources. The question is whether or not this reduces the capability to innovate.
The right mix of internal and external networking for innovation varies between sectors. In general, high innovating organizations have long-term, secure relationships with their employees. This provides a good basis of trust.
Roadmap to manage internal/external Resources for open innovation
Here are solutions to manage internal/external Resources for open innovation
- Share the problem you would like to solve:
While it is always important to keep certain trade secrets confidential, finding ways to share the nature of the problem you are trying to solve can turn vendors and partners into valuable contributors to an innovation project.
- Leverage resources from innovation communities to reap higher returns:
Ideas cannot be owned by any single organization or individual. They can come from anywhere, but experience shows that communities where all members have a vested interest in solving a problem produce some of the most robust solutions. A smart way to leverage these communities is to share a problem with relevant experts and stakeholders and then ask them to help find a solution. The concept is called “crowdsourcing” and has been successfully applied by numerous innovative organizations.
- Ensure you are first to market:
Many studies confirm that being first to market can have a dramatic impact on long-term profitability. In a market with few competitors, the cost of managing and deployingan innovation is considerably lower because you won’t have to invest in countering competitive activity or advertising.
- Leverage proven processes of partners:
There are organizations that claim they don’t have the time, money or resources to deploy innovation models. However, if approached, they may be willing share some resources with you and allow you to partner in developing and launching your product. In the business of innovation, a diversity of ideas and opinions can help you accelerate the pace of your innovation and also optimize it quickly.
Generally accepted good practices- Resource-Based View
The resource-based view (RBV) is a model that believes the basis for a firm’s competitive advantage lies primarily in the application of the specific bundle of resources at the firm’s disposal. It holds that the ability to transform a short-run competitive advantage into a sustained competitive advantage requires that these resources are heterogeneous in nature and not perfectly mobile. This combination results in valuable resources that are neither perfectly imitable nor substitutable without great effort. When these conditions are seen to hold true, evidence suggest the firm’s resources can help it sustain above average returns.
After identifying its potential key resources, the company must then evaluate whether these resources fulfill the following criteria (referred to as VRIN):
- Valuable – A resource should assist an organization in its value-creation strategy, by either helping it to outperform the competition or by reducing its own weaknesses.
- Rare – To be of value, a resource must be rare. If the resource is held by every competitor in the marketplace, or is easily procured, then it would not be considered to be rare.
- Inimitable – When a valuable resource is controlled by only one firm, it can be seen as a source of a competitive advantage This advantage is sustainable only if competitors are not able to perfectly duplicate this strategic asset.
- Non-substitutable – Even if a resource is valuable, rare, an inimitable, an equally important aspect is lack of substitutability. If competitors are able to substitute a near-identical resource that will offset the competitive advantage, then that original resource ceases to be be a competitive advantage.
A company should care for and protect those resources that possess these characteristics, because they are critical to organizational performance. The VRIN characteristics mentioned are individually necessary, but not always sufficient for a sustained competitive advantage. Within the framework of the resource-based view, the chain is only as strong as its weakest link.
Strong partnerships are not created overnight; it takes time to develop understanding and trust between organizations. Strong partnerships, however, can be of great strategic importance because working together can often be more effective for organizations than working apart.
A partnership is a mutually beneficial relationship where two or more parties have similar goals and agree to work together collaboratively to achieve them. There is an implied sharing of resources, risk and responsibility. Business partnerships should be formalized with requirements for both parties clearly defined, including any confidentiality, exclusivity, financial or time requirements. The agreement should include start and end dates as well as lay out the conditions for extending or breaking the agreement.
Consider the food service component of airline operations. While airlines are excellent at getting people from point A to point B safely, they are not experts in food preparation. Airlines realize their passengers need to eat on longer flights and those passengers have an expectation of reasonable quality. The airline’s core competencies are not in making sandwiches, pasta, etc. For this reason, an airline and a food service provider will frequently form an exclusive partnership where the airline provides the customer and the food service delivers the product served by the airline.