OPEN INNOVATION

Leveraging the best ideas

Open Innovation was coined as a term by Henry Chesbrough in his 2003 book, which focused on the synergies and networking effects of drawing together internal and external intellectual property as a stronger paradigm than introspective 'closed' R&D, as characterised by a classical company R&D lab working in isolation, guarding its ideas.

The Open Innovation concept highlights how ideas from different origins mingle to provide more effective solutions than linear development of a single approach, how ideas often have application outside the original ambition, and how ideas may need to be exploited outside the originating organisation, sometimes being re-imported in a more mature form.

The recognition of the benefit of open innovation reflects the historical reality that most important innovations involved teams that were well networked and multidisciplinary, and the twisting paths new technologies have often taken before yielding success.

If there is one key message the Chesbrough insight makes explicit, it that value created by single 'silver bullet' discoveries is a relatively unusual trajectory.

However, since the specific details of how ideas are fused into a solution are at the heart of competitive advantage, open innovation must be practiced in a way that keeps proprietary IP well protected. This suggests open innovation is most likely to be effective in developing intermediate capabilities and assets that go beyond incremental improvement, with the integration of such novel capabilities being held close. This distinction is a very important aspect of innovation and needs to be considered as an explicit, nuanced part of the business strategy and business model design.

Since Chesbrough, the term Open Innovation has been broadened in a way that can breed confusion. For the purposes of this discussion, I focus on three principle flavours to the way Open Innovation is understood:

• Open in the sense that new ideas are actively engaged from external organisations (including a customer stimulating innovation in its supply base)
• Open in the sense that IP is shared widely (not necessarily for free) vertically or laterally in the supply chain
• Open in the sense of developing an accessible architecture into which others can offer products as insertions

The driving principle is that innovation cannot be built only on internal know-how and capabilities, but has to draw in intellectual property and proprietary assets from the best elsewhere. This is in contrast to the traditional (and now largely obsolete) approach of in-house R&D fuelling innovation.

Innovation Governance Checklist

• Are the arrangements in place for people to network externally to gain appreciation of where good ideas are emerging, who are the leading teams, able to establish strong informal links?
• Is the leadership in place to balance the motivational benefit of competitive innovators with the lost opportunities of a 'not invented here' mind-set?
• Is there the means to develop IP that falls outside current core business, but which could add value elsewhere?
• Is there an explicit review of the approach to open innovation, where it is to be adopted and where a closed approach should be adopted, and how it relates to business model design?
• Is consideration given to creating or helping create an open architecture, for example to accelerate market uptake, encourage competitive supply, appropriate value from complementary segments of the supply chain.?

For a summary of the issues such a strategy for open innovation might consider, look at Creating an Open Innovation Strategy

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