• Open innovation is a strategic approach whereby companies draw on ideas, resources, tools and technological solutions that come from outside.
• The most widespread approach, known as inbound, involves establishing collaborations with startups and universities, crowdsourcing activities, hackathons or other similar initiatives.
• In Italy, large companies in particular have embraced this collaborative approach, while small and medium-sized enterprises show greater resistance.

Everyone talks about it, but are we sure we know exactly what it is? Open innovation is becoming central to the strategic decisions of many companies, alongside a host of other related concepts. To get to grips with it, we can try to unpack what it means: open innovation refers to a strategic approach adopted by companies to create more value and become more competitive in the market, by drawing on ideas, resources, tools and technological solutions that come from outside. We can compare it to grafting in botany — the practice of inserting branches or buds from one species or variety into another plant, with the aim of improving its resistance to adverse weather conditions or pest attacks, or of producing a new individual capable of yielding finer fruit.

When the concept of open innovation was born

The first person to theorise the concept of open innovation was Henry Chesbrough, professor and executive director of the Garwood Center for Corporate Innovation at Berkeley, California, in the publication "Open Innovation: The New Imperative for Creating and Profiting from Technology", dating back to 2003. After analysing large multinationals in the high-tech sector, Chesbrough describes the traditional paradigms of closed innovation — carried out within the company following established and tested strategies — and contrasts them with the new impulses that push research beyond corporate boundaries. This latter approach is precisely what he baptised as open innovation.

But how is open innovation put into practice?

There are essentially two types of open innovation: outbound and inbound. The first, still not widely used because it is considered risky, is a process of externalising internal stimuli and ideas in order to bring innovation outside the company — for example through joint ventures (agreements whereby both profits and risks are shared). The more widespread formula, inbound, is instead based on seeking out new external ideas and projects in order to bring innovation inside the company.

How does this process get started? Essentially through collaborations of various kinds with startups and universities, recourse to crowdsourcing, calls for ideas, user innovation or the organisation of hackathons, datathons, appathons or internal hubs, right through to outright acquisitions. The ultimate objective of open innovation, therefore, is a cross-pollination of ideas, solutions, processes, people, skills and company resources capable of generating benefits for all actors involved: large companies, startups, various partners, individual "inventors" and, ultimately, the market.

Simple, right? Not quite, in reality. Imagine, for example, that in order to bring open innovation to life, an already established business decides to acquire a startup: a move like this implies a far-from-straightforward revision of processes and company culture. For this reason, in recent years a dedicated professional role has even emerged: the innovation manager — a kind of process facilitator, capable first and foremost of identifying opportunities and, secondly, of introducing and developing a culture of change internally.

The innovation potential of startups

Acquiring innovative startups is one of companies' preferred ways of doing open innovation. It is generally a win-win situation. On one side, companies secure new ideas, technologies and skills in one fell swoop, and have the opportunity to engage with a leaner, younger and more open organisational model. On the other, startups gain access to larger pools of capital and acquire know-how, experience and connections. In a period of profound crisis such as the one brought about by the coronavirus, for example, a great many startups demonstrated resilience, leveraging their creative DNA to generate solutions for the resulting economic and social challenges.

The biggest obstacle to overcome when choosing this open innovation paradigm lies in reconciling contexts that are, more often than not, profoundly different from one another in terms of culture, methodology, approach, timescales and governance. On one side, it falls to companies to align their own pace and organisational processes with the rhythms of startups; on the other, startups in turn must try to adapt to the organisational complexity of their counterparts, so as to create a synergy between their respective worlds.

For this reason, knowing how to determine which startup to target and what kind of collaboration to establish is fundamental for any company wishing to implement a fruitful open innovation project. Startups can be engaged through different types of relationship, such as collaborations in research and development, spot or long-term supply arrangements, incubation or acceleration programmes, co-creation and business model innovation partnerships, through to equity participation in the startup and its outright acquisition by the company.

With LifeGate Way, innovation is also sustainable

LifeGate offers an open innovation approach through its subsidiary LifeGate Way, building an ecosystem of Italian sustainable-native startups to draw from, and encouraging corporates, venture capitalists (VCs) and stakeholders to adopt virtuous practices and new ways of thinking. Innovation, in other words, is welcome — as long as it is sustainable: laws, regulations and consumer sensibilities are, after all, increasingly moving in this direction. The tools and solutions that LifeGate Way makes available to companies within its ecosystem are numerous and address the most varied of needs. For example, Sustainable South Working responds to a challenge or research theme launched by the partner company, while at the same time delivering training and team building through experiential activities. People are both the engine and the fuel of the "startup machine": if something goes wrong, everything else grinds to a halt too. With its People programme, LifeGate Way works on both individual identities and group dynamics to facilitate exchanges and prepare the team to welcome new talent. If the goal is instead to open up dialogue among all stakeholders on the company's sustainability vision, there is the workshop Sostenibilità 10 e lode, which makes use of a deck of cards divided between values, trends, objectives and actions, with the budget variable guiding the dynamics and strategic choices. As mentioned at the outset, acquiring or partnering with a startup is a genuine boost of innovation for a company. The Adotta una startup programme offers businesses the opportunity to actively participate in the development of one or more startups from LifeGate Way's selected ecosystem, developing projects of shared interest through mentorship activities and workshops.

Where Italy stands on open innovation

Although lagging behind other countries (European and otherwise), Italy too is seeing a growing drive towards open innovation, particularly among large companies, which generally prefer the less risky inbound approach and look for ideas and stimuli from outside. According to research by the Osservatorio digital transformation academy based on a sample of 161 large national companies, 45 per cent have already started collaborations with these entities and 23 per cent are considering doing so in the future.

In particular, large Italian companies tend to collaborate with training and research institutions or, in 49 per cent of cases, with startups. This approach is less widespread among small and medium-sized enterprises: especially for those anchored to a now-obsolete business model, and to the reassuring certainty that "we've always done things this way here," it is no easy matter to balance the need to innovate with the risks that may arise from it. Nor is it easy to find the tools, the spirit of initiative or the will to undertake internal reform. Overcoming these obstacles requires defining a clear corporate direction, developing a genuine culture of innovation and finding a productive balance between openness to the outside world and the achievement of internal objectives.