The tech revolution is transforming industries overnight, and for organizations trying to stay ahead of the competition, looking inward for innovation is no longer enough. Startups are developing and rapidly scaling technologies and solutions that are threatening to upset established business models and steer industry growth into new areas.

In response, companies are adopting open innovation strategies to bring these disruptive technologies into their businesses to remain competitive.

The origins of open innovation

Professor Henry Chesbrough first coined the term open innovation. It refers to a paradigm that assumes that firms can and should use external ideas as well as internal ideas to advance their technology. Open innovation success relies on inflows and outflows of knowledge for accelerating internal innovation.

According to the Economist, 95% of organizations use open-innovation practices, with a further 54% doing so on most or all projects. Closed innovation among R&D departments is becoming outdated.

Why open innovation is important

Companies with effective open-innovation strategies are able to solve challenges more quickly by sourcing outside ideas and solutions. This also allows them to rapidly adopt new technologies or business models that they have not fully developed internally.

In other words, it is a fantastic way to work with outside talent that can spur greater achievement in less time.

There is more than one type of innovation process.

Here are four open-innovation success stories.

1. Samsung: A company with innovation in its DNA

Samsung’s view of innovation as a core principle has made it a global-tech leader. Its open innovation platform, Samsung Next, has a multi-pronged approach.

• Partnerships
• Ventures
• Mergers and acquisitions
• Next Product

Samsung maintains a group of internal innovators that focus on identifying market shifts and opportunities for developing software products. They also look for chances to work with third parties for collaborations.

What’s more, Samsung scouts promising early-stage and mature startups for investment so they can elevate their capabilities. Sometimes, they flat-out buy these companies.

For example, executives were searching for a path to penetrate the budding IoT marketplace when they discovered a promising company called SmartThings.

Samsung acquired the company in 2014 and has since expanded its services. This allowed them to grow their partnership with Google by using SmartThings to provide greater connected home experiences with the Samsung Galaxy smartphone.

Samsung also maintains an in-house incubation program called C-Lab Inside that lets employees nurture ideas.

According to their website, Samsung established C-Lab Inside in order to discover new ideas and instill a company-wide creative culture. Since its inception in 2012, the program has incubated 339 projects with 1,395 employees.

Employees submit ideas, and those with successful applications are given up to one year away from their roles to focus on implementing their ideas. Samsung supports this with funding, dedicated workspaces, and special incentives.

Some recent startups that have spun off from this program include Diavision, which developed a fast COVID-19 diagnostic kit-reading solution; Goose Lab, which created an AI dance game platform with motion recognition technology; and Cheeseade, which developed solutions for unmanned stores.

2. General Electric: an industry giant that matches the speed of a startup

GE doesn’t rely solely on its size or established market position to stay ahead of the curve. Open Innovation is a way for the organization to keep chasing a competitive edge.

The home appliance giant learned that it was falling behind smaller and more nimble competitors that were releasing cutting-edge products at a faster rate.

In 2014, GE launched a program that provided an open innovation, co-creation space called FirstBuild. The space has a micro-factory for quickly developing prototypes of home appliances.

The program actively encourages ideas from the online community and relies on a community of innovators and engineers to co-create. Together, they ideate, make prototypes, get feedback and produce products at speeds that allow them to match smaller competitors.

FirstBuild measured its success by the time it took an idea to reach the market. In 2014, that process took GE up to four years. However, after the first year of the program, FirstBuild had reduced the average to eight months. Two years later, it only took four months.

Successful FirstBuild products include everything from icemakers and indoor pizza ovens to mushroom fruiting chambers.

GE allows its online community to serve as beta testers as well as generate product buy-in prior to launch.

3. LEGO: Innovating from the pulse of the public

LEGO has a remarkable model for innovation that enables them to develop products based on pop-culture trends in real time. How do they do this? Crowdsourcing!

The toy maker invites the public to submit new product ideas and participate in challenges through its open innovation platform, LEGO Ideas. Anyone can build and submit original ideas and have members vote for which creations they’d like LEGO to put on store shelves.

LEGO established the platform in 2008 and through this open innovation model has sold more than 30 products based on crowdsourcing.

Not only does this allow LEGO to ride on the crest of public interest, but it also gives them the opportunity to engage with different customer segments. If LEGO selects and idea for production, the original creator receives 1% of the royalties on the products’ net sales.

Some of the most popular LEGO Ideas include an international space station, a tree house, a ship in a bottle, and even the Central Perk café from the TV series Friends.

4. AXA: keeping an eye on innovation

Multi-national French insurance giant AXA keeps its ear on the door of innovation quite literally.

They do this by setting up innovation outposts on the doorstep of tech hubs where they monitor cutting-edge companies for disruptive technology.

They established these so-called AXA Labs in San Francisco, London, and Shanghai. With a clear view of new trends and promising startups, they identify innovations for emerging customer needs.

From these open innovation efforts, AXA has collaborated with a multitude of partners to provide remote medical advice services, develop new insurance models, design insurance products for autonomous vehicles, implement blockchain technology and adopt new cyber security measures.

Open innovation is the new normal for successful companies

Finding new ways to develop products and services is a no-brainer. Investment in new disruptive technology is a big part of that.

While legacy companies have traditionally thrived through carefully established market reach and branding, they are continuously being challenged by organizations that move and innovate at unmatched speeds.

There are many types of open innovation, but organizations are increasingly scouting upcoming internal and external solutions for their development processes.

Companies that are on alert for new and disruptive technologies are more aware of how their traditional business models can adapt to stay relevant.

Open innovation is now a major part of most large organizations. It helps them solve internal R&D challenges, go in new directions, find alternative business models, and monitor industry threats.

Open innovation is a tool companies need to learn how to use in order to maintain their edge in fast-changing and dynamic markets.

The question is what is the best strategy companies can use to adapt to the future? What do you define as open innovation? We’d like to know!