How is Open Innovation changing the markets?

Open Innovation is modernizing the economy

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Open innovation as the main factor of development

Open innovation is an emerging paradigm which exposes organizations to communities and competencies through co-creation relationships (definition by Noel Carrol). Crowdholding raises a concern regarding the mismatch in the procedures used to evaluate the business value and the main components of value co-creation.

The beginning of the XXI century brought the development of a sharing economy on the basis of the information revolution and the globalizing economy. Open innovation can be considered аs a phenomenon existing in the conditions of sufficiently developed, civilized market relations. Open innovation processes involve a free and voluntary interaction of many independent participants (both individuals and organizations) in a highly competitive and dynamically globalizing market medium.

Open (in comparison with closed) innovations and processes are more demanding regarding the quality of economic, scientific, political, legal institutions that make up the environment for a generation, management and use of innovations. In the global markets and industries (Electronics, pharmaceuticals, telecommunications, automotive and aircraft industry, food industry, software and others) open innovations cross borders of countries and regions.

Henry Chesbrough introduced the notion of “open” innovation, writing about processes of management of innovation activities and the openness as well as network interaction of all participants of the innovation market. The scientist defined open innovation as the use of targeted input and output knowledge flows for acceleration of internal innovation and expansion of the external use of the innovation.

T. Grosfeld, T. Roland considered open innovations as a process of the joint launch of new products and services to the market and creation of new business opportunities by sharing knowledge among partners.

Analysis of approaches to the definition of “open innovation” has shown that they can all be conditionally divided into two groups:

Group 1 — in the conditions of developed network interaction, all partners or stakeholders participate in the development and promotion of future innovation, actively submitting both internal and external ideas, and innovations;

Group 2 — in conditions of developed network interaction, consumers (users) take an initiative to develop, refine, promote the future innovation, actively creating or attracting for this community (network forms).

There is no wrong approach to open innovation and allows for the crowd and entrepreneurs to innovate as a community. Read also our blog about Open Innovation in governments.

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Thus, the development of open innovation accelerates the transition to the next technological level, as the development of innovations and the number of innovative ideas keep growing. Most importantly, the processes influence the formation an “innovative” type of consumers.

It became clear that science and technology mean for the economy of developed countries no less than the traditional industries of the post-industrial era. Thus, in the United States, the share of value added created by organizations specializing in the provision of scientific, technical and professional services has grown five-fold since the middle of the last century, and already in the first decade of this century surpassed the share of all retail trade in the economy.

The prospects of modern high-tech companies now directly depend on how well they “sharpened” their business processes in order to be receptive to the emergence of new breakthrough ideas. Director of Innovation at Dell Jim Stikeleather, speaking at the Higher Course of IT Directors in Moscow, said that modern innovations live no more than two months, after which they will necessarily be repeated by competitors. The time when patents and copyright gave a competitive advantage for a long time was irretrievably gone, and, since intellectual value depreciates almost instantaneously, it is necessary to learn to create innovations faster than they die.

By the beginning of the millennium, it became clear that internal research and development departments and even entire scientific institutes can not cope with the task of creating the flow of innovations necessary for a faster business development. It was at this time that Chesborough’s called for the use of open innovations, i.e., innovations created not by a specialized unit, but by ordinary employees or partners of the enterprise or by outsiders, lay at the fertile ground. Interestingly, around the same time, in 2006, Jeff Howe, describing the work of the resource using open innovations in the Wired magazine, put into circulation the term crowdsourcing to denote network technologies that allow users to use the network to solve any tasks. Crowdsourcing and open innovation have long become synonymous. Now, on Crowdholding you can crowdsource and participate in open innovation.

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In a civilized world, the euphoria about open innovation is gradually coming to naught. This is clearly seen in the behavior of high-tech giants: Google, Facebook, Microsoft, etc. They do not implement crowdsourcing systems of “idea management” and do not like global forums and competitions. Leaders of the international high-tech sphere purchase successful innovative startups on the market, incorporating them into their business. In the past, high-tech companies, like Microsoft, also bought small players, but usually, this resulted in the purchase of their technology, development, and patents. Now the whole team is acquired (as happened with the services of WhatsApp, Skype, etc.), together with the management and even with its management style.

It has to be stressed that buying successful start-ups is part of the innovation strategy. Global leading companies establish strong business ties with various scientific centers and universities, investing in their development and research and creating around themselves an open, but well-organized knowledge environment. It is enough to look at the gratitude that foreign authors of scientific articles write at the end of their work to understand: most scientific research is carried out precisely through grants from high-tech companies. And it’s not about the social orientation of Western business. Financing research (the budget of which is negligible compared to the costs of innovation), companies accumulate around themselves scientists who feed on the ideas of innovators.

All this happens without unnecessary noise, but effectively. This is how a new knowledge economy is formed, where the main role will be played by the industries that produce not the product or service, but the very “man” — science, education, social and medical support. The knowledge economy is replacing the information economy, where information-generating industries dominate (banks, financial and telecommunications services, media and entertainment). Crowdsourcing and open innovation as information society technologies imply the use of the population itself for the provision of services. It is no coincidence that the main development of the banking and telecommunication business is creation.


In order to increase the audience implementing the principles of the concept of “consumer development,” it is necessary to popularize innovative ideas that are aimed at developing the country’s economy, reducing the gap from developed countries. Government bodies, educational institutions, and public organizations pay insufficient attention to increasing the effectiveness of innovation activities on the basis of the social network and the Internet as a whole. The need to develop indicators of innovation activity and the number of open innovations, allowing enterprises to establish clear guidelines for prospects, identify unused reserves, establish the place of the organization among other producers and match their technological level to the modern way, outlining the ways for its further development. Read more about innovation and its relationship with co-creation in our previous blog.

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