QUESTION: Cultural, political, and organizational challenges in the implementation of inside-out open innovation

The paper mentions that there are inevitable cultural, political, and organizational challenges when implementing inside-out open innovation. Could you think of any examples for such challenges (cultural, political, and organizational)? Which one do you think is probably the most difficult to overcome?

Inside-out open innovation faces first organizational challenges. Indeed, once you were one, now you are two at the vey least to be engaged or linked with one project. How to be sure you are going the same way ?

I believe that Cultural challenges are the most difficult to overcome because cultural difference are engrave to our core; organizational and political challenges can changed and/or be fixed...but culture is extremely hard to change and overlook. An extreme example of this could be a Jewish butchershop who decides to have their meet slaughtered somewhere else, and this place happens to be not kosher... that would not work for the Butchershop, and it would be a cultural difference between the two businesses that would have to be worked out in order for the partnership to keep on working.

I also think it's important to take into consideration the corporate culture within the company, due to possible organizational changes, like laying off people, hiring new people and shifting responsibilties. If the culture in the organization is stiff and unable to adapt itself quickly to the necessary changes it may stifle the innovation and the process of moving it outside the company.

For example, a manager that is responsible for a unit that develops a project that would eventually be spun-off, will probably do anything in his power to prevent the spin-off, for fear of losing his job. Such a situation can lead to inefficient decisions and create agency costs.

I think a company need to carefully evluate its financial structures so as to identify the best combination of expense reduction today and upside potential tomorrow. Also, a comapny need to be aware of the tension of internal and external channels, competing for the fruits of R & D. Besides, to manage different outside parties is not an easy task. They all have differnet corporate cultures and ways for doing business. It is fairly hard to find a win-win solution among parties with various interests. How to communicate, who should take responsibility to take this role should be thoughtfully planned in advacne.

I think each company has its own challenges, it also depends on the outsiders, partners, customers, on their corporate culture, their organization....
i agree that the most difficult one to overcome would be the cultural aspect, even if the organizational challenges are first showing, they are easier to manage than cultural ones, which are inherent to each company and each people, and difficult to change.

I think that planning and educating are the main words for this kind of change.
As always, people will not be willing to change, especially if they think that the result would be a lost of power or responsabiities.
So top management has to support the change, explain with a lot of pedagogy why it is benefic for the company and most of its employees.
Making a brutal change can be destabilizing for a lot of employee and results to a lost of productivity and efficiency.

I think the most difficult challenge a company has to overcome while implementing inside-out open innovation is the human ressources challenge. There are a real human cost of moving ideas and projects out the company. Inside out open innovation involves letting go some employees who work on the projects the company decides to spin off. This involves high emotional and economic costs and the company has to take it into account

It depends a lot on the company. Every company has their own difficulties, some companies have are better at introducing change and reorganizing organizational structures and some are better at handling the cultural side. There are multiple factors which will influence the implementation process. For example management, size of the company, the way the implementation is introduced to the employees and how much resistance to change is encountered. I believe that there is no one answer to the question.

These 3 main issues regarding open innovation are emphasized by the today globalization. Even the largest companies in the world need to use open innovation to develop more and more innovative projects.
so it is more and more complicated to organize companies within an international innovation system at national and global scale. There are already many inside organizations problem between departments (for ex. cost related problems between marketing and financial departments), or at the very top of the organizations, such as agency costs due to different goal for managers and shareholders (which would be higher if we have more managers). It is even more delicate when it is between companies from different level of development: it brings more cultural and governmental issues (for example with countries such as India or China).

--> Open innovation can indeed be benefits in terms of R&D,but it can trigger overcosts:
- international partnerships are more expensive and harder to organize than local partnerships (which also cause less confidentiality problems thanks to less communication)
- it can be more risky for small companies to
- it can have a negative impact on the company's flexibility.
- Small companies are more exposed in case of collaboration with large firms, since they have less ressources and are often less experienced in the management of their intellectual property rights....

I think one challenge for step no. 4 (grow your ecosystem, even when you're not growing) is to convince your partners, allies, etc. that your IP is a good one with growing possibilities. Further, the company has to think about how much they want to control the further development outside the company. If your company is the supervisor, the challenge is to manage the communication between your partners, to lead the project in your favourable position while holding costs preferably down.
If you don't want to have any control or not much control over your project anymore, then the challenge is to actually become and stay a preferred partner in your ecosystem after the project generates value.

It is true that there are many risks and factors to consider regarding the control of the project when moving innovation outside the company.

However, when I wrote the question my intention was to focus on the challenges that the company has to face from within, not on the dynamics of its collaboration with another comapny. For example - How does the corporate culture affect the decision to move innovation outside? What kind of organizational changes does the comapny have to make in order to make it work? Furthermore, how can it affect the political balances on the managent level?

I agree with a bunch of people here, but would not forget the political problems.
Some countries may not let some inside companies use inside out moves. It may have indeed bad consequences on the firm's financial health, and the firm could not lead the market alone anymore. Some country are really conservative, and there is no way a firm from this country could share some knowledge with outside companies.
Except this important point, i agree that the cultural aspect (of the people and of the firm) cannot be neglicted.

To emphasize what Edwige said about India: In terms of cultural aspect, we can take Mac Donald case as a typical example: when Mac Donald's start to grow in India, it has to avoid beef in the burger and build a reputation of non-beef burgers restaurant. (remplace beef by lamb as the cow has some religious aspect). This religious aspect oblige Mac Donald's to find innovative solutions.

Kathia has a great example; Decentralization can lead also allow a firm to go global quickly.

However it leads to a more complex problem which is the point I want to make (However, i do not disagree with Kathia on decentraliation). The problem will not only be the company's culture but the culture in general for different countries which I think is the biggest probelm.

In the state of a economic crisis, I doubt that political areana would be a problem since firms in different countries are trying to generate more growth in a still and declining economy.

As for organizational challenges, I believe that the management has to deal with the intergration of new and old workers. To be able to be open to more intergration between the diferrent organiational cultures. This has been done in different companies with success. An example would be the buddy system (an old employee with a new employee) which eased the new wokers into the organization. Also they mixed the management team with new management members. However when dealing with a countries cultural differences then that is a different ball field.

So this leads me to conclude that the hardest of the three is the cultural challenges.

Does anyone else have a different opinion?

From an organizational perspective, I would like to emphasize on the importance of Information Systems when implementing an InsideOut innovation strategy. (developers platform for instance)
An effective platform for insider and outsider to work together would enable the following :

- Secured information sharing.
- Collaborative experience enhancement.
- Corporate/Community bonding.
- Work capitalization.
- Recognition of individual contributions.

Intranet solution implementation can thus be considered as key milestone when deciding to move towards InsideOut innovation strategies.
In a nutshell, Organizational change goes hand in hand with appropriate supportive IT tools.

chloé_laluc wrote:I think the most difficult challenge a company has to overcome while implementing inside-out open innovation is the human ressources challenge. There are a real human cost of moving ideas and projects out the company. Inside out open innovation involves letting go some employees who work on the projects the company decides to spin off. This involves high emotional and economic costs and the company has to take it into account

I'm agree with Chloe, the most difficult challenge is related to persons; the employees and the management of the human ressources are very important when we talk about IP and R&D, because behind this intelectual production there are always persons with feelings, cultural identities, appreciations, etc.
Just complementing this idea, we can talk about the case of the French Telecom, this company currently is suffering a restructuring and, as a result of its restructuring plan, 23 employees have suicided and the French Government have got involved in this situation. I know that implementing inside-out open innovation is a different case, but the case of French Telecom shows us how the cultural and political factors always should be considered in each important decision of each company.

I don't think a spin-off will be affected by the mother company's culture that much. Not all of the employees in the mother company experince the open innovation move. Most of the staffs still work on the core business. Only a limited of them take part in the strategic move. I don't think the corporate culture inside the boundary really affect on the open innovation projects that much, thus causing those projects more flexible and venturous.

Hi! I agree with the posters above, yes the most difficult challenges are faced when adapting resources, people and ideas to different environment and cultures. However the point of this kind of strategy, in my opinion comes from the underlying principle that 1+1>2, it can be 3, 4 or even 100!!!

Im going to give you a tangible example to explain my point.
1. Most of the posters/students in E-commerce have different nationalities/backgrounds/cultures.
2. We all also have different "core" competences/strong personality types/values, capacities and capabilities.
3. We have a common purpose, (to learn something in this course for example)

Just look at what we naturally do: while conserving our core competences (who we each are) we adapt and give up certain aspects of ourselves which would otherwise difficult the process of achieving our common purpose. For example we give up our native languages and turn to English for a common ground from which to understand ourselves... what we are doing is creating a common platform for interaction. The challenge is to do this without loosing our core competences but actually enriching it by the interaction between eachother. In this way we naturally realize that together we can achieve much more than what we could have achieved by ourselves and indeed 1+1 is always more than 2.

Adapting my little story to the business and the case id say the following:

1. Businesses have to have very clear their core competence and never loose it.
2. Cultural adaptation and giving up ground is a must: knowledge and understanding for the other is key in achieving this. The purpose is to create a common ground from which to operate.
3. Have a common goal, shared throughout all implicated organizations.

What do you think? Can you identify with my example? Do you think that giving up culture compensates the gain achieved by common ground and purpose? Think that when you post you are giving up your native language and gaining/sharing information; you give up part of your (IP) for other!

There are two kinds of cultural differences. National (or regional) cultural differences and differences between company cultures. The first one is easier to evaluate, while the second one consists of many invisible values and unspoken rules. That can be a threat, especially when two parties with a strong company culture meet. I think different company cultures would be the most difficult to overcome. Because it is not possible so see the differences clearly in advance. Problems might occur and you don't know the reasons.

Just to add to Naomi's point on culture, the business manager or IP developer who's unwilling to let go of his/her project might intentionally slow down the spin-off by hiding crucial information; hence its very important that companies respect the developer and try to get his/her agreement before announcing the spin-off.