MOOI Theme 3

:

Processes and structures for
open innovation

Prof. Henry Chesbrough, University of California, Berkeley & ESADE

Prof. Wim Vanhaverbeke, Hasselt University, ESADE & National
University of Singapore

Dr. Nadine Roijakkers, Hasselt University


February 4, 2013
Processes and structures for OI:
Overview Innovation: Overview

Findings
 Both vertical and horizontal integration work,
depends on the business
 Distinction between formal and informal
organization. How OI is related to these forms?

Implications
 Key actions to implement in an organizational
structure
 Some organizational structures
2
FINDINGS
Processes and structures for OI:
Overview Innovation: Overview

Findings

 Both vertical and horizontal integration works,
depends on the business

 Generally distinguishes between formal and
informal organization. How OI is related to these
forms

4
Processes and structures– Finding 1:
Vertical and horizontal integration:
Overview

Both vertically and horizontally integrated companies have moved
forward with adopting open innovation concepts, but the resulting
innovationprocesses are distinct:
 Horizontally integrated companies
 [..] because they leverage their market position and network
of suppliers/clients to become the nexus of the evolving open
innovation network[..].
 In this way, these central companies are greatly increasing
the number of ideas coming in [..]while greatly decreasing
their R&D costs.

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Processes and structures– Finding 1:
Vertical and horizontal integration:
Overview

 Vertically integrated companies
 normally have a very strong core competency in their product
development, and their competitive advantage is based on this.
[..]
 These firms are not blessed with the same network of suppliers
and clients as their horizontally oriented compatriots;[..].
 Challenge … these large R&D operations can produce too many
ideas all trying to go down the product development funnel


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Structuring horizontal and vertical OI
• Horizontal OI:
– Standards? Precompetitive R&D?
• Vertical OI (Lego):
– “We have made a … cultural shift internally, where we have gone from
considering our customers as necessary intermediaries for reaching
our end users to see them as very important partners” Mads Nipper
– Partnerships with large customers like Wal-Mart, Target and Toys-r-us
has proved invaluable to Lego.
• more shelf space
• involve both customers and some of the key suppliers in the development
of new products.
• “Lego invites up to 20 of their largest and most important customers very
early in their development process in order to discuss what the new
products should be and whether the pricing ideas are right.”


7
Processes and structures for OI:
Overview Innovation: Overview

Findings
 Both vertical and horizontal integration works,
depends on the business
 Generally distinguishes between formal and
informal organization. How OI is related to these
forms

Implications
 Elements to implement in an organizational
structure
 Some organizational structures
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• “Formally structured organizations tend to be more
bureaucratic and are characterized by institutionalized rules,
[..], difficult integration across functions,[..].”
• “an informal organizational structure is characterized by
openness in the system which is a necessary precondition for
idea initiation in the innovation process“
• “An informal organizational structure is positively related to
the creation of open innovation by an organization.”
• ” A formal organizational structure is negatively related to the
creation of open innovation by an organization.”

9
Processes and structures– Finding 2:
Formal and informal structure:
Interactive poll 1
What are the three most important general structural elements
for stimulating Open Innovation?

• Centralized OI decision-making
• Flat hierarchy
• Informal way of working/communicating
• Horizontal integration
• Project-based organization
• Cross-functional teams/boundary spanning roles
• Empowerment in OI implementation


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implications
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Processes and structures for OI:
Overview Innovation: Overview

Findings

Implications
 Key actions to implement in an organizational
structure
 Some organizational structures
12
Processes and structures– Implication 1:
Elements to implement in an organizational
structure: Overview

Seven key actions in order to structure open innovation management
and organize for OI:
1. Delegation of Decisions to OI Teams.
2. Integration of R&D into the Business Units.
3. Co-Location of OI-Teams and Departments.
4. Central OI Teams.
5. Central OI Funds.
6. External Interface for Open Innovation.
7. Merger & Acquisition Department.

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Processes and structures for OI:
Overview Innovation: Overview

Findings

Implications
 Key actions to implement in an organizational
structure
 Some organizational structures
14
Processes and structures– Implication
2: Some organizational structures

Overview

• View of company-wide needs
& levrage across businesses
• Brings strategic growth
options
• Experts in OI skills & IP
• Central contact point
internally & externally
• Need to work to be viewed as
a business unit team member
• Acceptance requires support
from the top

OI generalist in each business
Lack of OI expertise in each
skill
View of business specific needs
and markets
Some leverage across
businesses
Community of Practice for OI
skill development
Central contact point by
business
Viewed as a business unit team
member
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• OI generalist in each
business
• Lack of OI expertise in each
skill
• View of business specific
needs and markets
• Lack leverage across
businesses
• Different OI practices by
business – diffcult to
develop a community of
practice
• Central contact point by
business
• Viewed as a business unit
team member
Centralized
Decentralized
Hybrid form
Current OI management structure at P&G
Bert Grobben – until recently Director Open Innovation Asia-
Pacific (Singapore) in P&G’s new Innovation Center
• Global responsibility for particular technologies (Skincare)
• Managing Asia Pacific portfolio of Open Innovation partners
and defining landscape and capabilities for building Best in
Class Open Innovation and Connect & Develop approaches.
cost innovation, strategic alliances & Academic, SME and MNC
interactions.
• Businesses in P&G have their local OI-team which can tap into
the major OI-centers around the world.



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Interactive poll 2
What are the three most important specific structural
elements for stimulating Open Innovation?

• Delegation of Decisions to Innovation Teams
• Integration of R&D into the Business Units
• Co-Location of Teams and Departments
• Central Innovation Teams
• Central Innovation Funds
• External Interface for Open Innovation
• Merger & Acquisition Department

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References
- Blog, http://www.communitech.ca, April 2011
- Dr. Sharan Kaur, International Journal of Business and Social
Science, Vol. 2 No. 6; April 2011
- Wentz RC: Die Innovationsmaschine, Springer Berlin-Heidelberg
2007
- Snyder NT, Duarte DL: Strategic Innovation: Embedding
Innovation as a Core Competency in Your Organization. Jossey-
Bass, Hoboken, 2003
- Lafley AG, Charan R: The Game-Changer, Crown Business,
New York 2008
- Blog, Linda Beltz, organizational structures for open innovation,
http://www.15inno.com/2011/09/02/organizationalstructures/
- Stephen Lindegaard:
http://www.15inno.com/2010/03/12/legovertical/




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Q&A
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