How to Increase the Success Rate of Open Innovation

Recently, open innovation—a business development approach that incorporates the knowledge and technology of external partners—has been attracting a great deal of attention in the new business development departments of large corporations.

If open innovation is utilized effectively, it can help companies leverage assets that have not seen the light of day in their current operations, and it can also provide them with new ideas and perspectives from partners.

It also offers various benefits and potential from the perspective of business growth.
For example, it is possible to enter “attractive markets that the company could not enter on its own” by creating “products and services that could not have been developed as an extension of normal production activities.”

In this article, I will share some methods I have discovered through my own experience to increase the likelihood of success with open innovation.

<Table of Contents>
▼ Five Key Points for Strategic Planning
▼Case Study: Dentsu Inc.’s Open Innovation Initiatives

Five Key Points for Strategic Planning

Open innovation involves collaboration with external parties with whom the company has not previously worked, and it also constitutes a new business venture.

To implement this effectively and achieve tangible results, you need to mobilize and secure the cooperation of many people both inside and outside the company.

The key to this internal and external coordination is persuasiveness. Therefore, I will explain the basic methods for persuading stakeholders.

First, the general process of open innovation can be outlined as follows:

① Strategic Planning
↓
② (Approval)
↓
③ Partner Matching
↓
④ Prototyping and PoC (Proof of Concept)

Within this process, the most critical step for building a compelling case and ensuring business success is the strategic planning phase (①).

I’ll omit the basic elements required for a business strategy—as they’re covered in MBA programs and general business textbooks and reference materials. Instead, I’ll focus on sharing the five key points of “strategic planning” that are particularly important for open innovation.

These five items are: ① the rationale for targeting the market; ② a clear articulation of resource availability; ③ managing expectations; ④ aligning on the degree of openness in the business; and ⑤ mutual recognition of corporate cultures.

① The Significance of Targeting the Market
・Based on your company’s management philosophy and vision, what is the significance of entering that market and market segment?
• How close is your company to that market?
• Specifically, what is your company lacking, and what synergies exist?
• How attractive is the product or service to partners, consumers, or clients?

② Clarifying Resource Availability
・What assets can your company provide, and conversely, what do you want partners to provide?
・What competitive advantages would our company gain by having that product or service?

③ Aligning Expectations
・For each phase and goal of the business, what level of economic benefit and what kind of exit strategy (means of recouping investment) is the company targeting?
• What kind of business partnership is the partner seeking, through what distribution channels, and what level of economic scale do they expect from the partnership?

④ Aligning the Level of Business Openness
・Is it possible to allow additional partners to join or replace existing ones if other suitable partners or companies express interest?
・Will the company accept non-compete clauses for its partners?
・What criteria will be used to evaluate the considerations listed above?

⑤ Mutual cultural acceptance
・Are there any conflicts between our company’s culture and the partner’s culture?
・If there are conflicts, from what perspectives do they arise, what risks do they pose, and what countermeasures can be taken?

The key to increasing the probability of success is to translate these five points into a common language that can be explained to all stakeholders. The goal is to make all parties feel personally invested in the project.

To achieve this, it is necessary to thoroughly analyze and think through what value we can provide to the other party, while maintaining our own company’s intentions and objectives.

Examples of Dentsu Inc.’s Open Innovation Initiatives

Recently, agile business operations and new business planning styles have become popular, and I believe these are excellent approaches. However, when it comes to open innovation, the mechanism is fundamentally based on the premise of having partners. I hope it becomes clear that—with the exception of frameworks where the entire process is already standardized, such as OEM agreements, intellectual property purchases, and consignment sales—this is an approach that requires a high degree of strategic thinking during the planning phase.

These days, we often see examples where the means have become the end—such as acceleration programs whose objectives haven’t been sufficiently defined. Precisely because it is open innovation, it is impossible to be passive or to simply wait for good ideas to come along and build a business.

This may sound like mere rhetoric, but I believe it is essential to adopt a mindset rooted in the strong determination and resolve to “create new businesses within our own company,” while being fully aware of the challenges and risks involved.

Incidentally, at Dentsu Inc. as well, we have formed project teams and are undertaking various open innovation initiatives by varying the implementing entities, ultimate objectives, and target audiences.

Dentsu Group Open Innovation Projects
(As of March 2019)BASE Q
Supports new business creation by intrapreneurs at large corporations through open innovation. A collaborative platform business involving three companies—Mitsui Fudosan, which operates the Innovation Building Program, Ernst & Young, and Dentsu Inc.

DENTSU JAM!
A co-creation project that supports the emergence of new businesses and industries. In collaboration with external partners, it promotes co-creation through an “NtoN (many-to-many) model” that involves multiple companies and organizations, including startups, companies from different industries, and even competitors.

GRASSHOPPER
An acceleration program that supports the growth of startups with a focus on creativity. It provides multifaceted support, including business co-creation through collaborations between startups and large corporations

NewsPicks Studios
Through a business partnership with NewsPicks, we collaborate in the planning, production, and management of post-text content, with a focus on video.

TANTEKI
A team that supports collaboration by helping professionals in corporate planning and business development at startups and large corporations design their “message” in a way that effectively reaches audiences who haven’t previously received it

SPORTS TECH TOKYO
Focusing on the intersection of sports and technology, this program recruits outstanding startups from around the world to support their business growth and foster collaboration with major corporations. It is a global open innovation platform originating in Japan and organized by Dentsu Inc.

Open Innovation Lab (InnoLab)
A technology boutique operated by Dentsu Inc. (ISID) that collaborates with domestic and international companies, startups, and universities to solve various social issues by combining technological seeds with societal needs, and pioneers the implementation of these solutions in future cities and societies worldwide

Co-Creation Innovation Lab
A joint organization established by the University of Tokyo’s Research Center for Advanced Science and Technology and Dentsu Digital Inc. to study best practices for open innovation

Dentsu Inc. B-Team
An “alternative approach” team comprising employees who are top performers in their respective fields but also possess a “B-side” perspective; they propose “Plan B” solutions to overcome various challenges and stagnation within companies and organizations that cannot be resolved through conventional “A-side” methods

Dentsu Inc. Growth Design Unit
An in-house organization composed of business growth support experts that systematizes business growth support services for startups and provides “360-degree business support services” primarily for media and platform operators

Dentsu Inc. Growth Hack Project
Provides full-layer, full-funnel internal improvements—including customer acquisition, monetization, and retention—ranging from business design and KPI/KGI formulation to the provision of optimal tools and resources for operations, as well as the analysis and implementation of detailed strategies such as A/B testing

Dentsu Inc. Ventures
A corporate venture capital fund that makes global venture investments, primarily in overseas companies in Europe, the U.S., and Asia, and promotes the Dentsu Group’s own open innovation through hands-on support and business development utilizing Dentsu Inc.’s core resources

*1: This includes services that, while not explicitly promoted as open innovation or not the main solution, are ultimately provided or implemented.

*2: In addition to the above, there are numerous open innovation support projects commissioned on an individual basis by client companies, but these have all been omitted

In the next installment—the final part of this series—we will introduce a framework for evaluating digital technologies that will be useful in the fields of business development, solution product development, and open innovation.