We live and work in a time of intangibles, such as electronic cash and virtual conversations. So perhaps it is not so startling to hear that, according to various estimates, 80 percent of the S&P 500's market value rests in intangible assets, including brands, patents, trademarks, trade secrets, formulas, designs, and other denizens of the invisible world.

One of those intangibles is open innovation. The entire process by which people in companies improve old products and services, invent new ones, and revamp and develop business strategies and practices is critical to companies. A PriceWaterhouseCoopers survey of 1,200 CEOs globally found that they thought innovation is the most important growth driver. More than three-quarters of the CEOs expected innovation to deliver "'significant' new revenue and cost reduction opportunities." According to the Plante Moran 2013 Innovation Survey, innovation is a priority for 94 percent of respondents.

There is also the darker side. A company that fails to embrace open innovation runs the risk of seeing its business badly damaged, if not even marginalized, by competitors who use innovation to deliver more of what customers want in increasingly effective and efficient ways.

Recognizing and championing the importance of innovation, however, is far different from making it work in a given company. Much of the focus on managing innovation tends to be for startups, which typically must learn to scale ideas to serve markets, or large corporations that have extensive resources to keep in line with top strategic goals.

Middle market companies tend to face different challenges. They lack the resources and R&D infrastructure of a large enterprise. At the same time, they don't have the luxury to simply begin from scratch as a startup must. According to some research by National Center for the Middle Market fellows Michael Leiblein and Justin Miller, mid-sized companies should consider some aspects of their organization and infrastructure to best encourage and support the innovation they need:

  • Be open to other sources of ideas. A third of service firms and more than half of manufacturers are too reliant on a small group of people to generate and select ideas. Having domain experts and senior leaders involved in innovation makes sense, but these companies are excluding more than 90 percent of their employees, which is a waste of a potential resource. Some companies are using contests to more broadly solicit ideas.
  • Consider new funding mechanisms. With the emphasis on "experts" as a source of ideas comes a tendency to fund innovation projects through functional area budgets and allocation. But important innovation often requires a cross-functional approach. Try innovation initiatives that span functional silos and budgets, rather than following functional lines, to emphasize a closer tie between innovation and strategic goals.
  • Look beyond existing customers and markets. Middle market companies tend to innovate with an eye toward specific groups of existing or potential customers and well-established needs. They are less likely to address basic research or the evolving needs of customers, areas that can offer significant business opportunity and long-term benefit.

Although changes in structure and processes cannot guarantee more effective innovation, open innovation will provide opportunities for mid-market companies to gain additional benefits and results from research, development, and invention in all aspects of the business.

Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc., and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter.