Open Innovation
This past week I read Henry Chesbrough’s book on Open Innovation. This book describes how organizations need to operate differently in a context of knowledge abundance.
Chesbrough says we are witnessing a paradigm shift from closed innovation to open innovation. The closed innovation paradigm is based on the belief that successful innovation requires control. Companies must generate there own ideas, then develop them, build them, market them, distribute them, service them, finance them, and support them, on their own. Closed innovation counsels businesses to be self-reliant and internally focused. To be sure of quality, availability, and capability you’ve got to do it yourself.
I really like some of the visuals he’s using for the way they illustrate concepts central to open business models. Here’s closed innovation:
Closed Paradigm for Managing Industrial R&D
Chesbrough, Henry William (2006). Open Innovation: The new imperative for creating and profiting from technology. Boston: Harvard Business School Press. pg. xxii.
Projects enter on the left at the beginning and proceed through within the firm till they are shipped to customers on the right side.
By contrast the open innovation paradigm assumes businesses can and should use external ideas as well as internal ideas, and internal and external paths to market. Doing it all yourself fails to productively make use of new knowledge and ideas outside your business. Open innovation combines both external and internal ideas to create value. In addition, ideas can be taken to market through external channels, outside the current business of the firm, to generate additional value.
Here is his visual for open innovation:
The Open Innovation Paradigm for Managing Industrial R&D
Chesbrough, Henry William (2006). Open Innovation: The new imperative for creating and profiting from technology. Boston: Harvard Business School Press. pg. xxv.
As you can see ideas can start outside the firm and move inside and ideas inside can leak to the outside. The solid lines showing the boundary of the firm are now dashed to show a more porous permeability. Open innovation requires less control and more collaboration.
Chesbrough says “At root the logic of Open Innovation is based on a landscape of abundant knowledge, which must be used readily if it is to provide value to the company that created it.”
Chesbroughs book provides case study examples of open innovation featuring firms like IBM and Intel with a particular focus on patents.
Our open business model initiative is focused more on copyright as opposed to patents, and we are interested in examples that are not just huge companies with massive R&D budgets but small startups and non-profits. Nonetheless, I think many of the principles outlined in this book apply to open business models made with Creative Commons.
I aslo think the digital nature of content licensed with Creative Commons license adds some new possibilities not fully explored in Chesbrough’s book. We know that digital goods can be copied and distributed at a cost of almost $0. This is a key differentiator of digital goods from physical goods making abundance truly possible. Yet the digital world is rife with schemes that rely on creating artificial scarcity of digital goods. Digital locks, password restricted access, and other forms of enclosure have been used throughout the computing era as a means of artificially creating scarcity. While digital goods can be abundant we have artificially constrained them, forcing them to be treated as if they are physical goods that others can be excluded from accessing. Artificial scarcity has been the primary underlying business model companies have relied on to generate value and revenue. I admire Chesbrough’s work for showing an alternative paradigm based on knowledge abundance.
For more see:
http://www.openinnovation.eu/open-innovation/
