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Open innovation in the food industry

The power of open innovation for the food and beverage industry

Many food companies desire to innovate to meet consumer demands and stand out from competitors. But innovation doesn’t always come easily.

That’s why many turn to a little extra help. Read on to learn how open innovation can help boost your business and how to do it the right way.

Open innovation definition

Open innovation is “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.”1

When Henry Chesbrough created the open innovation concept, he wanted to reduce the gap between academia and industry. As the UC Berkeley professor explains, open innovation is a more distributed, participatory, and decentralized approach to innovation. 1

He argues that useful knowledge is everywhere, and no company, no matter how big or capable, can innovate effectively on its own. Thus, companies can and should seek solutions from outside of their walls. It’s the opposite of the traditional approach where internal R&D teams develop products that the company distributes. 1

Open innovation can bring several advantages for businesses, such as 1

  • Reduce costs
  • Accelerate time to market
  • Stand out from the competition
  • Increase profits

What are the different aspects of open innovation?

Its creator believes open innovation has two facets – the “outside in” and the “inside out.” 1

The outside in aspect has to do with bringing external ideas and technologies to the company. The inside out is less common, and it requires incorporating underutilized ideas and technologies of the company into other’s innovation processes. 1

How do you know what to look for outside and what to let go of? To answer these questions, you’ll have to revisit your business model to find ideas and technologies that fit. Those internal ideas that don’t quite suit your current business model are good candidates to go to the outside. 1 

Open innovation with external product development companies

As we discussed, open innovation holds the promise to provide new tools for tackling innovation challenges.2

One way of doing that is by hiring an external product development firm, which can offer the following benefits: 2

  • More agile than internally-managed R&D
  • Less expensive and risky than merger and acquisition 

Why follow this path?

Outsourcing at least part of the innovation process with external collaborators can offer numerous advantages, such as:

  • Access to new toolkits, skills, and perspectives
  • Ability to move more quickly through R&D processes
  • Opportunity to have more intimate contact points with consumers
  • External players are often more prone to take risks and experiment

Last but not least, open innovation may offer a competitive advantage as a 2018 study of the most innovative companies suggested that strong innovators use this model 77% of the time, compared to just 23% for the average performers.2,3

Open innovation examples in the food industry

The food industry has much to win from putting open innovation into practice. One study examined case studies involving open innovation in small to medium-sized enterprises in Belgium.4

One of them was a family business founded in the 1970s. The company had seven employees and produced spices, flavors, and fragrances. The company used its customers as a primary source of in-house product development and worked with a flavor consultant and an external innovative research lab for product and process development. They also collaborated with private and public organizations in their country. As a result, the company innovated in several food products, such as a natural Chicken flavor and a spray-dried chardonnay wine vinegar. 4

“If we lock ourselves under the roof of our company, then we will lose all the opportunities and possibilities available outside of our firm -The company’s CEO says.” 4

Another example of successful implementation of open innovation in the food industry is the case of a firm that produces protein isolate, BSF lipids, and chitins with the help of larvae produced by the black soldier fly. The company established open innovation from the very beginning. They didn’t have the financial resources and technology to breed and process the insects. So, they found support in other firms, research institutions, and universities. Thanks to that, the company has become one of the most successful firms in the country. Furthermore, the firm sold its technology to some international projects to generate more income. 4

What are the main barriers to success?

Partnering with external teams can drive breakthroughs. But at the same time, it’s important to be aware of some common pitfalls.2

Examples of such problems are strategy and process management blindspots such as lack of a clear strategic brief and strong support from other internal clients. 2

Shifts in corporate politics and communication issues may also get in the way of a successful implementation. 2

How to do it right?

Here are some tips for a successful implementation of an open innovation plan:

    • Listen to your customers – it can provide critical support and give you insights to catalyze innovation.
    • Set your goals – what does your company wants to achieve?
    • Pick the right challenges to outsource collaboratively to external partners – usually something your team cannot effectively tackle, such as new spaces, processes, or supply chain. 
    • Delineate boundaries for innovation – What is the innovation team allowed to do and not?
    • Find a sponsor – it can help you find new resources and link your project to emerging shifts in strategic direction. 
  • Gather a highly skilled open innovation team

And if you need help at any stage of your food product development, Contact us to book a consultation. 

In summary

Innovation doesn’t have to be so complicated. With outside help, your company can get the resources it needs to innovate and leverage the business without taking all the risks. 

References

  1. Everything You Need to Know About Open Innovation. Forbes. Available: https://www.forbes.com/sites/henrychesbrough/2011/03/21/everything-you-need-to-know-about-open-innovation/?sh=2e21334775f4. Access: 05/16/2022. 
  2. Allio, M. K. (2020). Guidelines for open innovation success with external product development firms. Strategy & Leadership.
  3. BCG January 2018 report: “The Most Innovative Companies: 2018.” In this context, “open” meant having organizational structures that allowed easy collaboration with internal and external partners. www.bcg.com/en-nor/publications/2018/most-innovative-companies-2018-organizing-digital.aspx
  4. Sadat, S. H., & Nasrat, S. (2020). The practice of open innovation by SMEs in the food industry. Journal of Innovation Management, 8(2), 26-46.

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