1.1 Organizational Solutions to Realize Open and Distributed Innovation
At the beginning of this century, Procter & Gamble shifted from a centralized R&D structure to a decentralized global networking model to approach outside sources of innovation better following the mainstream of the open innovation paradigm (Chesbrough 2003). It abandoned the traditional âresearch and developmentâ logic to embrace the âconnect and developâ one. In replacing ânot invented hereâ with âproudly found elsewhere,â it significantly changed the way in which the innovation process was organized and altered the skillset required by its professionals. The radical changes introduced encompassed the engagement of outside scientists or engineers in addition to the 7500 in-house researchers; the establishment of relationships with research institutions and universities in different countries; the creation of an IT platform that allows the sharing of technology briefs with the suppliers; the extensive use of web-based innovation intermediaries that help to link externally sourced solutions to internal problems (InnoCentive, NineSigma, YourEncore and Yet2.âcom); and the development of a network of technology entrepreneurs, senior P&G people based around the world who lead the development of the needs lists, create adjacency maps and technology game boards and define the technological problems to solve and create external connections. Only a few years later, more than 35 percent of the companyâs new products contained elements that originated from outside, the productivity increased by nearly 60 percent, R&D investment as a percentage of sales declined from 4.8 percent in 2000 to 3.4 percent in 2006, more than 100 new products were generated during the period 2004â2006 and P&G was the big winner of the New Product Pacesetters list in 2013, launching 7 of the top 10 most successful non-food products of the year (Dodgson et al. 2006; Huston and Sakkab 2006; Ozkan 2015).
This pioneering experience has been followed by other companies during the last decade and has extended to small and medium-sized firms and public and not-for-profit organizations (West and Bogers 2016). The phenomenon of converging technologies has increasingly spurred firms to find innovative solutions in different fields (Enkel and Gassmann 2010), whereas the proliferation of digital technologies in the innovation process has rapidly changed the way in which firms collect, analyze and transfer knowledge and conduct forecasting and decision-making activities (Johnson et al. 2017; Urbinati et al. 2020). Consequently, companies are required to revise their approach to innovation, redesign their internal and network organizational structures and create new roles to streamline the flow of knowledge and its use within the innovation process (Boscherini et al. 2013; Chiaroni et al. 2010; Salter et al. 2014).
Another example of how these trends are progressively modifying the way in which firms organize their innovation process is offered by Swarovski. After a century of monopoly in crystal cutting, the company observed a sudden increase in the number of competitors, which were offering similar products at lower prices. It recognized the need to open up its boundaries to outside knowledge and engage external partners in different stages of the innovation process. In 2012, the company started an organizational change in which the R&D and marketing units were merged to form a research, design and innovation (RD&I) department. Coordination mechanisms have been introduced to improve the capacity to look outside and integrate the acquired knowledge internally; among them, a dedicated team for external collaborations, called open innovation networks, was appointed to search externally for new ideas, develop cross-industry partnerships and define knowledge-sharing practices and intellectual property management policies. In 2016, with the continued growth of digitalization, technical advancements and competition, the company again redesigned its innovation process. The centralized RD&I started to generate internal competition and frustration. Moreover, âthe hierarchical structure and a rather closed innovation cultural mind-set still existed in some parts. Swarovskiâs open innovation process was still being managed by a selected group of people, and there were limited possibilities for internal and external engagement and experimentationâ (DÄ
browska et al. 2019:9). In 2017, the open innovation networks unit was substituted with a new organizational structure and mechanisms that promoted open innovation as a âway of workingâ for all internal employees, who were asked to become âindependent open innovation professionals.â Specifically, employees were encouraged to create external networks of their own and to develop an open innovation mind-set. Cross-functional collaboration and knowledge sharing were promoted through internal workshops and the introduction of open innovation platforms and support systems for collaborative innovation and technology intelligence. A reward system encouraging employeesâ internal and external collaboration as well as experimentation was introduced. Focus area leaders for selected business fields were appointed and empowered with a dedicated budget. Finally, the company initiated the innovation ventures program to establish relationships with start-ups in digital business areas (DÄ
browska et al. 2019).
The creation of an open and distributed innovation ecosystem also requires the increasing use of users as external sources of creative insights, as in the case of LEGO, which relies strongly on its user innovation community through LEGO Ideas, an online platform on which customers submit their innovative insights for LEGO products. Before being eligible for formal evaluation from designers in LEGO, the idea must obtain more than 10,000 votes of support from other members of the community (Ma et al. 2018). Moreover, with the widespread use of digital technologies, open innovation is increasingly conceived as a platform strategy. The so-called platform ecosystem âenables external actors to develop complementary innovations in areas that are outside platform ownersâ expertiseâ (Hilbolling et al. 2020:20). This is the case of the Philips Hue smart lighting system, a digital product platform that has solicited the contribution of external developers, attracting more than 400 third-party apps.
These changes implemented in the internal organizational structure (such as the creation of ad hoc units, dedicated teams, spin-offs, start-ups and corporate venturing activities) and the orchestration of the external networkâthrough research contracts, partnerships, crowdsourcing and online innovation communitiesâalso require a redesign of the skillset mobilized by individuals during their innovation endeavor (Bogers et al. 2018). Specifically:
- A different composition of knowledge and competencies is required from R&D personnel, shifting toward a focus on integrators of knowledge and expertise (Petroni et al. 2012). It is becoming necessary for R&D personnel to possess a background of knowledge and experience that enables them to communicate and interact with partners outside the company and operate in different industrial sectors, to recognize cross-industry opportunities and to start collaborations even with partners with a high cognitive distance (Enkel and Gassmann 2010). On the intra-organizational side, they are required to facilitate the absorption of external technological and management knowledge through close collaboration with colleagues in othe...