Market Analysis

The 3 main organizational models of open innovation

Fri 29 Jan 2021

Open Innovation (OI) refers to the set of processes based on sharing and collaboration between the company and external sources of different kinds: competing companies, suppliers and customers, universities, startups, [...], but also company employees via intrapreneurship. For more than 10 years, it has become a powerful innovation lever in major global groups such as Google, Engie, Microsoft, Orange, among others.

The practice of Open Innovation in large groups is mainly based on 3 organizational models: Integrated/centralized, distributed and the "Skill Center", each with its own strengths and limitations.

The integrated or centralized model is inspired by the historical model of innovation laboratories. The various open innovation systems are defined and managed by a central entity whose activity can be geographically distributed. Often attached to the R&D branch of the company, this structure generally has its own internal governance and integrates the majority of project development stages, from project sourcing to contractualization with business units (BUs). One of the advantages of this model is being easily replicable (new sites and programs can be created following the same model) and guarantees a good dissemination of the best practices, and the consistency of results and performance monitoring. However, the defined objectives can sometimes be far from the requirements of internal customers and the model can be operationally and financially cumbersome to implement and operate. The Open Innovation of groups such as Engie, Unilever, Cisco, Mastercard, or AT&T is based on this organizational model.

Other groups such as Airbus or Amazon prefer a distributed organization. In this model, each operational entity can autonomously choose the vehicles (incubators, accelerators, monitoring and/or scouting cells, corporate ventures) and tools to be implemented (platforms, communication, etc.) to support their open innovation policy according to their own strategic objectives. This model is particularly effective in groups where the activities of business units and/or subsidiaries differ greatly from one another. However, this model is faced with obstacles: each entity wishing to develop an Open Innovation program must have sufficient market space and financial resources. In addition, the transfer of best practices and skills is not always ideal at group level.

The “skill center” is a hybrid model at the crossroads of centralized and distributed models. The skill center can be a central or collegial entity. Its role is to publish guidelines to harmonize the systems, processes and governance of open innovation and to streamline interactions with internal customers and supporting functions (HR, communication, etc.). The BUs and subsidiaries continue to manage the programs, but with the methodological and operational support of the skill center (providing business know-how, expertise, etc.). This organizational model, chosen by Microsoft, Google and Telefonica groups, allows combining the proximity with internal customers allowed by the distributed model while maintaining the proper distribution of best practices and the monitoring of the optimal performance of the centralized model.

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Alexandre Jolin

Market Intelligence Consultant Manager

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