Open Innovation
Open innovation can be interpreted as Diffuse Innovation that is based on participation from consumers and various external players, or in the more narrow sense as used by Henry Chesbrough, as structured cooperation for innovation between companies. We prefer the former definition.
It is also the title of a specific book by Henry Chesbrough.
Definition
“Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. [This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology.”
- Henry Chesbrough, Open Innovation: Researching a New Paradigm (http://www.openinnovation.net/)
Description
"The Open Innovation theory builds on the observation that an institution sits in an ecosystem of empowered individuals and other institutions, but that in a pre-network world the transaction costs of accessing the innovations of those actors was too high to justify. Thus, the institution develops its own internal knowledge creation and governance systems (technology transfer offices, tenure and review boards, etc). In a network culture there is the opportunity to connect more and more of those smart people to an institution’s mission: to contribute to internal projects from the outside, to take a project that fails to gather internal support forward using outside funding, to generate novel projects outside and “spin into” new internal projects. All of this becomes possible as the transaction costs involved in the knowledge movement required drop. Open innovation builds on the idea of knowledge “leakage”29 from the firm or institution to the outside world, which is an informal kind of governance. This leakage comes from many sources depending on the kind of institutions. It could be publication, via scholarly journal, by patent, by conference presentation, informal conversation, or more currently via blog post or wiki edit. The core insight of Open Innovation is the ability to use the world outside an institution to generate internally useful knowledge - and the core dependency of open innovation in turn is the need to make the flow of knowledge in and out of an institution a purposeful thing, not a random process." (http://cyber.law.harvard.edu/commonsbasedresearch/sites/commonsbasedresearch/images/Genomics_Knowledge_Governance.pdf)
Discussion
"Last week, I read an article on how Coloplast has set-up communities for their users to share experiences and ideas. You can use Google to translate the Danish article and you can check out one of their communities here: International Stoma Innovation Community. In the article, Coloplast claims that they have halved their development time over the last couple of years partly due to the external input and they also mention that they are now using many more external partners than previously.
It sounds good, but nevertheless, I think Coloplast is a nice example of company that is still stuck in the user-driven mindset. The main idea of user-driven innovation is to get input from the users – and perhaps even the eco-system – of your products or services.
Open innovation is about integrating external partners in the entire innovation process. This should happen not just in the idea or technology development phase but also in all other phases towards market acceptance. User-driven innovation is great as it directs your innovation efforts towards market needs. Open innovation takes you to the next step by providing more opportunities through external partners as you address those market needs.
Which red flags did I pick up on Coloplast? First, take at look at their corporate website. I cannot find any guidelines on how to approach Coloplast with ideas or other contributions. Compare this to Procter & Gamble where you can find a very visible link to their Connect+Develop initiative.
Another red flag is the stoma community itself. It really gives you the feeling that it is about how Coloplast can tap into users rather than how they can work together and build relationships with external partners. This is what user-driven innovation is about. It should just not be confused with open innovation." (http://www.15inno.com/2009/11/09/userdriven/)
How IP-based business models block Open Innovation
"A world of purposeful information flow in and out of institutions is at odds with many of the business structures of the last 50 years - especially intellectual property rights. Copyrights govern the copying, distribution, and reuse of the documents containing actionable knowledge, from software to scholarship. Trade secrets and knowledge leakage on the public web are completely at odds with one another. And patents prevent institutions from acting on useful knowledge, even if the action would be far afield from the business concerns of the patent owner. Business models incorporate these knowledge “properties” as assets to be protected, and build infrastructures of lawyers and compliance offices precisely to prevent their flow out and usage in the external world. Thus, the business model often forms a block to the institution’s adoption of an open innovation-based knowledge governance model, even if the ideas and theories of open innovation are attractive to the management and leaders of the institution."
Examples
See also: Networked Innovation Initiatives
Open Innovation Platforms
Compiled by the Openeur blog at http://www.openeur.com/blog/en/2007/08/02/bestprac-en/
Innocentive, solving technical problems Picnic - Sent in your ideas to save the planet Yet2.com - patent trading Ninesigma.com - Innovation networking IXC Australia - Similar approach as ninesigma Eureke medical - Medical Open Innovation platform
Open Innovation Startups
Compiled by the Openeur blog at http://www.openeur.com/blog/en/2007/08/02/bestprac-en/
fellowforce.com - open innovation competions ideawicket.com - evaluating business models crowdspirit.com - product development by the crowds spigit.com - a Startup game - evaluating business ideas Incuby.com - online community for inventors Ideaconnection - Open Innovation - idea marketplace [http://ponoko.com/ Ponoko[ - Rapid Prototyping platform
Key Books to Read
From an earlier list at http://www.openinnovators.net/best-books-on-crowdsourcing-open-innovation-management-wikinomics/:
The Classics
- The Wealth of Networks: How Social Production Transforms Markets and Freedom - by Yochai Benkler
Yochai Benkler shows us how the Internet enables new commons-based methods for producing goods, remaking culture, and participating in public life.
- Democratizing Innovation - by Eric Von Hippel
“Von Hippel presents a persuasive case for the benefits of encouraging lead users to innovate and a truly intriguing look at what they’ve contributed to the world so far”
- Wikinomics: How Mass Collaboration Changes Everything - by Don Tapscott, Anthony D. Williams
As a proponent of peering, sharing, and open-source thinking, Don Tapscott has presented a clear and exciting preview of how peer innovation will change everything.
- We Are Smarter Than Me: How to Unleash the Power of Crowds in Your Business - by Barry Libert, Jon Spector, Don Tapscott (foreword)
In We Are Smarter Than Me, you will discover exactly how to use social networking and community in your business, driving better decision-making and greater profitability. The book shares powerful insights and new case studies from product development, manufacturing, marketing, customer service, finance, management, and beyond.
Others
- Outside Innovation: How Your Customers Will Co-Design Your Company’s Future - by Patricia B. Seybold
Patricia Seybold argues that companies should seek innovation by actively engaging and bringing their customers into the product development process.
- Motivation in Open Innovation - by Robert Motzek
Robert Motzek’s study investigates the motivational profiles of user innovators from a manufacturer’s point of view, focusing on lead users and tool kit users. The analysis is supported by two exploratory case studies of Spreadshirt and Threadless.
- Innovation Happens Elsewhere: Open Source as Business Strategy - by Ron Goldman, Richard P. Gabriel
It’s a plain fact: regardless of how smart, creative, and innovative your organization is, there are more smart, creative, and innovative people outside your organization than inside. Open source offers the possibility of bringing more innovation into your business by building a creative community that reaches beyond the barriers of the business.
- The Global Brain: Your Roadmap for Innovating Faster and Smarter in a Networked World - by Satish Nambisan, Mohanbir Sawhney
Nambisan and Sawhney have written a book that constructs a truly effective bridge between network driven innovation and its application. A refreshing look at innovation and its practice.
Details on Chesbrough's book
Henry Chesbrough's three books
- Open Innovation: The New Imperative for Creating and Profiting from Technology -b y Henry Chesbrough
Chesbrough suggests that companies make themselves more permeable to the flow of knowledge through such strategies as hiring professors and grad students as summer consultants, sponsoring university research, investing in and partnering with high-tech startups and venture capitalists, and disseminating their own innovations through spin-off companies or even by publishing it in the public domain.
- Open Innovation: Researching a New Paradigm - by Henry Chesbrough, Wim Vanhaverbeke, Joel West
Offering theoretical explanations for the use (and limits) of open innovation, the book examines the applicability of the concept, implications for the boundaries of firms, the potential of open innovation to prove successful, and implications for intellectual property policies and practices.
- Open Business Models: How to Thrive in the New Innovation Landscape - by Henry Chesbrough
Chesbrough is not the first academic to grasp the superior economic value of intellectual over tangible property in today’s economy. But he may be the one who has thought most deeply about its consequences for business.
Description and Review
From the publisher:
"In his landmark book Open Innovation, Henry Chesbrough demonstrated that because useful knowledge is no longer concentrated in a few large organizations, business leaders must adopt a new, "open" model of innovation. Using this model, companies look outside their boundaries for ideas and intellectual property (IP) they can bring in, as well as license their unutilized home-grown IP to other organizations.
In Open Business Models, Chesbrough takes readers to the next step—explaining how to make money in an open innovation landscape. He provides a diagnostic instrument enabling you to assess your company's current business model, and explains how to overcome common barriers to creating a more open model. He also offers compelling examples of companies that have developed such models—including Procter & Gamble, IBM, and Air Products.
In addition, Chesbrough introduces a new set of players—"innovation intermediaries"—who facilitate companies' access to external technologies. He explores the impact of stronger IP protection on intermediate markets for innovation, and profiles firms (such as Intellectual Ventures and Qualcomm) that center their business model on innovation and IP.
This vital resource provides a much-needed road map to connect innovation with IP management, so companies can create and capture value from ideas and technologies—wherever in the world they are found."
Jon Lebkowsky at Worldchanging.org:
"Open Innovation tells how technology research and development, formerly "closed" and handled inside megacompanies like IBM and Xerox, increasingly happens in smaller companies and universities. What he calls "Open Innovation" is typically driven by VC-funded startups that build toward acquisition, a model that was popular through the Internet boom of the 90s, and is still common. Chesbrough's book is a good overview of the history of corporate innovation in the USA, and a good explanation of the closed vs open models for innovation.
Closed innovation gave way to the more open model because the workforce started churning, and it became increasingly difficult to contain the ideas that resulted from the best thinking and experimentation within any one company. There's also been a knowledge sharing movement facilitated by the Internet, and the Open Source movement's commons-based peer production model, which is oddly excluded from Chesbrough's consideration.
This is where I had a problem with the book – it didn't go far enough. The model Chesbrough describes is an extension of the top-down corporate model, failing to acknowledge promising "small is beautiful" emergent approaches to innovation and business. Open source is one example, the bootstrap approach (favored by fast-growing groups like Bootstrap Austin) is another.
I do recommend the book for its value in setting context, but I don't think it's truly worldchanging. We would hope to see Chesbrough or someone follow up with an exploration of smaller, more modular approaches to business development and technology innovation, and business structures that are truly open, transparent, and inclined to balance competition with cooperation." (http://www.worldchanging.com/archives/004759.html)
More Information
Introductory articles:
- Principles of Distributed Innovation. Karim R. Lakhani and Jill A. Panetta.
- When to engage in open innovation? Bhaskar Chakravorti.
More advanced treatments:
- special issue of the journal R&D Management, edited by Ellen Enkel, Oliver Gassman and Henry Chesbrough, at http://www3.interscience.wiley.com/journal/122535404/issue
Bibliography: