In a sector characterisedby the need to reduce timeto market and find newideas to generate newproducts, firms areconstantly searching forideas and innovations thatwill give them acompetitive edge. Majorcorporations need access tonew ideas andtechnologies to feed theirinnovation processes.Small firms are significantgenerators of innovationbut are typically resource-constrained.

Bringing together smalland large companies inmutually beneficial

partnerships harnesses thespeed, entrepreneurship andinnovative capacity of smallfirms to feed the channels,

brands and resources of thelarge company, creating newvalue for consumers they couldnot deliver alone.

Open innovation (OI) canfacilitate this process. OI wasdefined by Henry Chesbrough,a professor at the Center forOpen Innovation at theUniversity of California,Berkeley, as “the use ofpurposive inflows and outflowsof knowledge to accelerateinternal innovation, and expandthe markets for external use ofinnovation, respectively”(Chesbrough, 2003).

It is a strategy by whichcompanies allow a flow ofknowledge across theirboundaries as they seek toenhance their innovationcapability.

To implement OI,companies must tackle four

key issues: culture,procedures, skills andmotivation. It typicallyrequires the involvement oftop management,independent OI teamsworking within a traditionalcompany configuration,training and incentives toadopt open practices.

In the FMCG sector, OI is anopportunity to innovate andincrease competitiveadvantage. Research by theInstitute for Manufacturing(IfM), at the University ofCambridge, shows the keyadvantages of OI cited by firmsare a shorter time to market andgreater access to competencies.

As large companies adopt OImodels and look beyond theirboundaries for ideas, smallcompanies are one obvioussource. Small firms, especially

OPEN INNOVATION

44 | FMCG News | FMCGNews.co.uk

The importance of openinnovation in the FMCG sector Dominic Oughton discusses the importance of encouragingand embracing innovation in the industry

Dominic OughtonPrincipal Industrial Fellowat IfM Education andConsultancy Services (IfMECS)

Pictured: an open innovation process. The boundaries of the firm,represented by the dashed lines of the funnel, are permeable and allow ideasand technologies (the mauve and green circles) to pass in and out of the firm.

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