Understanding Closed Innovation: What It Is and How It Works

Innovation is a driving force behind business success, and companies are always on the lookout for ways to develop new products and services to stay ahead of the competition. In the past, businesses relied solely on in-house research and development (R&D) to innovate, known as closed innovation. Today, there is a new approach known as open innovation, where companies collaborate with external partners to create new ideas and solutions.

In this article, we will focus on closed innovation, exploring its benefits and drawbacks, and how it differs from open innovation.

What is Closed Innovation?

Closed innovation is a strategy where a company keeps its research and development process in-house. It involves working on new ideas, developing them, testing them, and launching them to the market, without relying on external partners or stakeholders. This approach is suitable for companies that have the resources, expertise, and infrastructure to handle their R&D process internally.

Benefits of Closed Innovation

One of the significant benefits of closed innovation is that it allows companies to have full control over their R&D process. They can decide which ideas to pursue, how to develop them, and when to launch them. This way, they can protect their intellectual property and maintain their competitive advantage. Additionally, the company’s internal teams have a deeper understanding of the business goals and objectives, which can lead to more focused and effective innovation.

Drawbacks of Closed Innovation

While closed innovation has its benefits, there are also some drawbacks to consider. For example, it can lead to a lack of fresh perspectives and ideas, limiting the company’s ability to develop innovative solutions. Additionally, the costs of maintaining an in-house R&D team can be high, especially for small businesses.

Closed Innovation vs. Open Innovation

Closed innovation differs from open innovation in that the latter involves collaborating with external partners, such as universities, research institutions, and other businesses. Open innovation allows for a broader range of perspectives and ideas, which can lead to more innovative solutions. However, it also requires more resources and may lead to a loss of control over the innovation process.

Conclusion

Closed innovation is a viable strategy for companies that have the resources and expertise to handle their R&D process internally. However, it’s essential to consider the benefits and drawbacks of this approach, as well as how it differs from open innovation. By understanding the different approaches to innovation, companies can make informed decisions about how best to achieve their goals and stay ahead of the competition.

When is closed innovation appropriate

Closed innovation is appropriate in several scenarios, such as:

1. When the company has significant resources to invest in R&D: Closed innovation requires substantial investment in resources and infrastructure to maintain an in-house R&D team. If the company has the necessary resources and can invest in research, it can use closed innovation to develop innovative products or services.
2. When the company wants to protect intellectual property: If a company wants to protect its intellectual property and maintain its competitive advantage, closed innovation is a viable strategy. Keeping the R&D process in-house allows the company to have full control over its intellectual property and keep it confidential.
3. When the company has a clear understanding of its business objectives: In closed innovation, the company’s internal teams have a deeper understanding of the business goals and objectives. This allows them to develop solutions that align with the company’s goals and objectives.
4. When the company wants to maintain control over the innovation process: Closed innovation allows companies to have full control over the innovation process. This means that the company can decide which ideas to pursue, how to develop them, and when to launch them.

In summary, closed innovation is appropriate when the company has the necessary resources and expertise to handle its R&D process internally, wants to protect its intellectual property, has a clear understanding of its business objectives, and wants to maintain control over the innovation process.