Keeping Secrets Holds Back Innovation
When
it comes to collaborating on something new, secrecy and tension can ruin a
beautiful partnership.
In
an era of increasingly complex and expensive technological development and
shortened innovation cycles, Procter and Gamble’s Connect + Develop open
innovation programme, is an excellent example of how external knowledge can
advance innovation. Since its launch in 2001 the programme has formed more than
2,000 partnerships and been responsible for dozens of innovative products and
new processes to increase the firm’s productivity.
Openness
starts from within
Today more and more companies are looking outside the
firm for new ideas and, like P&G, they are adopting principles of open
innovation into their business model hoping to enrich their knowledge pool and
improve the possibility of finding new and useful combinations of previously
disparate ideas. Their efforts (and investments) have met with varying degrees
of success.
Which
begs the question why are some firms more able to transform knowledge sourced
externally into innovative outputs?
Is
anybody listening?
Open
innovation is not just a matter of getting the right contacts. To get the most
out of their open innovation strategy firms must start by creating the right
conditions within their organisation. As well as having sufficient resources –
both financial and human capital – to implement fresh ideas, companies looking
to maximise commercial benefits from collaborative associations, need to enter
the partnership with the right mindset, exuding a willingness to share as well
as absorb knowledge.
Reciprocity
and trust
Studies
show that reciprocity and trust are two factors which are consistently
important in achieving efficient and equitable outcomes in inter-firm
partnerships.
Reciprocity
foments the mutual forbearance that lies at the heart of any inter-firm
involvement. It’s an expectation that the favour one partner provides to the
other will subsequently be returned – and a moral obligation on the other’s
part that it will, indeed, uphold this deal. Trust is an expectation that one
partner will not exploit the vulnerabilities of the other when faced with the
opportunity to do so.
Being
perceived as withholding information makes it very hard to create the trust
necessary for any successful collaboration. When sharing information with you,
your partner needs to know that you are being open with them.
It
also makes it very difficult for your partner to know how they can help. They
need to know what YOU need. By not revealing how your operations work, their
ability to collaborate is restrained.
Protecting
IP
While
it’s important that firms protect their intellectual property (IP), if they go
about it the wrong way they can create an atmosphere of secrecy and tension
likely to hamper collaborative efforts.
In
those external knowledge sourcing partnerships, it seems best to protect
knowledge using legal mechanisms, such as patents and copyright. This type of
protection is less likely to create tension. The company is being open with its
partners by saying “this is what we do and this is how we’re protecting this
knowledge”.
When
it comes to systems and processes however, some knowledge is very difficult to
patent. And in industries like the chemical sector these processes are very
important. Often the only way to protect it is through secrecy. Unlike legal
protection mechanisms, which force firms to disclose and codify their
technological activities making public their capabilities and knowledge,
secrecy requires firms to hold tight to what they know and do and only show
partners the pieces of their operation that they think they need to see. It may
be very hard to fully benefit from open innovation when the mindset requires a
high level of secrecy.
In
our research, Ready to be Open? Explaining the Firm level Barriers to
Benefiting from Openness to External Knowledge,
co-authored with Michael Mol, Professor of Strategic Management at Warwick
Business School and Julian Birkinshaw, Professor of Strategic and International
Management at London Business School, we studied data provided by more
than 12,000 companies to the UK’s Community Innovation Survey (CIS) between
2002 and 2006 and looked at how secretive behaviour influenced the correlation
between external knowledge sourcing and the introduction of new products.
The
results showed that using secrecy as a strategic knowledge protection hinders
the innovation benefits deriving from external knowledge partnerships.
The study showed a distinct trade-off between strategies aimed at
accessing external knowledge through collaborations with outside parties and
those using a secretive behavioural orientation as a strategic knowledge
protection mechanism.
Give
and take
Value
creation occurs by bringing together ideas and resources in novel ways. It
requires participants to give and take freely, for example by sharing their
semi-formed ideas in the hope that they will spark off new possibilities with
others. This type of creative process is quickly undermined if one party is
unwilling to make certain resources available, or if they are too guarded in
the ideas they contribute.
In business, as in
life, successful partnerships are two-way streets and require openness and
trust.
http://knowledge.insead.edu/entrepreneurship-innovation/keeping-secrets-holds-back-innovation-3477?utm_source=INSEAD+Knowledge&utm_campaign=ea764b793e-24_July_mailer7_24_2014&utm_medium=email&utm_term=0_e079141ebb-ea764b793e-249840429
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