The food industry should embrace the possibilities offered by open innovation if they are to succeed in an increasingly competitive market place, says a new review.
It is becoming increasingly difficult to manage all the factors involved in food production, from the initial concept to the requirements of intermediate customers, end-users and legislators, says a review in the journal Trends in Food Science & Technology.
“Open innovation does take place within the food sector, in spite of it being known as a relatively more traditional and mature industry,” wrote Soumodip Sarkar from the University of Évora and Ana Costa from the Catholic University of Portugal.
“Our review and analysis demonstrated that firms stand a better chance of escaping the law of diminishing returns to innovation efforts if they can improve the effectiveness of both their technological and marketing capabilities in a concerted manner,” they wrote.
Closed innovation refers to processes in which human capital inputs are sourced predominantly from within a company’s boundaries. On the other hand, open innovation refers to processes in which inputs are, for the most part, sourced outside the company.
Open innovation has traditionally been linked with fast-growing, technology-intensive industries, such as the information and communication technology sector. The food industry, said Sarkar and Costa, has traditionally not engaged in open innovation.
However, a small amount of studies on the topic have shown that open innovation in the food industry does occur, and the rewards are there for all to see.
Open innovation in action
The Portuguese researchers use International Flavors and Fragrances (IFF) as an example of a company that outsourced part of its new product design to customers. The company developed an innovation tool-kit, which allowed customers to design and alter flavour samples as they wanted.
“This tool allowed … IFF to bypass costly market research activities and accelerate the trial-and-error cycles that inevitably accompany product development,” wrote Sarkar and Costa.
“By putting customer expertise to use, IFF was also able to expand its knowledge-base and increase the level of customization of its product offer, while lowering its share of the innovation risk.
“This type of innovation strategy has the potential to change the competitive structure of the food flavours’ market through the change of IFF’s competitiveness,” they added.
Another example was Procter & Gamble’s (P&G) successful development of a new type of Pringles’ potato crisps that was printed with words and images.
By employing open innovation through the employing the edible printing technology developed by an Italian baker to lower product development costs and the time-to-market for the new product.
This Italian baker’s technology “was discovered through the global network of potential sources of ideas and know-how that P&G maintained as a part of its open innovation program,” said Sarkar and Costa.
Take home message
The reviewers wrote that the food industry will have to increasingly rely on open innovation if it is to manage the challenges posed by the competitive market place.
“As such, the sector should exhibit a significant number of open innovation strategies, the purpose of which could range from merely securing access to external sources of human capital to actively taking part in the creation of inter-organisational knowledge and skills,” they concluded.
Source: Trends in Food Science & Technology
Published online ahead of print, 24 September 2008, doi: 10.1016/j.tifs.2008.09.006
“Dynamics of open innovation in the food industry”
Authors: S. Sarkar, A.I.A. Costa