Guidelines for open innovation success with external product development firms

PurposeThe article offers an answer to the question, “When companies are caught between recessionary financial constraints and epic market discontinuity, what approaches actually deliver innovation efficiently and effectively?”Design/methodology/approachThe article offers guidelines for enterprises seeking to implement a form of open innovation with external product development firms that offers the prospect of being more nimble than internally-managed R&D and less expensive, risky and complex than outright merger and acquisition activity.FindingsPick the right challenges to “outsource collaboratively” to external innovation partners. One rule of thumb: partner externally when the defined challenge is something your team cannot effectively tackle–for example, new spaces, channels, materials, processes or supply chain. Outsourcing to experienced innovators can reduce internal competition, accelerate organizational learning and counteract internal turf battles. 10;Practical implicationsExperienced innovators seek authorization to manage their initiative as a portfolio of projects: instead of isolated stabs at innovation, they create a diversified array of programs, with different risk/reward ratios and different foci.Originality/valueThe author has extensive experience working as a a corporate sponsor of open innovation projects and as a contract R&D innovation manager and his teams have had to deal with programs that meander and drift because corporate politics shift, decisions are opaque and strategic communication breaks down. The guidelines offered are designed to prevent such breakdowns.