Open Innovation: Is it Really Worth Sharing?

I recently received a very interesting comment. So interesting, in fact, that I feel it is worth posting. Sit tight, this is a long post. I would like to thank Micheal for putting forth such an interesting question.

Michael wrote:

The entire special report on Innovation in the recent Economist is worth the read. In the article you cite, “The Love-in…” I would be curious to read your critical assessments about the challenges facing management to even move slightly toward “open innovation”.

For example, it seems that one of the daunting issues facing management when contemplating such a move is to redefine the firm’s value proposition. I can illustrate one example from a recent conversation with a book author. He wrote his first book about 25 years ago and his most recent in 2004. He was lamenting that his most recent book can now be downloaded from several web sites. Aside from whether the availability of his book on these sites is legitimate, let’s assume that it is, to him it means that he is not being compensated for the consumption of his work product.

I think this is a relevant example because. as in open innovation, the value of his work has shifted from the physical representation of his work — the book — to something else. He could see this as a new opportunity to gain credibility as the expert he clearly is that will lead to other “value generating” activities (e.g., career enhancement, consulting engagements, etc.).

Perhaps this is a trivial example of open innovation, but I think the basics are there. For firms that move toward open innovation they clearly have to accept that “always invented here” meant they could patent their ideas and build a patent portfilio of some value of its own, while also generating profits from products and services flowing from the inventions/innovations. But if they are content to not own the inventions themselves, then a new value proposition needs to established to make it all worth the effort.

I don’t know the answer to this question. I suspect it varies by firm, product, service and industry – but I’m reasonably certain it’s a major question facing the prospectcs of open innovation.

Agree? Disagree? Thanks!

Michael, I absolutely agree when you say that the entire special report on Innovation in the recent Economist is well worth the read. Innovation is such a hot topic, that having the economist dedicate so many pages to it was quite a treat.

Though the articles examine innovation from many angles, they continue to leave us (or me anyway) with that lingering feeling that though a lot of possibilites were presented, little was laid out in the way of real, solid roadwork. That is to say, there was no “tear out, foldable, pocket innovation roadmap” for me to use. Not that that is the ultimate goal, but it would be nice if we were a little closer.

I must tell you though, that I have only recently begun to familiarize myself with the world of innovation, in the economic sense. I am a beginner, and I find it fascinating, but I am by no means an expert. That in mind, I found your example of the writer very relevant.

A similar example, that came to me immediately when I read your post, was something currently happening in the music industry. For some artists, the challenge of controlling illegal downloads has proven to be a tsunami not worth swimming against. Within the last few months, a few major artists (e.g., Madonna) have announced that they will not re-sign with their record companies and will offer their music online, for free. Indeed, this indicates that they are confident that they have developed a new, innovative, business model and will gain revenue with other ‘value generating’ activities (e.g. concerts, merchandise, other appearances, etc). These are exciting (though if you are a recording executive, I bet REALLY scary) times in the music industry with regard to innovation. I believe the publishing industry will be forced address similar issues, as you have shown.

For many industries, the R&D/in house patent model is so difficult to let go of (the pharmaceutical industry comes to mind). I think it will continue to be that way depending on the product or service offering. It is crucial to keep in mind that a patent is only as good as the attorneys protecting it. So, for smaller companies, it might not be a justifiable fight, thereby making open innovation, potentially, a more profitable choice. Not owning the patent and sharing the knowledge or technology does force the organization to find ways to add value that are not easily duplicated. It forces companies to innovate.

Open innovation requires networks. The trick, it seems, it to manage your networks and offer enough information to keep a continuous flow (both to and fro) yet not give up the entire farm, so to speak. You want to give up enough knowledge or technology to nuture your network, but not so much that you put yourself out of business. This is a delicate balance and one that is very much a constant concern for the IT industry.

So, I agree. If companies are content to not own the inventions themselves, then a new value proposition needs to be established to make it all worth the effort.

Thank you so much for such a compelling comment! Please visit again.
Nina.

Open Innovation = “Never Invented Here”?

An article in The Economist (Oct 13th-19th, 2007 p.16-19) titled “The love-in: The move toward open innovation is beginning to transform entire industries” This article discusses the interesting dynamics of open innovation and how some industries embrace it, while others simply do not.
Henry Chesbrough, wrote “Open Innovation” and “Open Business Models” and is largely credited with popularizing the concept of open innovation. He is a professor at UC Berkeley, and the article states that he “observes with a smile that ‘this is the 40th anniversary of the Summer of Love’.” Berkeley, “at the very heart of the anti-establishment movement of the 1960s”…spawning “plently of radical thinkers”, seems a natural birthplace for concepts and ideas in relation to innovation.

Open innovation results in organizations sharing and gleaning ideas with individuals and organizations outside their own. Bright ideas are openly shared and used resulting in more agile corporate development. Fast failure and getting products to market more quickly, reduced internal R&D expeditures are potential benefits. Losing the proprietary technology necessary to mantaining a competitive edge is a possible downside.

Here are some surprising stats:

All in all it is a pretty interesting article and makes compelling arguements both for, and against, open innovation. You can read it here.

And the picture of the stethoscope at the top of the page is from Bang & Olufsen. I just like their design process. They collaborate with students and universities a lot. Smooth design.

Strategy for Strategy

Consulting consultants.  Strategy for strategy.  An extra layer for complexity for my project.  Certainly, I have increadible resources at my fingertips.  Guidance and windom at my disposal (I hope).  In a lecture today we learned of the sociological thoughts on networks and networking, in contrast to the economic perspective we are comonly exposed to.  Of course there was mention of Chesbrough’s theory on “open innovation” and how networks function in that context, however the sociological appoach was far more squishy and fluid.  The lecturer likened a network to a snapshot of a film.  In other words, it is everchanging.  Everytime a new connection is made via an existing connection, the power position changes as does the network’s structure as a whole.  (This, by the way, is all in realation to the startup phase of small high-tech firms.) It was interesting to hear a philosopher’s point of view on the subject and it is completely relevant to my consulting project.  I immediately got her card, put her in my network and hope to find an opportunity to seek her counsel.