Open Innovation in Action - Modes of Open InnovationDr. Sabine BrunswickerFraunhofer-Institute for Industrial Engineering & ESADE Business SchoolOpen Innovation 2.0 Conference, Dublin May 21, 2013
Open Innovation in Action: Modes of Open InnovationThe innovation game haschanged¹Source: 1) Chesbrough (2003)
Open Innovation in Action: Modes of Open InnovationThe orginial concept of open innovation describes a cognitive framework for a firm’sstrategy to profit from innovationOpen Modelexistingmarketnew marketother firm’smarketidea sourcingrunning/successful innovation projectsdiscarded innovation projectsClosed Modelmarket+++newproduct/serviceinternalinnovationresourcesinternalinnovationresourcesexternalinnovationresourcestechnologysourcingco-developmentpartnershipsspin-outSource: see also Chesbrough (2003, 2006)
Open Innovation in Action: Modes of Open InnovationSince 2003, the phenomenon is widely discussed and firms experiment with a range ofdifferent practices; do we know which ones matter?Google Search Open InnovationNov 2011 > 8 million hitsMay 2013 > 700 million hitsWidely discussed phenomena Multiple case studies Lack of insights?Adoption andpervasiveness ofof differentmodes of openinnovation
Open Innovation in Action: Modes of Open InnovationIn our new executive survey we found that open innovation is on the rise; it receivesincreasing management support at the top executive levelExecutive studyUC Berkeley andFraunhofer Sampling among the largest firms in Europe andUS Firm criteria: >1000 employees and >250million USD in sales Key informants: CEO, COO, or CTO atheadquarter Data collectionOctober– December 2012 125 datasets(5 % response rate)Adoption ofopen innovationAbandonmentOpen innovationexperienceManagementsupportIntensity78% practice openinnovation todayNo firm has abandonedopen innovationMedian of 5 years71 % have increasedmanagement support82 % have increasedopen innovation activitySource: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 125
Open Innovation in Action: Modes of Open InnovationThere is not „one“ single open innovation strategy; it involves a „bunch“ of practices
Open Innovation in Action: Modes of Open InnovationLarge firms like GE experiment with start-up competitions and idea contests toimplement inbound open innovation and create new innovation ecosystemsChallenge Powering theGrid Powering yourHomeB2B EntrantsOpportunity todevelop commercialrelationship with GEGE investment Nearly 4000 ideas 75,013entrepreneurs 23 partnerships ($200 USD investment)Source: www.ge.com, Chesbrough (2012) California Management ReviewCo- investment &venture partnersEmerald CapitalFoundation Capital….
Open Innovation in Action: Modes of Open InnovationOpen innovation intermediaries are on the rise; various types of firms have beenexperimenting with their services and learn their lessonsIntermediarySearcherMedium-sized firm (incollaboration withassocation)Solver CommunityReseachers, scientist, etc.“Request forproposal”Ideas andSolutionsMarket for Ideas and TechnologiesProblem: Strong durablegear materials that do notrequire lubricationSolutions:26 Solutions submitted16 new Solutions8 Solutions with potential fordevelopment
Open Innovation in Action: Modes of Open InnovationWe can differentiate between inflows and outflows of knowledge; they do notnecessarily imply a direct financial compensationDirectionInboundOutboundPecuniary Non-pecuniaryFinancial flowsSource: Chesbrough & Brunswicker (2013); Dahalander (2010)Inbound &pecuniaryInbound& non-pecuniaryOutbound&pecuniaryOutbound& non-pecuniary
Source. siehe auch Chesbrough (2003, 2006); Dahlander (2010)Open Innovation in Action: Modes of Open InnovationThere are various inbound practices to implement open innovationIP In-licensingInformal networkingPublically fundedR&D projectsContracting externalR&D servicesOpen InnovationIntermediariesInboundUniversity grantsSupplierinnovation awardsOwn crowdsourcinginitativeCustomer andconsumer co-creationIdea and start-upcompetition
Open Innovation in Action: Modes of Open InnovationCo-creation and informal networking are the top inbound practices; new practices score rather low2.342.642.663.373.713.733.874.194.384.431 2 3 4 5 6 73.804.093.764.014.474.044.114.284.124.681 2 3 4 5 6 7Customer and consumer co-creationInformal networkingUniversity research grantsPublically funded R&D consortiaContracting of external R&D serviceIdea and start-up competitionsIP in-licensingSupplier innovation awardsCrowdsourcing (unknown problem solvers)Specialized services OI intermediariesNot important HighlyimportantSignificantdecreaseSignificantincreaseNo changeSource: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 91Importance in 2011(mean values)Change of importance 2008-2011(mean values)Inbound practices
Open Innovation in Action: Modes of Open InnovationJoint venturing is the top outbound mode of open innovation; spin-offs and donations scorevery low in terms of priority2.262.432.843.453.753.854.211 2 3 4 5 6 73.913.744.204.633.974.394.621 2 3 4 5 6 7Joint venture activitiesSelling of market-ready productsParticipation in public standardizationCorporate business incubation & venturingIP out-licensing & patent sellingDonations to commons or nonprofitsSpin-offsNot important HighlyimportantSignificantdecreaseSignificantincreaseNo changeImportance in 2011(mean values)Change of importance 2008-2011(mean values)Outbound practicesSource: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 91
Trusted NetworkNewpartnersPearlfinderSupplierGovernmentResearcherDevelopmentpartnerOpen Innovation in Action: Modes of Open InnovationIndeed, we found that new partnerships and innovation networks are the driving force of openness;IT offers firms new affordances for new kinds of innovation networks and empowers individualsPearlfinder• Company owned digital community• Challenge-driven innovation• Multi-staged process and individualTerms + Conditions• Link with other open innovationpracticesPartner and partner selection• Suppliers, universities,developmant partners,• No start-ups• Selection based on„manageral fit“and stabiltiy, IPR-Policy,„Academic Excellence“ andconcrete idea• Selection process based on newmethods such as incubation labChallengeUni
Open Innovation in Action: Modes of Open InnovationLarge firms do not yet recognize the value of connected communities; however, the gravity isshifting….The gravity is shifting….People-centric and digital networksBottom-up innovationConnected citizen
Open Innovation in Action: Modes of Open InnovationThere is an internal component of openness; managing the journey from closed toopen innovation is the biggest challenge3.694.554.534.534.895.263.614.284.494.64.975.61 2 3 4 5 6 7Avoidance of external or already existing knowledgeEffectiveness of intellectual property protectionIdentifying new innovation sourcesProtecting internal critical know-howManagement of external relationship with innovation sourcesManaging the organizational change internallyChallenges of engaging in open innovation(mean values, 1=not important to 7= highly important)when firms startedtodayNot important Highly importantSource: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 91
Open Innovation in Action: Modes of Open InnovationThere are different maturity stages of open innovation; it is a journey of experimentation andlearningClosed system First experimentCreating ofinnovationecosystemSystematicprocesses tomanage internaland externalinnovationsPerformanceMaturity levelsPhase 1 Phase 2 Phase 3 Phase 4 Phase 5Self-sustainingsystem(Platform player)FokalesUnternehmenKonkurrentenKundenKunden derKundenLieferanten2nd tierLieferantenUnis/ Forschungs-einrichtungenKomplementorenIntermediäreCommunitiesInterneTechnologie-BasisAktuellerMarktAktuellerMarktGescheiterte Ideen/abgebrochene ProjekteErfolgreiche Ideen/ erfolgreicheProjekteInterneTechnologie-BasisAktuellerMarktAktuellerMarktGescheiterte Ideen/abgebrochene ProjekteErfolgreiche Ideen/ erfolgreicheProjekteGescheiterte Ideen/abgebrochene ProjekteErfolgreiche Ideen/ erfolgreicheProjekteSource: Brunswicker and Ehrenmann (2012)New capabilities and processes: Design-led experimentation IP by design Network orchestration…
Open Innovation A „new“ paradigm for managing innovation?It is not easy to implement open innovation; it requires a systemic shift and re‐thinking of manyaspects of one’s business to utilize it effectively„If you’re not failing everynow and again, it’s a sign you’re notdoing anything very innovative.“Woody AllenManaging OpenInnovation in LargeFirmsSurvey report - Executive StudyOpen Innovation 2013Henry ChesbroughSabine BrunswickerContact:Sabine.email@example.com;firstname.lastname@example.org
Open Innovation A „new“ paradigm for managing innovation?We are observing a shift towards the network level of open innovation activities; innovationcommunities and partnerships become more and more importantSource: Pisano and Verganti (2008)Elite Circle ConsortiumInnovation Mall Innovation CommunityGovernanceParticipationFlatHierarchyClosedOpen
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