What is Open Innovation?

Recently, growing attention has been devoted to the concept of "Open Innovation", both in academia too every bit in practice. Chesbrough, who coined the term "Open up Innovation" describes in his book "Open up Innovation: The New Imperative for Creating and Profiting from Technology" (2003) how companies have shifted from so-called closed innovation processes towards a more open way of innovating.

Traditionally, new business development processes and the marketing of new products took place within the firm boundaries (Figure 1).

Figure ane Closed innovation

Still, several factors take led to the erosion of closed innovation (Chesbrough, 2003). Beginning of all, the mobility and availability of highly educated people has increased over the years. As a effect, large amounts of noesis be outside the inquiry laboratories of large companies. In addition to that, when employees modify jobs, they take their cognition with them, resulting in cognition flows betwixt firms. 2d, the availability of venture majuscule has increased significantly recently, which makes information technology possible for good and promising ideas and technologies to be further developed outside the firm, for instance in the form entrepreneurial firms. Besides, the possibilities to further develop ideas and technologies outside the firm, for instance in the form of spin-offs or through licensing agreements, are growing. Finally, other companies in the supply chain, for instance suppliers, play an increasingly important function in the innovation process.

As a result, companies accept started to look for other ways to increase the efficiency and effectiveness of their innovation processes. For instance through active search for new technologies and ideas outside of the firm, just as well through cooperation with suppliers and competitors, in gild to create customer value. Some other of import aspect is the further development or out-licensing of ideas and technologies that do not fit the strategy of the company. Consider, for example, ASML, which is a Philips spin-off.

Open up Innovation can thus be described as:

combining internal and external ideas as well equally internal and external paths to market to advance the development of new technologies.

Effigy 2 Open innovation

What does this mean?

In the offset place, the shift described above means that companies have to get enlightened of the increasingly importance of open innovation. Not all good ideas are adult within the own company, and not all ideas should necessarily be further developed inside the own firm's boundaries. The table below further illustrates this:

Closed Innovation Principles
 		Open Innovation Principles
The smart people in the field work for us. Not all the smart people work for us, so owe must observe and tap into the knowledge and expertise of bright individuals outside our company.
To profit from R&D, we must discover it, develop it, and ship information technology ourselves. External R&D can create pregnant value: internal R&D is needed to claim some portion of that value.
If we find it ourselves, we will get it to the market start. We don't have to originate the research to turn a profit from it.
The company that gets an innovation to the market first will win. Building a better business model is better than getting to the market starting time.
If nosotros create the nearly and the best ideas in the manufacture, nosotros will win. If we make the best utilise of internal and external ideas, we volition win.
We should command our intellectual property (IP) so that our competitors don't profit from our ideas We should profit from others' employ of our IP, and nosotros should buy others' IP whenever information technology advances our business model.

This means that within the company a shift should accept identify in the style people await at the company and its surroundings. Involving other parties when developing new products and technologies can be of great added value. Think for instance about cooperation with other firms in your sector, suppliers, universities, and of form end-users.

The business model plays a crucial role in this is. After all, how and when external noesis is required and used is to a big extent determined by the companies' business model which describes how value can exist created from innovations and which elements take to be sourced internally or externally.

Reference: Chesbrough, H. (2003), "Open up Innovation: The New Imperative for Creating and Profiting from Engineering science", Harvard Business concern School Press.