This is “open innovation“: The use of internal and external information to develop innovations — and then taking those ideas to market either internally or through other organizations. As individuals, we have a fair amount of control over how we practice open innovation. In large organizations, however, the process generally needs to be formalized. Open innovation is important, but can be complex in companies where the innovation process involves a large number of business units, systems that may not even have been invented yet, and policies and procedures that are evolving.

An interesting example of open innovation is the SAP Co-Innovation Lab (COIL) as SAP and its partners have found a way to integrate hardware and software innovation in a way that is open, but also protective of intellectual property. From the COIL homepage: “COIL enhances the capabilities of SAP’s partner and customer ecosystem through an integrated network of world-wide expertise, and best-in-class technologies and platforms.” SAP worked with founding sponsors Cisco, HP, Intel and NetApp to set up the initial co-innovation laboratory at SAP’s Palo Alto, CA. facility. (There are also now facilities in Tokyo, Bangalore, and São Paulo.)

COIL is successful, at least in part, due to how the partners have managed the technical, human, and organizational dimensions of the innovation process. The physical structure of the COIL facility allows the organization to install relevant hardware and software in a collaborative but safe environment. It also provides a modular co-working area for the most intensive portions of the collaboration where face-to-face interaction is required, and a showcase area where customers can come and see the joint result. The organizational infrastructure lets the companies start with a framework intellectual property arrangement.

In a recent meeting I had at SAP on the topic of open innovation, David Cruickshank, director of the Co-Innovation Lab, noted,  ”COIL is a unique approach and now we’re trying to do more.” Even a company the size of SAP can gain value from co-innovating with partners and customers through trust and open innovation. The key takeaway is that this is not ad hoc collaborative innovation. It is a formal approach calling on the appropriate business units and team members of all involved companies in a well-considered strategy.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• A near-term outlook for big data
• Defining work in the digital age: an analysis by GigaOM Pro
• Millennials in the enterprise, part 1: strategies for supporting the new digital workforce