Open innovation represents the next wave in value creation and production evolution, with organizations increasingly collaborating beyond their organizational walls. According to new Avanade Trendlines research*, 85% business and IT leaders say that their organizations will broaden their use and sharing of first party data with other companies by 2025. And already, 37% agree they have already or are actively forming a data cooperative with partners outside of their organization for further growth opportunities. Why are we seeing this shift? And why is digital transformation being powered by collaboration?

Look beyond the walls of your organization to fuel growth
Historically, labor was an individual activity, with artisans meticulously crafting products that went to market. This approach produced items of high quality; however, significant cost and individuality caused scalability challenges. For example, to create the fixtures and fittings for a house, each item would be individually made by hand. When fixtures broke, or wore away, a craftsman had to create a uniquely matching piece.

The advent of assembly lines and factories revolutionized work; the thinker Adam Smith demonstrated the power of the division of labor with a pin factory. By breaking down the task of creating a pin into various steps – each performed by a specialist – efficiency soared, production costs fell, and the path towards mass production was paved.

Our global economy has transitioned from an industrial model to a knowledge-based paradigm – and while our methods of production have improved through technology, organizations are encountering a new challenge. How do we effectively harness, synthesize, and apply the vast knowledge and expertise within and beyond our organizational boundaries? With faster speeds and increased connectivity across devices and everyday physical things, the answer, increasingly, lies in open innovation.

Scale growth and innovation through hyperconnectivity and open ecosystems
Through open innovation, we are ushering in a new era of value creation that transcends organizational boundaries, enabling a fluid exchange of ideas, insights, and expertise. We see increasing operability among platforms and organizations – these open innovation opportunities are promising for businesses and their employees. Indeed, 54% of business and IT leaders already say that open innovation has accelerated internal innovation, and 53% say it has created new revenue streams.

This new phase in our evolution recognizes that no organization can be an island of knowledge. Rather, it promotes a collaborative, networked approach to innovation that draws on the collective intelligence of many. It's the pin factory of the digital age, assembling ideas instead of pins and doing so on a global, distributed scale.

Here are three ways to help your organization and people benefit from open innovation.

1. Inspire and empower employees to discover new insights and innovate
   Of those surveyed who benefit from open innovation with partners, the majority (61%) cited improved employee experience as the top benefit. And that covers both business and IT functions. A meta-analysis of 130 studies and over a million organizations across various sectors found that companies with operationalized open innovation functions can achieve 18% higher financial performance than those without.

   Let’s say a retailer wants to better understand customer footfall to provide a more compelling, personalized shopping experience. Business leaders may see the chance to get creative, partnering with other local retailers, property managers, and local transit companies to capture shopper visits at scale in context – and building up a larger ecosystem.

   But that ecosystem can only go so far without the trusted data exchange to integrate it with internal enterprise systems. This provides a window of opportunity for technology teams to cooperate (and in some situations engage in “coopetition”) to share data and insights more effectively. For example, Avanade has partnered with Metrikus to create an Intelligent Workplace Digital Twin, allowing building owners & leaseholders to gain one view of their workplace and securely share data, which answers typical open innovation questions such as “How will this data be shared?” – “How can data be kept secure?” – and “How can we innovate based upon what we learn?”

   The outcomes of an open innovation initiative include motivation for employees, and new meaningful insights. And innovation output is strongest and most impactful when collaborating with a whole ecosystem than in any other mode.




2. Go all in to seize the growth opportunities of open innovation
   As we talk about open innovation, it’s important to note that the creation of new products and services is most effective when your company’s strategy can evolve to take advantage of strategic alliances, sales, strategic cooperation, and product co-development. Open innovation is “all in” – the academic research shows that if you adopt this model, then you will only gain significant benefit if you align your sales, product teams, and overall strategy to focus on collaboration. It is about breaking down barriers—between departments, organizations, and even industries.

   That’s why it’s crucial to prioritize interoperability in your technology strategy. Consider DAPR (Distributed Application Runtime), a portable, event-driven runtime that makes it easier for developers to build resilient, microservice stateless and stateful applications. DAPR enables developers to focus on writing business logic, not solving distributed system challenges, thereby accelerating the time to market and increasing operational efficiencies. This focus on interoperability over individual platforms—the so-called "protocols over platforms" strategy—can be extended to the wider digital ecosystem. The "fediverse" (a federation of social networks, blogs, and websites) is another prime example of this, where disparate platforms communicate via common protocols. Integrating such interoperable solutions, by adopting open protocols, can significantly extend your organization's reach and innovation potential; even Meta’s new launch of a Twitter-competitor, Threads, intends to connect with the fediverse.




3. Embrace open innovation to more efficiently solve problems and differentiate
   In the realm of open innovation, inspiration and learning opportunities can come from the most unexpected places. Take nature, for instance. The field of biomimicry involves learning from and emulating nature's time-tested strategies to solve human design challenges. From architecture inspired by termite mounds to wind turbines designed to mimic whale fins, nature can be an extraordinary source of innovation. Open innovation encourages and thrives on this kind of out-of-the-box thinking, with organizations like the Biomimicry Institute sharing techniques and connecting practitioners globally.

   Another untapped source of fresh ideas and perspectives is academia. Academia may have an undeserved reputation for stuffiness, but collaborating with universities and schools can provide businesses with access to cutting-edge research, diverse talent, and new ways of thinking that can help to break down groupthink and foster innovation.

   Collaboration assumes that your organization doesn’t always have the smartest people – by co-operating out in the open, including with competitors – we can solve our commoditized problems more efficiently. FINOS is a great example – allowing financial services firms to collaborate on their “table stakes” problems, such as data engineering and visualization, while keeping their “crown jewels” like investment strategies in-house. Alternatively, you can establish cooperative relationships through secure data sharing to free resources to focus on your in-house differentiators.

Avanade’s commitment to open innovation
Our open innovation ecosystem comprises developers, universities, startups, standards organizations, NGOs, and open-source communities. By actively fostering these relationships, we've been able to drive unprecedented value creation for our clients and the wider digital ecosystem. Our new .NET Foundation membership underlines Avanade’s commitment to open innovation, strengthening our ability to deliver cutting-edge solutions using the .NET platform. This new collaboration adds to our portfolio of open innovation partnerships with organizations such as Linux Foundation, Green Software Foundation, Major League Hacking, MIT Sloan Center for Information Systems Research and other university partners.

To learn more about how to drive business value from open innovation, read the Trendlines report or contact us for a custom briefing.