Open innovation and HR practices - The people side to successful innovation

August 19, 2021

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Traditional models for the management of innovations assumed successful innovations required all the capabilities in-house.

Recently firms have innovated through knowledge sharing and co-creation with other firms, customers and value chain partners.

This new concept in Innovation practice termed as Open Innovation (OI) is based on availability of abundant knowledge outside the boundaries of organizations and defined by Prof. Henry Chesbrough - as a “paradigm that assumes that firms can and should use external as well as internal ideas, and internal and external paths to market, as they look to advance their technology”  

OI opens up the human side and mindset alongside organization boundaries. What are the implications of opening boundaries to existing organizational HR practices? How do people think about the next big thing in innovation?

HR'S ROLE IN INNOVATION

Even though the concept of OI has received much interest among management practitioners and researchers, there are no concrete views on how to do it right and develop HR practices around it.

Open innovation networks such as the Co-Innovation Network (COIN) by TCS, Co-Innovation Lab (COIL) by SAP, Philips Innovation Campus etc. have successfully managed partnerships with industry bodies, government, academic institutes, alliance and supply chain partners, research institutes, student community, venture capitalists, startups and even competitors.

In HR for example, companies like 3M, SAP, Titan, Coffee Day, and Bosch have joined hands through an initiative called XChange. XChange supports leadership development opportunities by leveraging strengths and facilities of the participant organizations.

OI is people-enabled, supported by organizational innovation culture. We focus on the following key pillars to understand how HR practices can support OI success:

Developing incentives for employees’ ‘open’ behavior and changes to performance management systems – The major goal in the context open innovation network should be maximization of expected net profit from the knowledge assets creating value across the chain of partners. Hence, the rewards and benefits scheme should evolve based on true innovation value and not limited to the firms internal value.

Talent agenda  - Innovation leaders realize that all smart people cannot be within one firm. OI creates an ecosystem of smart people. OI extends current practices of consulting and outsourcing elements to partnerships.

In the case of OI, use of internal and external paths to market and emphasis on moving people from one organization to other may create complex networks that have access to organizational knowledge.

Effective talent management and external knowledge sourcing plays a key role in OI success.

Training – Openness of firms are generally measured in terms of depth and breadth of partnerships which translates to number of partners, types of partnerships. and intensity of partnerships.

OI professionals hence need to effectively manage relationships alongside skills that drive innovations.  Absorptive capacity of individuals also play a crucial role while realizing value of OI.  

These elements should be imbibed into skill training to effectively manage the changing business models to support OI.

Support legal department on appropriability regime – Since new knowledge and know-how could be a source of competitive advantage, protecting it from the competitors is also important.

New knowledge and know-how may spill over to competitors when the markets are deregulated, complex networks are created, and/or with improved channels for communication, creating an appropriability problem.

Based on innovation objectives the strength of appropriability regime and HR would play an important role alongside legal teams to support appropriability aspects.

To summarize, strategic focus of open HR practices should be driven by

  • External focus for skills
  • Create innovation leaders who drive open innovation
  • Building the risks and rewards policies
  • Training to fix poor networking and co-creation skills
  • Leveraging social media and openly available information as the foundation.

HR practices play a pivotal role in defining organizational culture and climate that fosters innovation.

For example, People Business while working with ITC on an engagement on “employee growth” had HR leaders from other organizations to share their experiences to co-create what is best for the firm.

Adopting open innovation practices is the first step for every organization in realizing innovation is not a monopoly.

We need to innovate HR practices to support innovation practices that traverse organizational boundaries and get rid-off the ‘not invented here syndrome’.

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