Open Innovation

the modern concept of open innovation was coined in the early 2000s by writer Henry Chesbrough.

In his book, Chesbrough defines open innovation as “the use of purposive inflows and outflows of
knowledge to accelerate internal innovation, and expand the markets for external use of innovation”.

Open Innovation Past and present

By Henry Chesbrough

Source: editorialdesk@innovationmanagement.se

Businesses and organizations have always invited feedback from the wider public for suggested
improvements to their products and services.

Open innovation is the practice of businesses and organizations sourcing ideas from external sources as
well as internal ones.

This means sharing knowledge and information about problems and looking to people outside the
business for solutions and suggestions.

In practice, open innovation can take the form of established partnerships like Delphi and Mobileye
working on autonomous driving systems, through to co-creation competitions like the BMW startup
challenge, and crowdsourcing portals like the ‘My Starbucks Idea’ platform.
Instead of the secrecy and silo mentality of traditional business R&D, open innovation invites a wider
group of people to participate in problem-solving and product development.

Open innovation isn’t just a one-way street, either. By inviting others to participate in generating ideas
for products and services, companies can also share information and expertise with communities of fans
and customers.

Open innovation is basically an alternative to this conventional method of doing innovation where
information has to stay within preset confines. A mindset, if you will, of being open to sharing and
receiving information.
Open vs Closed Innovation

You may’ve not heard of “closed innovation”, but I’m sure you’re familiar with it. It’s what just about all
known companies in more traditional industries do to birth new products or services.

Closed innovation relies on the idea that internal expertise (ideas), along with an iterative process for
managing that expertise, can sustainably produce new businesses. Information is kept within the
confines of the company and is not shared with any external parties. Thus, it looks like the funnel on the
left, with solid walls representing the limiting yet secure internal development process.

Open innovation, on the other hand, is based on the belief that knowledgeable and creative individuals
outside the company can also contribute to achieving strategic goals and that sharing intellectual
property both ways is useful for different parties in different ways. The more information is gained, the
more educated the decisions ultimately are. The open innovation funnel on the right is more like a
hybrid between a sieve and a funnel, as the development process is not limited to individuals within the
facilitating company. In addition, the amount of ideas is also higher.

What

Open innovation is the practice of businesses and organizations sourcing ideas from external sources as
well as internal ones.

This means sharing knowledge and information about problems and looking to people outside the
business for solutions and suggestions.
The boundaries between a firm and its environment have become more permeable; innovations can
easily transfer inward and outward between firms and other firms and between firms and creative
consumers, resulting in impacts at the level of the consumer, the firm, an industry, and society.

---- Instead of the secrecy and silo mentality of traditional business R&D, open innovation invites a wider
group of people to participate in problem-solving and product development.

Why

The central idea behind open innovation is that, in a world of widely distributed knowledge, companies
cannot afford to rely entirely on their own research, but should instead buy or license processes or
inventions (i.e. patents) from other companies.

Example:

Samsung - Diverse types of collaboration

Samsung has also been qualified as one of the most innovative big companies today. Of course,
Samsung has a major internal R&D unit, but the company is also a proud open innovation advocate and
does open innovation collaboration especially with startups.

How

A party (or rather, parties) together facilitating a challenge where people can propose ideas to fix a
general problem.

Regardless, it was the transparent utilization of external contributors to achieve a greater good.