Can you think of disadvantages of open innovation? When processes are not well organized, open innovation can have disadvantages. Below we have listed the most important disadvantages for you:
● Leakage of knowledge and information
● Dependency on external parties
● Inefficiency (costs, loss of time) if collaboration is not benificial
● Tension between traditional outsourcing model and collaborative model (both exist side by side)
● Unfamiliarity with open/collaborative revenue models
Open innovation means that all information is public!
The likelihood of this happening isn’t very high, but the risk of unintentional leakage of information is certainly present. When companies collaborate to develop a new machine, it is imperative that information (e.g., hourly rates, machine costs, quality) is shared. But you also want to know whether the intended partner is financially sound and able to bear the investments and risks.
Looking at each other’s business involves risks. To a certain extent they can be legally mitigated, but in practice they cannot be entirely eliminated.
Dependence on external parties
A frequently heard criticism of (far-reaching) cooperation between companies is that this comes at the expense of independence.
As a company, you don’t want to be dependent on the goodwill and performance of one partner, especially when crucial parts of your company are involved.
ASML is largely dependent on the performance of the entire supply chain. This is even more true for the suppliers of the lenses in the EUV machine, Zeiss, for example. However, this company supplies such specialized technology and products that there is little or no alternative. Both companies are more or less condemned to each other
It has already been mentioned that open innovation and collaboration in the chain requires specific skills and rules. The possibility of using external expertise and facilities for product, process or market development does not automatically result in benefits and profits.
If collaboration partners stick to traditional role patterns and are reluctant to share knowledge and information, the collaboration is more likely to result in a loss of time or even fail to deliver the desired outcome.
On paper, open innovation and collaboration between OEM and (1st tier) suppliers offers many advantages! In practice, however, it is difficult to make optimal use of these advantages.
All too often two parties do business with each other in different ways. In one project the supplier is a risk-bearing partner and has the freedom to make its own choices regarding technology and production.
In another project, the same company delivers volume parts as specified by the OEM.
Buyers, sellers and developers often want to “take along” habits and rules from one business model to another.
Open innovation and certainly open business models are still largely new and unknown, especially to SMEs. Unknown makes unloved. Also in the entrepreneurial world. Practice shows that OI and chain collaboration offers advantages, but only if this is well organized. Collaboration therefore requires knowledge and skill.
There are still few good models on how to set up and operate a joint revenue model. In practice, it always comes down to customization, which often involves legal expertise. This is covered in M2, forms of business models.
Innovation, also in the form of OI, is necessary but at the same time ‘risky business’. Success cannot be programmed, especially when it has to be realized in a dynamic environment with changing consumer behavior, technical challenges and the involvement of various stakeholders.
The ‘Museum of Failure’ presents several examples of new products that have failed hopelessly. Many of these products were created in collaboration between companies and other stakeholders.
So there is still a world to be won!
Samuel West is obsessed with failures. In fact, the innovation researcher and organizational psychologist collects them-and now his collection is on display. The Museum of Failure, West’s brainchild, celebrates the absurd and hilarious wrong turns that companies have taken in their product development-from Colgate’s unappetizing beef lasagna, to Harley Davidson’s leathery-scented perfume, to Bic’s sexist ” for Her ” lady’s pen.