Innovation Management

2021-0412 AD5129


7.1 Open Innovation Ch. 3

A00999997


Jorge Fernando Duque González

May 26, 2021

 The Open Innovation paradigm
The open innovation paradigm means that valuable ideas can come from inside or
outside of the company and can go to market from inside or outside of the company as
well.

A closed innovation paradigm was preferred when most of the knowledge was
generated inside of a company, usually by an R&D department that had most of the
world’s experts on the technology that the company was using, but this is changing.

Knowledge is not centralized to R&D departments inside organizations anymore. There

are experts online who contribute their expertise to open-source projects, researchers
from top universities contributing scientific papers to open knowledge databases,
teachers with entire groups of alumni learning from them. All of this changes the
viability and desirability of a closed innovation approach. R&D departments are not the
only place where knowledge abounds anymore.

Things that are contributing to the end of knowledge monopolies are the increasingly
smoother diffusion of scientific research from top universities, distribution of patent
awards to non US companies and small/medium firms, as well as the increasing
number of college and post-college graduates in the US, where around 50% of
students in engineering and post-doctoral programs in top universities like Stanford or
the MIT are from outside of the US.

This is considered by many the end of the industrial research era, yet successful
companies won’t be the ones complaining about it but rather the ones that make use
of this change in trends: instead of developing new technology for your own use, you
can take the technology that someone created and find uses to it that the market will
pay for. Companies can manage their intellectual property not to prevent their
competitors from using their technology, but rather to profit from their advances (with
the royalties received). Some uses may even include funding new startups and
coaching them in order to get multiples off the initial investment once the startup gets
acquired. You don’t need to invent the most (or best) new knowledge to win, instead
you win by making the best use of internal and external knowledge in a timely way to
create new products or services.

This expands the role of internal researchers from knowledge generation to also
knowledge brokering: generate knowledge and know when to use it or share it, find
gaps and fill them, integrate external knowledge when it makes sense to do so or even
find profitable ways of selling it.

An important part of the open innovation paradigm is the VC industry, which under the
closed innovation paradigm had a negative reputation, in open innovation it’s the place
where new organizations sprout, carrying novel ideas that can disrupt markets,
generating vast amounts of knowledge or new research areas that can benefit current
companies that are open to the benefits this can give them.