As industries navigate volatile markets and technology disruption, companies of all sizes need solutions to problems that unlock open innovation. Whether it be a multinational addressing falling share price concerns, or Twitter (now rebranded to ‘X’) exploring new revenue streams, organisations need curious minds to collectively guide innovative practices and ensure resilience.

For two decades, market disruption has caused over 50% of Fortune 500 companies to go bankrupt, be acquired or cease to exist, with Innosight predicting a steady churn rate of S&P 500 companies dropping off the index (roughly three quarters to be replaced by 2027).

Moreover, 95% of new products fail each year according to Clayton Christensen. Polaroid, Kodak and Nokia — all late adopters of the digital revolution — are prime examples of companies missing out on product innovation that ultimately undermined their competitiveness.

To fully grasp the dramatic consequences of such disruption, here are 50 brands that failed to innovate.

With current economic headwinds placing massive pressure on organisations, business units are facing severe budget cuts and talent shortages despite the addition of new work streams. This, compounded by internal review congestion (that results from innovation backlog), poses a wicked problem for product development and transformation initiatives alike.

To address such adversity, three areas are crucial to acknowledge during recessionary outlook:

• Identify the right people in your company to instil iterative practices
• A collective impetus towards embracing open innovation
• Cultivating a low-fear innovation culture

Choosing the right people to instil open innovation

Highly networked individuals, who understand complex decision making intricacies across the organisation, can act as change sponsors to translate and recontextualise the solution state. They play a key role in shaping the innovation culture while ensuring strategy is met with pragmatism. This is a crucial part in rationalising any change effort and garnering support.

As consultants dazzle top leadership with nascent concepts, entrancing executives to think big and fast follow, mid- to long-term projects tend to experience bouts of inertia that ensue due to practicality issues, leaving mid-management disillusioned and workforces fatigued. 

Companies, now more than ever, need internal steering roles to solve deep-rooted complexity. Certainly, consultants play a functional role in challenging management bias and proposing cross-industry recommendations, but without knowledge of the intrinsic decision making dynamic it becomes problematic to extrapolate representative observations without experiential empathy.

Here, intrapreneurs can act as key advocates to drive open source iteration and instil a culture of ‘provocative thought experimentation’. As Karim R. Lakhani, a professor of Harvard Business School, articulates: ‘This ability for us to do cumulative knowledge production in modular chunks is what enables communities to be successful for open innovation.’ 

Embracing open innovation to unlock ingenuity

So, why open up effort externally? Might this expose intellectual property risks, or stir quality control issues when open sourcing talent? 

Not necessarily, if introduced effectively for relevant use cases. For example, internal research and development initiatives often generate narrow ideas with high capital investment, and this can confine overall output value. Of course, certain initiatives may require a high level of confidentiality — and in this regard it’s better to innovate internally — but for broader problems such as ideation or workforce diversity, harnessing the power of communities across a wider spectrum of domain expertise can unleash profound outlier potential.

The gig economy, or crowdsourced remote-first market, is proving to be a highly cost-efficient way for organisations to approach limited budgets and manage evolving workforce needs. With the global staffing industry growing at a subdued rate of +4% in 2022, the emerging gig economy cloud vertical has surpassed this traditional market by a staggering +17.4% CAGR (2018-2023), and is forecast to grow at a further +16.18% CAGR (2023-2028).

Traditionally, we’ve seen companies optimise cost efficiencies by leveraging external talent in conservative contexts (i.e. contingent work and business process outsourcing), and this is where the concept of ‘open talent’ is showing significant potential for disruption. While internal stakeholders remain cautious about the integrative capacity of leveraging external networks, online labour markets are disrupting industry advantage in three ways: speed (immediate talent supply), specialisation (quickly scaling staffing levels up and down based on need) and competition for talent (alternative talent streams).

In an upcoming book about the Open Talent Revolution by Harvard Business School Press, authors John Winsor and Jin H. Paik provide a framework to scaling open innovation. The book is entitled, ‘Open Talent: Leveraging the global workforce to solve your biggest challenges’ and aims to showcase practical methodology for orchestrating talent ecosystems.

One such remote-first organisation that is reaping the benefits of increasing sentiment in the gig economy is Freelancer. In 2019, the largest freelance and crowdsourcing marketplace invested in a cobranded community of engineering expertise between Freelancer and Arrow Electronics in an effort to expand its value proposition to encompass new transactions that otherwise would not have been possible. This integration strategy has contributed to its 50 million user base (up from 38 million users in 2019). 

A dyadic community model, however, that equitably enables both seekers and providers is yet to be holistically achieved across the gig economy. For instance, transparency regarding terms of trade and transactions still requires further governance and industry adoption.

Aside from online labour markets, there are unique ways to unlock innovation potential, such as contests in the form of idea/solution generation and grand challenges as well as user communities (GitHub, WordPress and Wikipedia, to name a few). Below is a snapshot inspired from Harvard Online’s Open Innovation course covering a multifaceted journey of iterative perspectives.

Cultivating open innovation

Culture is the societal fabric that unifies a cohesive group, yet it can also lead companies to reject innovative risk endeavours such as crowdsourcing, blockchain and artificial intelligence. 

In a pertinent Harvard case study about overcoming cultural resistance, Havas Creative ad agency’s acquisition of Victors & Spoils in 2012 provides a retrospective tale of introducing crowdsourcing to a rigid cultural dynamic — a phenomenon many companies struggle with as a result of normative behaviour and failure to phase adoption. 

Important lessons can be drawn from this context, such as the value of sensitive internal communications, reinforcing workforce strategy concerns for internal stakeholders, and engaging sponsors throughout discovery.  

How might you introduce open innovation within your enterprise culture? To what extent might your team be able to harness the collective power of communities for opening up ingenuity?

Only about 30 percent of companies polled by McKinsey exhibit lower-fear innovation environments. This, to some extent, explains the 95% product failure rate prevalent each year in enterprises that tend to lack autonomy and risk-taking. 

To take the fear out of innovation, a culture that rewards creative initiative must start with executive sponsorship. As Erik Roth explains ‘If you can’t get the resources to scale those bottom-up ideas into something meaningful … the fear of stepping out of line overcomes the rewards of being entrepreneurial.’

These five fundamental traits can help identify high-performing innovation cultures that embody psychological safety. How mature is your team or enterprise in adopting these dimensions? 

Published via LinkedIn