July 22, 2013 Editor 0
Open Innovation is a term promoted by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at UC Berkeley, in his book Open Innovation: The new imperative for creating and profiting from technology. The concept is related to user innovation, cumulative innovation, Know-How Trading, mass innovation and distributed innovation.
“Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology”. The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward. The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (e.g. patents) from other companies. In addition, internal inventions not being used in a firm’s business should be taken outside the company (e.g., through licensing, joint ventures, spin-offs).
Several companies currently operate as open innovation intermediaries, including InnoCentive, Innovation Exchange, Hypios, InnovationXchange, NineSigma, Starmind, yet2.com, MillionBrains, and Tekscout in US, One Billion Minds in India, PRESANS in France, Innoget in Spain, and Fellowforce among others. Other companies such as Deutsche Telekom report on using multiple instruments to open up their innovation system. Such instruments include corporate venture capital funds, foresight workshops, executive forums, and spin-outs.
Closed Innovation and its erosion
The paradigm of closed innovation says that successful innovation requires control. A company should control (the generating of) their own ideas, as well as production, marketing, distribution, servicing, financing, and supporting. The main cause behind this idea is that, in the beginning of the twentieth century, universities and government were not involved in the commercial application of science. Some companies therefore decided to do it all on their own. They created their own research and development (R&D) departments to be able to control the whole new product development (NPD) cycle inside the company. There just was not the time to wait for the scientific community to become more involved in the practical application of science. There also was not enough time to wait for other companies to start producing some of the components that were required in their final product. These companies became relatively self-sufficient ‘castles’, with little communication directed outwards to other companies or universities.
Throughout the years several factors emerged that eroded the closed innovation paradigm:
- The increasing availability and mobility of skilled workers
- The growth of the venture capital market
- External options for ideas sitting on the shelf
- The increasing capability of external suppliers
These four factors have resulted in a new market of knowledge. Knowledge is not anymore proprietary to the company. It resides in employees, suppliers, customers, competitors, and universities. If companies do not use the knowledge they have inside, someone else will. Innovation has shifted from being closed to being open
Open source vs. Open innovation
While open source and open innovation might conflict on patent issues, they are not mutually exclusive, as participating companies can donate their patents to an independent organization, put them in a common pool or grant unlimited license use to anybody. Hence some open source initiatives can merge the two concepts, this is the case for instance for IBM with its Eclipse platform which IBM is advocating as a case of open innovation, where competing companies are invited to co-operate inside an open innovation network.
In 1997, Eric Raymond, writing about the open source software movement, coined the term ‘the cathedral and the bazaar’. The cathedral represented the conventional method of employing a group of experts to design and develop software (though it could apply to any large-scale creative or innovative work). The bazaar represented the open source approach. This idea has been amplified by a lot of people, notably Don Tapscott andAnthony Williams in their book Wikinomics. Eric Raymond himself is also quoted as saying that ‘one cannot code from the ground up in bazaar style. One can test, debug, and improve in bazaar style, but it would be very hard to originate a project in bazaar mode.’ In the same vein, Raymond is also quoted as saying, ‘The individual wizard is where successful bazaar projects generally start’.
Open Source specialist François Letellier advocates that open source (or free software) is a natural way of innovation in the software industry and that it is an exemplary and very effective form of open innovation – as open-source projects/communities act as innovation intermediaries.
- Open Innovation and Business Model: A Brazilian Company Case Study
- How to benefit from open innovation? An empirical investigation of open innovation, external partnerships and firm capabilities in the automotive industry
- Using Open Innovation to combat Ebola
- Open Innovation in Sports
- The Value of Open Innovation for B2B Companies
- Open Innovation Lessons
Tags: Open innovation
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