Innovation
Innovation is the implementation of a new or significantly improved idea,good, idea, good, service, process or practice which is intended to be useful Rubenstein defined innovation as the process whereby new and improved product, processes, materials, and services are developed and transferred to a plant and/or market where they are appropriate
Relation between Technology & Innovation
Technology is the practical implementation of learning and knowledge by individuals and orga or gani niza zati tion onss to ai aid d hum human an en ende deav avor or.. Tech Te chno nolo logy gy is th the e kn know owle ledg dge, e, pr prod oduc uct, t, procesess, tools, and system used in the creation of goods or in the provision of M argar aret et A. Whi White te an and d Ga Garr rry y D services ( Marg Bruton)
Tec ech hno nolo logy gy en ena abl bles es inno nov vati tio on innovation innova tion enables enables technolo technology gy
Technology = input for innovation Innovation = resulted on new technology
Technology
Innovation
and
Open Innovation THE BASIC PREMISE pening ening up the innovation process ” “O p ” DEFINITION siv ve infl flo ows and ou outtflows of „ The use of purposi knowledge to accelerate internal innovation, and to expand the markets for external use of innovation, respectively ‟ ‟ (Chesbrough et al., 2006:1 2006:1) ) The first process is called inbound open innovation and the second out-bound open innovati innovation on Henry Chesb Chesbroug rough h con connect nected ed the proc processe esses s of acquiring external knowledge and explo exp loiti iting ng int intern ernal al kno knowl wled edge ge ext extern ernall ally y by placing them both under the open innovation umbr um brel ellla wit ith h th the e la lab bel els s INBO IN BOUND UND AN AND D OUTBOUND OPEN INNOVATION
Based on these terms term s Herzog (2011) defined the open innovation as...
A holistic approach to innovation management management as “systematically encouraging and exploring a wide range of internal of internal and external sources for innovation innova tion opportunities, opport unities, consciously consciously integrating int egrating that exploration with with firm capabilities and resources,, and broadly resources b roadly exploiting those opportunities through multiple channel channels” s”
Difference between Open & Closed Innovation "Closed" Innovation Viewpoint
"Open" Innovation Viewpoint
Nobody can know what we are innovating
Nobody can know the confidential ideas that we are working on
Spending more on internal R&D will improve our market position and help us grow
"Smart" innovators engage with the global innovation community and reap the highest returns
First-to-patent = highest profit
First-to-market = highest profit
We need more R&D staff to close our knowledge gaps
We need our R&D staff focused on our core competencies, allowing outside solution providers to provide the rest
OPEN INNOVATION INNOV ATION IS USUALLY CONTRASTED CONTRASTED WITH CLOSED INNOVATION •“Supposedly •“ Supposedly its it s predecessor, where companies generate their own innovation ideas, and then develop, build, market, mar ket, distribute, service, finance, and support them on their own” (Chesbrough, 2003a, 2003a, p. 20)
Comparison between....
Closed Innovation Paradigm
Perusahaan melakukan riset dan pengembangan dengan resource dari internal perusahaan, dan hasil/produk-nya dilindungi oleh perusahaan sampai diluncurkan ke pasar/market
Open Innovation Paradigm
Perusahaan melakukan riset dan pengembangan dengan resource dari internal dan eksternal perusahaan, demikian pula hasil penelitian internal dapat dipakai oleh eksternal perusahaan
Why we need to t o applied OPEN INNOVATION PARADIGM? To increase investment in new business bu siness
Firms expect to further reduce their
development
internal basic reserach efforts
To managing the product portofolio
To make more use of acquiring technology from external sources
To be competitive, to create the basis for
Deepen their competence base in their
innovation strategies
current technologies and markets
Technologies and markets sooner or later will be mature •
Firms need to initiate new businesses
Firms need to focus on their current business •
Firms need to identify, acquire, and develop new competencies, simultaneously
RELEVANT DEVELOPMENTS IN THE WIDER INNOVATION ENVIRONMENT INCLUDE INCLU DE :
Social Soci al an and d ec econ onom omic ical al ch chan ang ges in working patterns, Increased labor division due to globalization, Impr Im prov oved ed mar arke kett in inst stit itut utio ions ns fo forr trading ideas, And the rise of new technologies to collaborate across, Ggeographi Ggeo graphical cal dista distances nces (Da (Dahland hlander er and Gann, 2010)
THE ‘DO-IT-YOURSELF’ MENTALIT MENTALITY Y IN INNOVATION MANAGEM MANAGEMENT ENT JUST BECAME OUTDATED (GASSMAN, 2006) Trends suc Trends such h as ou outso tsourc urcing, ing, agi agilit lity, y, and fl flexi exibil bility ity had al alre read ady y fo forc rced ed co comp mpani anies es to re reco cons nsid ider er th thei eirr stra st rate tegi gies es an and d pr proc oces esse ses s in ot othe herr ar area eas, s, an and d to become network organizations
Content of Open
Innovation
Open innovation is a relatively new and rich concept THE 3 CONTENT OF OPEN OP EN INNOVATION: Classifications of openness main in act activ ivit ities ies of in Th The e two ma inboun bound d versus outbound open innovation The focus shifts to the various aspects of open innovation effectiveness
Classification of Openness The
various knowledge flows in open inno in nova vatio tion. n. Lic Lichte htent ntha hale lerr an and d Lic Lichte htenth nthal aler er (2009) distinguish between three knowledge processes: Knowledge exploration, Retention, Exploitation tha th at ca can n be pe perf rfor orm med ei eith the er in inte tern rna all lly y or externally
Op Open en
innova inno vati tion on pr prac acti tice ces s can grouped by distinguishing between Process Outcome
also
be
Various ways of innovation i nnovation based on the openness of both the process and the outcome of innovation INNOVATION PROCESS
INNOVATION OUTCOME CLOSED
OPEN
CLOSED
1. CLOSED INNOVATION
3. PU PUB BLIC INNOVATION
OPEN
2. PRIVATE OPEN INNOVATION
4. OPEN SOURCE INNOVATION
CLOSED INNOVATION Pro rop pri rie eta tarry innov ova ati tion on is deve de velo lope ped d in-h in -hou ouse se (Che (C hesb sbro rou ugh gh,, 20 2003 03a) a),, bo both th the the pr pro oce ces ss and th the e outcome are closed
PRIVATE OPEN INNOVATION The Th e ou outco tcome me is clo close sed d (a proprie proprietary tary inn innova ovation) tion) but the process is opened up, up, either by using the input of external partners or by externally exploiting an internally developed innovation. Such as Procter & Gamble (Huston and Sakkab, Sakkab, 2006 2006))
PUBLIC INNOVATION Devoting scarce resources to innovation and then to give away the outcome for free seems highly unlikely for economists (e.g., Lerner and Tirole, 2005; Kogut and Metiu, 2001), but in some cases it makes good econ ec onom omic ic se sens nse e (v (von on Hi Hippe ppell an and d vo von n Kr Krog ogh, h, 20 2006 06). ). Th The e ex exam ampl ple e is standard setting, setting, where the original innovators do not exclude others to use an innovation in order to reap the benefits of a de facto market standard, examples include the introduction of JVC’s VHS videotape in 1976 and the IBM PC in 1981
OPEN SOURCE INNOVATION Whe Wh ere bo both th th the e inn innovati ovation on proc process ess and an d th the e outc tco ome ar are e ope pen n. Open source sour ce so softwar ftware e is th the e bes estt known example of this category example ms offi of fice ce by mi micr cros osof oftt & op open en of offi fice ce by oracle
Inbound vs Outbound Innovation INBOUN INBO UND D OP OPEN EN IN INNO NOVA VATI TION ON refers to internal use of external knowledge OUTBOUND OPEN INNOVATION refe re fers rs to extern external al exploit exploitati ation on of internal knowledge
This relates to the three knowledge processes of knowledge exploration, retention, and exploitatio exploitation n that can be performed either inside or outside a firm’s boundaries (Lichtenthaler and Lichtenthaler, 2009 2009))
INBOUND INB OUND INN INNOV OVA ATION Empirical studies have consistently found that comp co mpan anie ies s pe perf rfo orm mo morre in inbo boun und d th than an outbound activities : Chesbrough and Crowther, 2006; Bianchi et al., 2010;; Cheng and Huizingh, 2010 Chiaroni et al. Procte Proc terr & Ga Gam mbl ble e re repo port rted edly ly only only us uses es 10 perc pe rcen entt of its te tec chn hnol olog ogiies (Hu Hust sto on an and d Sakkab, 2006 2006))
OUTBOUND OUTBO UND INNO INNOV VATION Possible explanations for external under exploitation exploitati on include: Historical reasons The possibility to use existing relation- ships diff ffu usi sing ng rel elev eva ant kno now wled edg ge The fear of di (Rivette and Kline, 2000) To give away corporate ‘crown jewels’ (Kline, 2003)
A rise in efforts of companies to license out their technologies (Fo Fosf sfur uri, i, 2006; Granstrand nd,, 2004) Motorola estimates the potential of licensing out as $10 billion annually (Lichtenthaler, 2007)
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Effectiveness Interesting issue is what aspects of open innovation activities make the concept effective: Lower costs Shorter time to market More sales Licensing technologies increases company profits Exploiting company’s own market to focus at the expense of its customers Offe fens nsive ive re reas asons ons (sti tim mul ula ati ting ng gro row wth) wer ere e more Of important impo rtant than defe defensive nsive reas reasons ons (dec (decreasi reasing ng cos costs ts and risks) The Th e cha chain in of op open en inn innov ovati ation on eff effec ects, ts, from immediate to long term, strategic consequences: trateg egic ic be bene nefi fits ts of ou outb tboun ound d op open en “S trat inno in nova vattio ion n in incl clud ude e ge gettti ting ng ac acce cess ss to new markets and enhancing the firm‟s tech te chno nolo logi gical cal po posi siti tion on” (Lichtenthaler, 2007; Nagaoka and Kwon, Kwo n, 2006)
Context of Open Innovation I. INTERNAL CONTEXT CHARACTERISTICS: Company characteristics related to demographics and strategies Demographics include: Number of employees, Sales, Profits, Age, Location, Market share, Ownership type. Strategy characteristics include: Strategic orientation, Aspects or goals of the innovation strategy, Incumbents versus new entrants, Organizational culture.
II.
EXTERNAL CONT EXTERNAL CONTEXT EXT CHARA CHARACTER CTERISTIC ISTICS: S: The most obvious external context characteristic is indu in dust stry ry.. Man any y op ope en in inno nova vati tio on st stud udie ies s fo focu cus s on specific industries : Consumer
electronics (Christensen et
al., 2005), Food (Sarkar and Costa, 2008), Financial services (Fasnacht, 2009), Automotive (Ili et al., 2010), Biotechnology (Fetterhoff and Voelkel, 2006; Bianchi et al.,) Applying open inno innovatio vation n se see ems to be more a matter of business strategy than a matter of industry trends (Keupp and Gassmann, 2009), op e n innovation adop ad optio tion n th the e in inter ternal nal en envi viro ronm nmen entt in firms is more important than the external environment. environment.
Open Innovation Process I.
TOWA TO WARDS RDS OPE OPEN N INNOVA INNOVATIO TION N The tr The tran ansi siti tion on pr proc oces ess s fr from om cl clos osed ed to op open en innovation Chiaroni et al. (2010) identify four organizati organizational onal dimensions:: dimensions Inter-organizationall networks, Inter-organizationa Organizational structures, Evaluation processes Knowledge management systems
II. OPEN INNOVATION INN OVATION PRACTICES The ou The outsi tside de pla playe yers rs ran range ge fr from om su suppli ppliers ers,, cus custom tomer ers, s, and competitors, to research institutions and organizations in very diff di ffere erent nt in indu dustr strie ies s th that at ei eith ther er ha have ve sol olut utio ions ns th tha at ca can n impro imp rove ve the company’s inn innova ovation tions s or tha thatt can ex explo ploit it solutions the company has developed. developed. Fetterhoff and Voelkel (2006) propose a model including the following five stages: (1) seeking opportunities, (2) evaluating ev aluating their market potential and inventiveness, (3) recruiting potential potentia l development partners, (4) capturing ca pturing value through commercialization, (5) extending the t he innovation offering
Conclusion
Open in Open inno nova vati tion on is a co conc ncept ept th that at has recently attracted a lot of atte at tent ntio ion, n, bo both th in pr prac acti tice ce an and d in acad ac adem emiia wi with th th the e ba basi sic c pr prem emis ise e opening up the innovation process ” “ opening ” One of the main reasons is that the concept inb inbou ound nd / out outbo bound und op open en innovation fits very well with many trends in the broader management arena The firm need to applied open innovation paradigm becau because se of the adva ad vant ntag ages es and th thei eirr st stra rate tegy gy to make the effectiveness The „do -it- -it- yourself‟ enta tallity in yourself‟ men innovation management just became outdated
