Open Innovation (Part 1/4): What is open Innovation?
This is part of the Open Innovation series dissecting:
1. What is open innovation?
2. When is open innovation successful? What are its advantages and disadvantages?
3. What are examples of open innovation models?
4. What are successful case studies of open innovation and what can we learn from them?
The term ‘Open Innovation’ was coined by Henry Chesbrough, professor and director at the Center for Open Innovation at the Haas School of Business at UC Berkley and popularised in his book Open Innovation: The New Imperative for Creating and Profiting From Technology.
For Chesbrough, 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.” In other words, it’s a process through which an organization is able to cultivate growth by relying on ideas, technologies, and resources external to it.
In the traditional, vertically integrated Research & Development (R&D) model for innovation, knowledge is tightly controlled and decisions are centralized. Research begins with discovery and exploration of ideas. The most well-understood of these ideas make it to development — though the well-understood ideas are rarely those with the most potential — and some of these actually make it through the development process and on to commercialization.
Traditional R&D ‘Closed’ Innovation
Open Innovation, on the other hand, embraces the reality that the best ideas, technologies, and solutions are external to the organization whether that be with customers, suppliers, technology providers, startups, academia, or other institutions. Open Innovation is also a much more continuous process where technologies and ideas are incorporated not only during the research phase, but as products are developed and commercialized.
Open Innovation
Aside from in-sourcing ideas and technologies, Open Innovation also recognizes the fact that technologies and solutions developed in-house may be better commercialized by other organizations, thereby maximizing the value of internally developed intellectual property. That is, underutilized or underresourced internally developed technologies are commercialized through partners who may obtain additional benefit from these technologies.
Open Innovation is often confused with Open Source, but they’re far from the same thing. Open Innovation is a process of innovation, from idea generation to development and commercialization. Open Source, on the other hand, is a software development term to denote situations in which source code is made freely available and may be redistributed and modified with little to no financial remuneration.
Others confuse Open Innovation as a methodology of supply chain management. It’s not. Open Innovation involves much more than managing suppliers, opening up the nature and process through which ideas are explored and developed. This includes not only suppliers, but also academia, startups, other large organizations, customers, and many other parties.
Open Innovation is critically important in today’s world where knowledge is widely distributed and no one organization controls, nor has all the capabilities required to drive innovation. Companies can no longer rely entirely on their own research, people, and technologies, but must actively seek and manage partners that can actively contribute to developing new products and services.
Next week we address the questions of when open innovation is successful and what are its advantages and disadvantages.
If you have Open Innovation comments or examples that you want to share, let us know!
