Open Market Innovation

Open-market innovation treats innovation like a two-way market: you license in ideas, technology and capacity you don't have, and license out or sell the ideas and patents sitting unused inside your own business, instead of hoarding everything in-house and letting it go to waste.

Ideas and IP flow both ways through the gap - in from partners who have what you need, out from what's sitting idle on your own shelf.

Innovation as a two-way market, not a one-way ask for outside help.

Reach for this when…

Your R&D budget can't match competitors twice your size.
A good idea exists outside the company and you're reinventing it slowly instead.
Customers or suppliers keep suggesting fixes you don't have the capacity to build alone.

How to run it

Map what's sitting unused inside the business: patents, prototypes, ideas nobody's shipping.
Map where your real innovation gap is: capability, budget, speed, or knowledge only an outsider can fill.
Open in both directions - license in what you need, license or sell out what you're not using.
Structure the deal properly before you share anything: ownership, royalties, control, exit terms.
Protect what actually needs protecting (core IP) and treat everything else as tradeable.

A worked example

Situation. Diego Salazar ran Salazar Textiles, a family textile manufacturer in Quito, Ecuador, watching larger competitors out-innovate him on digital textile-print designs with an R&D budget he couldn't match.

Applied. Rather than trying to build the capability alone, he opened a bounded collaboration with a dye supplier and a handful of regular wholesale customers to jointly develop a lower-waste dye process, sharing both the development cost and the resulting formula.

Result. The eco-dye process launched within a year, at a fraction of what solo R&D would have cost him, and the wholesale customers who co-developed it became his most loyal accounts.

Santoso Batik's bounded collaboration with a supplier and its own customers, not a broad open call.

The catch

Opening up means real exposure: shared ideas can leak to competitors, and partners don't always have aligned incentives once the value becomes obvious. It also takes real relationship management, which smaller firms often underestimate, and not every capability gap is safe to hand to a partner who might become a rival.

If you can't say what you're protecting before you open the collaboration, you'll find out the hard way what you should have protected.

Origin: Darrell Rigby & Chris Zook (Bain & Company, HBR 'Open-Market Innovation', 2002)

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