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42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
42629 lecture 2 pt1
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42629 lecture 2 pt1

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Open Innovation …

Open Innovation
http://www.youtube.com/watch?v=JE64nCAT7FQ

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  • Hughes Electronics (NYSE: GMH), the communications and automotive electronics division of General Motors (GM), trades separately but is still entirely owned by its parent.
  • Transcript

    • 1. Welcome to 42629Open vs Closed InnovationThomas J. Howardthow@mek.dtu.dk Unless otherwise stated, this material is under a Creative Commons 3.0 Attribution–Share-Alike licence and can be freely modified, used and redistributed but only under the same licence and if including the following statement:“Original material by Thomas J. Howard for course 42629 – Innovation and Product DevelopmentDepartment of Mechanical Engineering, The Technical University of Denmark”
    • 2. Agenda08:30 – Open vs Closed Innovation09:00 – Break and discussion09:15 – Crowd Sourcing09:45 – Exercise10:00 – Break and discussion10:15 – Product/Service-Systems (PSS)10:45 – Exercise11:00 – Break and discussion11:15 – Open Design11:45 – Exercise2 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 3. What is Open Innovation ?3 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 4. Open Design: The Oxford English Dictionary The Oxford English Dictionary – 1st Editionhttp://www.manhattanrarebooks-literature.com/oed.htm “Box of quotation slips” by Owen McKnight, CC BY-SA 2.0 4 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 5. Open Innovation “A paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” (Chesbrough H. W., 2003).5 © 2007 Henry Chesbrough 2012
    • 6. The Power of Open Innovation Concrete Issues (Issue 1/11) - http://www.concreteissues.com/cartoons6 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 7. Why Opening Up is Difficult7 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 8. Game Theory: The Prisoner’s Dilemma• Two robbers enter a house8 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 9. Game Theory: The Prisoner’s Dilemma• Two robbers enter a house• Police catch them• Due to a lack of evidence they can only be charged with trespassing (skudt og dræbt)9 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 10. Game Theory: The Prisoner’s Dilemma• Two robbers enter a house• Police catch them• Due to a lack of evidence they can only be charged with trespassing (skudt og dræbt)They are then given the offer that:• If both remain silent they get 1yr each• If both confess they get 5 yrs each• But if one confesses and the other doesn’t, the confessor gets 0 years and the other gets 20 yearsWhat should the prisoner A do?10 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 11. Game Theory: The Prisoner’s Dilemma• Two robbers enter a house• Police catch them• Due to a lack of evidence they can only be charged with trespassing (skudt og dræbt)They are then given the offer that:• If both remain silent they get 1yr each• If both confess they get 5 yrs each• But if one confesses and the other doesn’t the confessor gets 0 years and the other -5, -5 -20, 0 gets 20 yearsWhat should the prisoner A do? 0, -20 -1, -111 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 12. Opening up is difficultConservative industries consider Knowledge as power to be held tightly Most stakeholders are slaves to the prisoners’ dilemma and therefore -5, -5 -20, 0 reach suboptimal solutions 0, -20 -1, -112 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 13. Activities of Open Innovation Exploitation: • Venturing: Starting up new organisations drawing on internal knowledge, and possibly also with finance, human capital and other support services from your enterprise. • Outward IP licensing: Selling or offering licenses or royalty agreements to other organizations to better profit from your intellectual property, such as patents, copyrights or trade marks. • Employee involvement: Leveraging the knowledge and initiatives of employees who are not involved in R&D, for example by taking up suggestions, exempting them to implement ideas, or creating autonomous teams to realize innovations.VAN DE VRANDE, V., DE JONG, J.P.J., VANHAVERBEKE, W. and DE ROCHEMONT, M., 2009. Open innovation in SMEs: Trends, motives andmanagement challenges. Technovation, 29(6-7), pp. 423-437. 13 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 14. Indicators of Openness Exploration: • Customer involvement: Directly involving customers in your innovation processes, for example by active market research to check their needs, or by developing products based on customers’ specifications or modifications of products similar like yours. • External networking: Drawing on or collaborating with external network partners to support innovation processes, for example for external knowledge or human capital. • External participation: Equity investments in new or established enterprises in order to gain access to their knowledge or to obtain others synergies.VAN DE VRANDE, V., DE JONG, J.P.J., VANHAVERBEKE, W. and DE ROCHEMONT, M., 2009. Open innovation in SMEs: Trends, motives andmanagement challenges. Technovation, 29(6-7), pp. 423-437. 14 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 15. Indicators of Openness Exploration: • Outsourcing R&D: Buying R&D services from other organizations, such as universities, public research organizations, commercial engineers or suppliers. • Inward IP licensing: Buying or using intellectual property, such as patents, copyrights or trade marks, of other organizations to benefit from external knowledge.VAN DE VRANDE, V., DE JONG, J.P.J., VANHAVERBEKE, W. and DE ROCHEMONT, M., 2009. Open innovation in SMEs: Trends, motives andmanagement challenges. Technovation, 29(6-7), pp. 423-437. 15 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 16. Open vs. closed innovation Closed Innovation – the lab is our world Open Innovation – the world is our lab Hire the best and the smartest Recognize that lots of smart people work elsewhere, so find ways to interface with them Put them in special conditions Open your networks to diverse talents Innovators are free from market Innovators are exposed to real world pressures to innovate from within needs, pressures and information exchange to innovate by engagement Very pushy - move technology pipeline Push and Pull - non-linear process of from ideas to products ideation advances products and services Delivered to passive customers Delivered to engaged customers16 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 17. The Current Paradigm: A Closed Innovation System Science & TheTechnology Market Base Research Development New Products Investigations & Services R D&E 17 © 2007 Henry Chesbrough 2012
    • 18. Great Successes from theClosed Innovation Model• The Chemicals Industry – Germany and later US• Edison, GE, and the rise of electrification• Rockefeller and Standard Oil• World War II scientific achievements• Chandler: Internal R&D key to the rise of the modern US corporation in 20th century18 © 2007 Henry Chesbrough 2012
    • 19. Rising Costs of R&DThen (25 years ago) Now•<$ 50 million for a •> $ 800 million for new drug a new drug•< $ 10 million for a •> $50 million for a new consumer new consumer product product19 © 2007 Henry Chesbrough 2012
    • 20. Diminishing Economies of Scale:US Industrial R&D by Size of EnterpriseCompany Size 1981 1989 1999 2003< 1000 employees 4.4% 9.2% 22.5% 22.5%1,000 – 4,999 6.1% 7.6 % 13.6% 14.8%5,000 – 9,999 5.8% 5.5% 9.0% 7.5%10,000 – 24,999 13.1% 10.0% 13.6% 13.4%25,000 + 70.7% 67.7% 41.3% 40.9%Sources: National Science Foundation, Science ResourceStudies, Survey of Industrial ResearchDevelopment, 1991, 1999, 2001, 2003.20 © 2007 Henry Chesbrough 2012
    • 21. Open innovation Closed innovation Other firm´s market Licence, spin Our new out, divest market Internal technology base Internal/external Our current venture handling market External technology insourcingExternal technology base 21 Stolen with pride from Prof Henry ChesbroughHenry Chesbrough © 2007 UC Berkeley, Open Innovation: Renewing Growth 2012 from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27, 2004
    • 22. The Division of Innovation Labor•Open Innovation separates innovation into multiple stages –From a marathon to a relay race•Lab and Test Equipment are Fundamental to this division of labour –Customer’s ability to verify that spec –Supplier’s confidence that good product was delivered –Enables the innovation baton to be passed efficiently and effectively22 Stolen with pride from Prof Henry ChesbroughHenry Chesbrough © 2007 UC Berkeley, Open Innovation: Renewing Growth 2012 from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27, 2004
    • 23. IBM’s Closed Value Chain All IBM – pre 1993 Solutions Value-Added Activities Applications Productivity SW Operating Systems Computers Chips, devices Atoms Materials Value Chain23 © 2007 Henry Chesbrough 2012
    • 24. IBM’s Open Business Model Integration Other Integrators Solutions Value-Added Activities Applications Applications Productivity SW Productivity SW Operating Systems Operating Systems Computers Computers Chips, devices Chips, devices Atoms Materials Materials IBM Chain OEM Market24 © 2007 Henry Chesbrough 2012
    • 25. IBM’s Open Source Business Model•Spends about $100M each year on Linux –50% for general improvement –50% for specific improvements for IBM gear•Others spend another $800M a year•IBM creates value through Linux –Also donates development tools, patents•IBM captures value through value-added services and software “up the stack”25 © 2007 Henry Chesbrough 2012
    • 26. Procter & Gamble•P&G used to be a VERY closed organization –“We invented Not Invented Here” J. Weedman•P&G financial crisis, in 2000 –Missed a series of quarterly financial estimates –Stock market lost confidence in the company –Stock price fell by more than half in 4 months! –CEO (Jagr) was fired26 © 2007 Henry Chesbrough 2012
    • 27. Searching for the Root Cause•“We fundamentally had a growth problem. Our current brands were performing well. But we weren’t developing many new brands.” C. Wynett•To get new brands, P&G needed to open up.•Connect and Develop strategy lead to: –Crest SpinBrush –Swiffer dusters –Olay Regenerist27 © 2007 Henry Chesbrough 2012
    • 28. The New P&G•Many processes to enable open innovation –Technology scouts –Legal templates for IP, partnering –Investments in Innovation Intermediaries•The Goal Now: Become the open innovation partner of choice28 © 2007 Henry Chesbrough 2012
    • 29. Balancing Internal and External R&D Funding: P&G 100  Westinghouse% from  RaytheonExternal  TI P&G 2002  Nokia 0  Hitachi 0 % from internal 100 29 © 2007 Henry Chesbrough 2012
    • 30. Balancing Internal and External R&D Funding: P&G 100  Westinghouse P&G% from  Raytheon 2007External  TI 2002  Nokia 0  Hitachi 0 % from internal 100 30 © 2007 Henry Chesbrough 2012
    • 31. 31 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 32. 32 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 33. Apple iPhone Collaborator Network http://www.benmillen.com/portfolio/proje cts/iphoneDeconstruction/map2.html33 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 34. Apple iPhone Collaborator Network http://www.benmillen.com/portfolio/projects/iphoneDeconstruction/map2.html34 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 35. Benefits of Open Innovation?• Multiple sources of ideas, parallel discovery• Faster exchange of ideas through innovation actor networks and shared development• Lower costs• Skilled labour is more mobile and independent• Ability to outsource is growing with more distributed workforce• More agile, better able to deal with uncertainty of markets and technology, more adaptive, more efficient• End of knowledge monopolies (conventional IP models) as predominant economic leverage35 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark
    • 36. Questions ?36 Original material by Thomas J. Howard for course 42629 – Innovation and Product Development 2012 Department of Mechanical Engineering, The Technical University of Denmark

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