Learning to open up: German industry underestimates the power of external knowledge

July 23, 2014

The latest results of the Industry Innovation Index survey commissioned by Altana, a German-based specialty chemicals group, are in and once again providing interesting insights into German industrial managers' take on success factors of innovative companies. Interestingly, but perhaps not surprisingly, the factor that scored the lowest was open innovation.

According to the survey, currently only seven percent of companies consistently incorporate external expertise into their innovation processes.

Germans, it would seem, are not ready to let it all hang out, but still prefer to remain mostly self-reliant when it comes to innovation.

Currently, German industrial managers rate the use of external knowledge as the least relevant factor for successful innovation, with a mere seven percent making a conscious effort to build and maintain networks with specialists. These are the results of the new Industry Innovation Index, illustrating the state of innovative capability and the culture of innovation in German industrial companies. In November and December 2013, market research institute Forsa polled 250 top decision-makers across all sectors and 250 entry-level employees in German industrial companies, on behalf of Altana.

This survey shows that at present, companies are primarily focusing on internal programs, rather than external sources. For one in two managers, the key features of innovative companies were the promotion of exchange between departments (58 percent), creativity and inventiveness of employees (57 percent), and scope for innovation (54 percent). 

But is this really so terrible? The general consensus today would appear to be that companies can no longer survive on their own -external knowledge is vital in order to achieve their full innovative potential, while globalization and short product life cycles are adding extra pressure on companies to open up their innovation processes. Meanwhile, a voluminous body of literature has also accumulated on the subject, in which the benefits - but also the difficulties - of using external sources to create knowledge that can lead to innovation are closely examined.

The bottom line in many of these studies is that, while there are distinct benefits to be gained from external knowledge sourcing, there has to be an internal infrastructure present in the company for this knowledge to be put to effective use.  Internal managerial practices designed to manage innovation would seem to be a vital element in determining whether or not an organization will benefit from using external knowledge sources. Such practices, however, are something that, for whatever reason, are still lacking in many German companies, especially in small and medium-sized enterprises.

Altana, however, believes that in the medium term there is no way to avoid opening up innovation processes to outsiders. As Altana CEO Dr. Matthias Wolfgruber, commented: "Going solo in the area of research and development does not lead to optimal results. Innovation management in conjunction with other companies, customers and suppliers not only helps to minimize the risk of poor investments, but also opens up brand new opportunities."

According to Altana, further results of the survey indicate that a process of rethinking is slowing taking shape, at least at larger companies. Among companies with more than 1,000 employees, 13 percent indicated that they had already incorporated external knowledge into their innovation processes in a systematic way. For many smaller companies, however, who are more likely not to have functioning internal information management system in place, opening up innovation processes is simply too complex.

"Thanks to the Internet a sheer unlimited amount of information is available almost like an additional raw material. But it is all about using the right sources of this raw material quicker than the others, and gaining valid insights and knowledge," adds Altana CTO Dr. Georg F. L. Wießmeier.

"The prerequisite for this is an intact internal information management system and a network of committed staff who devise methods for efficiently researching and selecting external information in order to glean new knowledge for the company."

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