Welcome to the Open Innovation Day2012

Hkan Ozan, Director, Swedish IT-User Centre (NITA) Manager, Open Innovation Forum

Agenda
1. 2. 3. 4. 5. The The The The The history of innovation. importance of innovation today. history of innovation management. growth of the IT industry and the web. changing field of innovation open innovation

From industrialism to individualism

THE HISTORY OF INNOVATION

In the beginning
14th century in (into) and novare (novelty). Pre-18th century. Innovation meant disrupting stability.
Disrupt: To throw into disorder, to interrupt the normal course

First appearance Dictionary of the English Language (1755): Innovation: Change by the introduction of novelty. The French revolution 1789. The first industrial revolution (steam engines and railways). The second industrial revolution (electricity, cars and manufacturing systems) 1850.

1900-1940: Productivity
The establishment of mass production

Scientific management (Taylor, 1911). Fords mechanised assembly line 1913. Methods like industrial engineering, operations management, production function, etc. Massive increase in the production of consumer goods. Technology-push driven, sellers market.
The linear evolution of innovation throughout the last century
1900s 1940s

productivity

1940-1970: Efficiency
The introduction of mass consumption

Increased competition, lower prices, rising incomes and increased global wealth. Mass retailing. Introduction of a credit-based purchasing system. 1950s: mainly product innovations. 1960-70s: mainly process innovations.
The linear evolution of innovation throughout the last century
1900s 1940s 1940s 1970s

productivity

efficiency

1970-2000: Quality
The introduction of quality management

Efficient production processes and robotics led a flooded consumer market. From the sellers market to the buyers market. 1980s: robotics boom. 1990s: quality control boom (1987, 1994: ISO 9000) TQM, TPS, Lean Manufacturing, Six Sigma
The linear evolution of innovation throughout the last century
1900s 1940s 1940s 1970s 1970s 2000s

productivity

efficiency

quality

2000-: Innovation
The necessity of new thinking

Companies can now produce plenty, efficiently and with quality. Tremendous global productivity leads to perfect competition, implying eroding profit margins. Differentiation becomes the key!

The linear evolution of innovation throughout the last century

1900s 1940s 1940s 1970s 1970s 2000s 2000s

productivity

efficiency

quality

innovation

From industrialism to individualism

THE IMPORTANCE OF INNOVATION TODAY

The need for structured innovation

Several recent studies point to the global importance of innovation: IBM Global CEO Study (1,500 CEOs) Boston Consulting Groups Senior Executive Innovation Survey (3,000 top executives) McKinsey Global Survey on Innovation (722 top managers) Findings: 84% of all top executives define innovation a top-three priority (McKinsey, 2010) 27,5% of annual investments will be spent in innovative solutions. (IBM, 2009)

The need for structured innovation

At the same time the following results are presented:
Over 50% of the companies are dissatisfied with the financial results of their innovation spending. Only 23% of the companies have a formalized innovation process. The largest obstacle for successful innovation efforts is lack of internal coordination.

This has led to a exploding demand for research and competence in the field of Innovation Management.
McKinsey, 2010

From industrialism to individualism

THE HISTORY OF INNOVATION MANAGEMENT

What is innovation management?

Innovation management is managing structured methods for incorporating creativity and new thinking in organizations with the purpose of creating new business. Innovation management manages innovation strategy, processes, organizational structure, culture and methods and tools for creating a more innovative organization.

The history of innovation management

Innovation management has grown to be a new field as a result of the increased demand for structured innovation.
*Laws of imitation. (Tarde, 1890) Theory of social change. (Ogburn, 1922) Establishment of research laboratories. (1930s) The linear model of innovation. (Maclaurin, 1945) Innovation studies. (Freeman, 1960s) *Measuring innovation. (OECD, 1991)

The evolution of innovation

1900s 1940s 1940s 1970s 1970s 2000s 2000s

productivity

efficiency

quality

innovation

The evolution of Innovation management

Maclaurin

Freeman

OECD

Numerous Actors...

From industrialism to individualism

THE GROWTH OF THE IT INDUSTRI AND THE WEB

The growth of IT and the web

Separately from the industrial revolution another disruption has come along that is changing the world around us dramatically.

The growth of IT and the web

In 2005 Tim OReilly introduces the term web 2.0. In 2006 Andrew McAfee coined the term Enterprise 2.0. These new communication patterns makes external competence affordably accessible. So how has this changed the area of innovation?

The changing field of innovation

OPEN INNOVATION

Open innovation
Due to the Internet revolution we are facing a whole new scope on innovation: Closed innovation (the old) Companies must generate their own ideas. Having the best experts employed in the organization. Strong focus on intellectual property rights and protecting innovation from competitor exploration. Is based on a certain mistrust of user competence and ideas.

Open innovation
Innovation as a production process
Product

1. Closed innovation
Idea

Product development

Open innovation
Increased competitiveness has lead to an erosion of closed innovation: Semi-closed innovation (the evolution) Companies are still generating all ideas in-house. A sense of user involvement is present. End-users are accounted for earlier in the process. End-users are asked to verify closed innovations.

Open innovation
Innovation as a production process with user involvement 2
Idea User studies Product

2. Semi-closed innovation

Product development

Open innovation
Increased competitiveness has lead to an erosion of closed innovation: Erosion factors Increased competitiveness demands shorter time to market. More experts and easier access to expertise. Skilled labor more mobile/independent. The transaction cost of finding new competence decreases (Coases theorem). Alexandrian information access. Increase of venture capital.

Open innovation

A new era requires a new innovation approach Open innovation (the new) Understands that trying to think out-of-the-box is more difficult than having people thinking in your box. Utilizes external competence and micro-employments. Embraces the insight that the best user is the user himself and that personalization is important. It is not about having the best production process any more, it is about being the most customer oriented and having a more agile and flexible production process.

Open innovation
Innovation as a dynamic eco system

3. Open innovation

Open innovation
Inform

3. Open innovation
retize

Structuring the flow From idea to innovation

Conc

Ideas

Produce

an Org

ize

Summary: The changing field of innovation

The evolution of the IT industry The evolution of innovation

1900s 1940s Mainframes 1940s 1970s Personal computers Internet Web 2.0 2000s

1970s 2000s

productivity

efficiency

quality

innovation

Open Inno- va+on

The evolution of Innovation management

Maclaurin

Freeman

OECD

Numerous Actors...

Hkan Ozan, Open Innovation Forum www.openinnovationforum.com +46 708 858585 hakan.ozan@nita.uu.se

THANK YOU!

Open Innovation Day 2013

Monday March 11 Sheraton Stockholm

Prof. Frank Piller Director, Technology & Innovation Management Group at RWTH Aachen. Co-director, MIT Smart Customization Group

Jeffrey Phillips Author of Relentless innovation (2011) and Make us more innovative (2008).

Confirmed speakers

Open innovation