Venturing Insights #13 - It's all about Knowledge
Insights from 'Extending Open Innovation – How to Orchestrate Your Knowledge Flows': Strategies for Enhancing Knowledge Management in Open Innovation.
Previously on Open Road Ventures: In the last episode of Venturing Insights, I shared some tips for enjoying an ‘Innovator Summer,’ including recommendations for books, podcasts, and even music. If you missed it, you can catch up here!
Welcome back to Open Road Ventures! I hope your summer is going full sails.
I am personally taking the chance, between one dive and another (yes, I am a scuba diver) to catch up on some insightful reading. I recently delved into this article by Tobias Gutmann, Christopher Chochoiek, and Henry Chesbrough (the “father” of Open Innovation) titled ‘Extending Open Innovation – How to Orchestrate Your Knowledge Flows’.
This article confirmed my belief (perhaps Confirmation Bias?) that effectively managing Knowledge Flows is one of a company's top priorities. This is especially true if the company is engaged in Open Innovation practices.
As we know, Open Innovation is all about making both the internal and external company boundaries more permeable. It covers a wide range of tools, including open source, crowdsourcing, IP licensing, university collaborations, startup engagements, corporate venture capital (CVC), supplier-driven innovation, and user innovation, to name a few. All of these processes involve the flow of knowledge across organizational boundaries.
The larger the firm and its external connections, the more complex and challenging it becomes to manage the knowledge flows effectively.
Traditional Open Innovation flows
The traditional Open Innovation framework focuses on Outside-In (such as a big corporation partnering with a startup and bringing the startup’s innovation inside the corporate boundaries) and Inside-Out (such as established firms licensing their IP to the outside world or spinning off corporate ventures) flows.
What about Outside-Out and Inside-In?
However, some of the most prominent current concepts about innovation management (e.g. Ecosystems), seem to be driven by other knowledge flows that do not fit this traditional view.
Indeed, a recent survey identified two main Open Innovation challenges for large firms: managing internal organizational change and external innovation relationships. These issues involve coordinating internal knowledge flows and overseeing external ecosystems where knowledge often circulates independently, emphasizing the need for effective internal and external knowledge management in Open Innovation.
Practically speaking, we're referring to Inside-In and Outside-Out practices:
Inside-In refers to the knowledge flows from an Open Innovation/CVC unit to another corporate or business units.
Outside-Out refers to the knowledge flows that connect startups to each other and to important customers or complementary partners outside of the firm’s internal boundaries
These knowledge flows, apply to OI in general and to CVC In particular. Through their research, Gutmann, Chochoiek and Chesbrough, have uncovered some practices of CVC units that effectively manage knowledge within and across internal and external boundaries.
Below, I will write a few tips derived from my reading.
Tip #1 - Map your Knowledge Flows
By using this map companies can visualize the flow of knowledge within and outside their organization. The vertical axis represents where knowledge is applied (demand-side), and the horizontal axis represents where knowledge originates (supply-side). It is divided into four quadrants:
Inside-Out: Knowledge originates inside the organization and is applied outside.
Outside-Out: Knowledge comes from outside and is also applied outside.
Inside-In: Knowledge is both sourced and used within the organization.
Outside-In: External knowledge is applied within the organization.
Tip #2 - Identify Gaps
This mapping can reveal gaps, such as underutilized internal innovations or weak external collaborations. For example, a tech company might find it struggles to commercialize internally developed AI models (Inside-Out), while a pharmaceutical firm might discover that external university research (Outside-In) isn’t fully translating into new drug developments.
As we have seen before, Outside-Out and Inside-In knowledge flows have been identified as the most challenging in traditional Open Innovation. Therefore, it may be beneficial to place greater emphasis on these eventual gaps.
Tip #3 - Adopt Best Practices from CVC
To enhance Open Innovation, companies can learn from the best practices of Corporate Venture Capital (CVC) units, as highlighted in the matrix.
The Outside-Out and Inside-In models highlight how CVCs act as both Ecosystem Enrichers and Cross-Silo Knowledge Brokers:
Ecosystem-Enriching (Outside-Out): CVC units excel at orchestrating external partnerships and fostering innovation ecosystems. This involves curating businesses through exclusive events, promoting ecosystems to accelerate market infrastructure, validating pre-due diligence to save time and resources, and sharing deal flow with other venture capital units.
Cross-Silo (Inside-In): CVCs also focus on breaking down internal silos, pooling knowledge across units, and inspiring intrapreneurship by sharing insights and best practices from external ventures. They influence corporate strategy through venture-informed decision-making, engage in reciprocal exchange with business units, and inspire intrapreneurship through mentorship programs.
By leveraging these CVC best practices, companies can create a symbiotic relationship between external innovation and internal expertise, driving corporate growth and adaptation in an ever-changing business landscape.
For more details, check out the full article here!
Until next time, keep innovating and stay inspired!
A soundtrack for you: