[Public Voices] Beware of Blindly Following 'Open Innovation'

Innovation Strategies and Implementation Methods
Must Differ According to Corporate Characteristics and Business Models

Recently, when attending international conferences, presentations or panel discussions on Open Innovation are always included. Open Innovation is a hot topic not only for large corporations but also for global companies, mid-sized enterprises, public institutions, and even startups. However, there seem to be few people who can clearly explain the ultimate direction Open Innovation should take and the value it should create.

The term Open Innovation was first introduced in 2003 by Professor Henry Chesbrough at the University of California, Berkeley campus. It emerged as a critique of the closed innovation model that expects profits exceeding development costs. It refers to the pursuit of division of innovation labor, where companies share their internal resources with external parties throughout stages from product planning to research and development to customer sales, collaborating with other companies, universities, and research institutions to create the necessary technologies and ideas for innovation. It is both a process of making business models open and a starting point that breaks the fixed notion that companies must own all processes and data.

As of 2023, not only working methods but also digital technologies and environments are becoming more open in nature. According to global consulting firm McKinsey, by 2026, 50% of corporate revenue will come from products, services, and business models that have never been created before. This means that the current business models held by companies cannot create sustainable management situations. New business models must be discovered through Open Innovation and continuously innovated and advanced.

What about our reality? In Korea, which applies trends faster than anywhere else in the world, many companies and institutions advocate Open Innovation, but it is true that there is less consideration about what value to create. There is some regret regarding companies focusing on innovation, digital transformation, internal ventures, and Open Innovation as if they were trends. Before following these huge flows and trends, companies and institutions need to deeply examine the correlation between their strategic directions and the problems they face.

These various topics are not separate but interconnected. At the center is business model innovation for discovering new future growth engines for corporate sustainability and management innovation in response to changing management conditions.

Implementing Open Innovation does not automatically realize corporate innovation. There must be a change in how corporate executives view ‘innovation’ and ‘value creation.’ The strategy should shift from the past ‘Fast Follower’ approach, which quickly follows global companies, to a ‘Fast Fail’ strategy based on rapid execution and trial and error. This approach is the core engine behind how big tech companies like Google and Amazon have grown from small startups into global corporations and continue to innovate today.

While Open Innovation is certainly an important tool for corporate innovation, blind faith should be avoided. Innovation strategies and implementation methods must vary depending on the nature, size, and business model of the company. It should not be like mechanically applying formulas as if memorizing multiplication tables. It could be like an adult trying to buy clothes for a newborn baby. I hope Korean companies contemplate the purpose and value of Open Innovation to achieve meaningful results and grow into global companies.

Hyungseop Kim, Managing Director, SAP Korea

This content was produced with the assistance of AI translation services.