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Distributed Perspectives on Innovation
 

Distributed Perspectives on Innovation

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“Distributed Perspectives on Innovation: Open Innovation, User Innovation and Beyond.” Keynote talk given 5 May 2010 at the Georg-August-Universität Göttingen, for workshop entitled “New ...

“Distributed Perspectives on Innovation: Open Innovation, User Innovation and Beyond.” Keynote talk given 5 May 2010 at the Georg-August-Universität Göttingen, for workshop entitled “New Forms of Collaborative Production and Innovation: Economic, Social, Legal and Technical Characteristics and Conditions”

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  • Franke’s term
  • Also, the other counterpoint is the vertically integrated model, where in order to do anything, you have to do everything.
  • Franke’s term
  • This is the sources of innovation diagram shown as a value network/ecosystem diagram
  • Franke’s term
  • This is the sources of innovation diagram shown as a value network/ecosystem diagram
  • Overlapping commercialization modes, notably OI-inbound and UI-input New commercialization modes not previously studied For specific phenomena, an opportunity to differentiate overlapping but distinct innovation modes

Distributed Perspectives on Innovation Distributed Perspectives on Innovation Presentation Transcript

  • Distributed Perspectives on Innovation: Open Innovation, User Innovation and Beyond Joel West blog.OpenInnovation.net San José State University New Forms of Collaborative Production and Innovation Georg-August-Universit ä t G öttingen May 5, 2010
  • Today’s Story
    • Traditional and distributed innovation
    • Similarities and differences
    • Emerging areas of research and practice
    • Conclusions
  • What is “Innovation”?
  • Defining “Innovation”
    • Some disagreement over “innovation”:
    • Technical vs. economic (or both)
    • Radical vs. incremental
      • Is cost reduction radical? (Leifer et al)
    • Adopter vs. producer perspective
    • New to the firm vs. new to the world
    Source: Bogers & West (2010)
  • Latent value of an innovation
    • “ The inherent value of a technology remains latent until it is commercialized in some way.”
    • A business model unlocks that latent value, mediating between technical and economic domains.
    • – Chesbrough & Rosenbloom (2002)
  • Invention vs. Innovation
    • “Inventions … do not necessarily lead to technical innovations . In fact the majority do not. An innovation in the economic sense is accomplished only with the first commercial transaction.”
    • —Freeman (1982: 7)
  • Non-commercial Application
    • “Innovation is composed of two parts: (1) the generation of an idea or invention, and (2) the conversion of that invention into a business or other useful application.”
    • — Roberts (1988: 12)
  • Vertically Integrated R&D Research Investigations Development New Products & Services The Market Science & Technology Base Source: Chesbrough (2006)
    • Research of Alfred D Chandler (1918-2007)
    • Studied large US firms 1840-1940
    • Firms vertically integrate to supply own inputs and control their outputs
      • R&D is an essential part of integration
      • Technology industries require large R&D labs
      • Markets don’t exists to buy/sell innovation
    • Integration widely adopted in practice
      • Pattern of large 20th C US and MNC firms
    Vertical Integration
  • Distributed * Perspectives on Innovation * i.e. O/U/CI
  • Value Network Suppliers Focal Firm Comple- mentors Users Rivals
  • Sources of Innovation X = Sources of Innovation; † limited emphasis Source: West (2009) Focal Firm Suppliers Customers Rivals Vertical integration X User innovation X † X Cumulative innovation X X Open innovation X X X X
  • User Innovation
    • From von Hippel (1988, 2005)
    • Users know their needs best
    • Goal: engage users in innovation
      • Use empowerment, other motivations
      • Direct (toolkits) & indirect (feedback)
      • Requires processes, tools, design
    • Found in ever-wider domains
  • Free vs. Paid Revealing
    • What do users do with their innovations?
    • Use them and keep quiet
    • Free revealing (Harhoff et al 2003)
      • Share them with other users
      • Give them back to companies
    • Make money
      • Sell them back to companies
      • User-entrepreneur (Shah & Tripsas 2007)
  • Cumulative Innovation
    • Promoted by Scotchmer (1991, 2004)
    • Focus: developing radical innovations
      • Initial innovation is rarely complete
      • Subsequent shared technological progress
    • Competitors build on each other
      • Need rights to each others’ work
      • Some IP regimes hinder C.I.
    • Jungle vs. commune view of rivalry
  • Three Cumulative Patterns
    • Core technology, many derivatives
      • E.g., Cohen-Boyer patent
    • Derivative of many building blocks
      • E.g., GSM/W-CDMA MP3 cameraphone
    • Incremental quality improvements
      • E.g., higher resolution inkjet print heads
    Source: Scotchmer (2004)
  • Open Innovation
    • By Chesbrough (2003, 2006, 2007)
    • Key points:
      • Find alternate sources of innovation
        • Either markets or spillovers
      • Find alternate markets for innovation
      • Central role of the business model
    • Cognitive managerial paradigm
    • Framework consonant with UI, CI
  • R&D under Open Innovation Source: Chesbrough (2006) Current Market Internal Technology Base Technology Insourcing New Market Technology Spin-offs External Technology Base Other Firm’s Market Licensing “ Open” innovation strategies
  • Key Issues for Open Innovation
    • Maximizing returns to internal innovation
    • Identifying/incorporating external innovations
    • Motivating an ongoing stream of external innovations (with or without money)
    R&D Firm Ideas Products Licensees Licensors Motivating Incorporating Maximizing 2 3 1 Source: West & Gallagher (2006)
  • Related Innovation Models
    • Cooperative innovation without monetization:
    • Open Science
      • Cumulative knowledge production
    • Free Software
      • Shared production of shared good
  • Creative Industries
    • Copyright industries involve creativity, not technical innovation
    • Some models consider creativity
      • Open source software
      • Creative commons
    • Parallels to O/U/CI
      • Dispersal, cumulative nature are similar
      • Value creation, capture are different
  • Similarities Across O/U/CI
  • Dispersal of Knowledge
    • “ In Open Innovation, useful knowledge is generally believed to be widely distributed, and of generally high quality.” (Chesbrough, 2006: 9)
    • “ Different users and manufacturers will have different stocks of information … each innovator will tend to develop innovations that draw on the sticky information it already has” (von Hippel 2005: 70)
  • Other Similarities
    • Orientation outside the firm
    • Innovation activities take place across organizational boundaries †
    • Overall, rejecting Vertical Integration
    • † Some U.I. ignores the firm entirely
    Source: Bogers & West (2010)
  • Contrasting Modes of Commercialization
  • Innovation Flows Suppliers Focal Firm Comple- mentors Users Rivals Open Innovation User Innovation Cumulative Innovation all forms
  • O/U/CI innovation modes #1-5 Source: West & Bogers (2010) Knowledge leaks between competitors CI-rival Rivalrous Innovators share knowledge CI-share Cooperative Cumulative innovation Others commercialize the firm’s innovations OI-outbound Inside-out Firm commercializes others’ innovations OI-inbound Outside-in Open innovation Firm commercializes own innovations VII Vertically inte-grated innovation Vertical integration Commercialization Path Abbrev. Innovation Mode Research Stream
  • O/U/CI innovation modes #6-9 Self commercialization UI-startup User entrepreneurship Non-commercial diffusion UI-share User sharing Enhances own utility, but not diffused UI-self User self-help By producers UI-input Lead users User innovation Commercialization Path Abbrev. Innovation Mode Research Stream
  • Antecedents for Selecting Modes
    • Supply conditions
      • Scale economies
      • Cost of production and distribution
    • Demand conditions
      • Heterogeneity of demand
    • Institutional conditions
      • Strength of IP regime
      • Markets for innovation
  • Distinct Commercialization Paths Source: West & Bogers (2010) inside focal firm outside focal firm inside focal firm outside focal firm creation commercialization VII OI-outbound OI-inbound UI-input UI-startup user-generated content crowd sourcing UI-share open science innovation communities free software business ecosystems CI-rival CI-share co-creation
  • Communities
  • Importance of Communities
    • Best known from open source software
    • Implicit in CI research
      • E.g. Meyer (2006) on 19th century airplane
    • Increasingly important in UI
      • E.g. Franke & Shah (2003), von Hippel (2005), Jeppesen & Frederiksen (2006)
    • Finally being recognized in OI
  • Communities in OI
    • Two pre-requisites:
      • Voluntary association of independent actors
      • Enabling innovation commercialization
    • Open questions
      • Who are the members? Individuals (cf. UI communities) or firms (cf. ecosystem, networks …)
      • What are the boundaries?
      • Upstream vs. downstream communities
      • Interactions within vs. with communities
    Source: West & Lakhani (2008)
  • Communities as Third Mode
    • Open innovation has three modes
    • Outside-in: using external innovations
    • Inside-out: commercializing internal innovations
    • Coupled: communities, ecosystems, alliances, consortia etc.
    Source: Enkel, Gassmann, Chesbrough (2009)
  • Communities in OI (3)
    • Study of three innovation communities:
    • Participants from multiple organizations
    • Anchored to specific innovation
    • Shared goals, objectives, identity
    • Leverage distributed competencies
    • Tied to Witte’s Organisation f ü r Innovationsentscheidungen – Das Promotorenmodell
    Source: Fichter (2009)
  • Are Fir ms Only “Open Enough”?
    • Firms, OI communities share interests
    • Firms chronically unwilling to give up control
      • E.g. OSS communities: Apple, Google, Nokia, …
    • Is it possible for firms to be open?
      • Optimistic view: firms gain more by openness
      • Pessimistic view: Firms are only as open as they need to be (West, 2003; West & O’Mahony, 2008)
  • Academic Controversies
  • Why So Many Germans*?
    • They’re everywhere in UI/OI research:
      • OUI (n ée UI) workshop 2003, 2004, …
      • R&D Management Sept 2009 (8-1)
      • Heute
    • Is it Eric’s dad? His co-authors?
      • If so, why the interest in “open” innovation?
    * Plus of course German-speaking Swiss and Austrians
  • Ambiguous Classifications Some phenomena might be UI, OI or VI Phenomenon It’s UI Not UI User entrepreneurs Users have knowledge VI: integrated firm User generated content Users have knowledge OI: Not solving own problem; often paid Open source “ scratching an itch” OI: “pooled R&D”
  • What About Acquisitions?
    • Firms buying innovation by buying firms
      • Cisco growth strategy (Mayer & Kenney 2004)
      • Now Google: Android, Grand Central, etc.
    • Is it OI-Inbound?
      • Externally developed, internally commercialized?
    • Is it VII?
      • Ongoing innovation, commercialization controlled by one firm
  • Why does classification matter?
    • Different assumptions about
      • Sources of innovation
      • Motivations for innovating and diffusing
    • Different managerial advice
    • Different policy prescriptions
      • E.g. IP policy, economic growth
    • Can they all be right?
      • Or is this the blind men and the elephant?
  • Emerging Patterns of Practice
  • Learning from Observation
    • ” The field of innovation studies arguably operates in Pasteur ’s Quadrant, in that the processes and practices of industry actors often extend beyond the bounds predicted by academic theory.”
    • – Chesbrough (2006)
  • Is ICT Vertical Integration Dead?
    • Silicon Valley: distributed innovation
      • Ecosystems
      • Component-based business models
      • User innovation via beta sites, toolkits
      • 1990s, even IBM became distributed
      • Grove (1996) pronounced VI dead
    • Today: increasing integration
      • Apple, Google, HP, Microsoft, Nokia
  • Is OI a Substitute or Complement
    • Open innovation offered as a complement to traditional corporate innovation
      • Increasingly, OI used as a substitute
    • OI-Inbound: OI vs. internal R&D
      • Instead of correcting atrophied internal R&D
      • Firing internal R&D workers (e.g. HP)
      • What about absorptive capacity?
    • OI-Outbound: OI vs. actual business model
      • IP licensing -> Patent trolls
      • Where is the value creation?
  • Monetizing Knowledge Flows
    • Contrasting views of charging for knowledge
      • UI, CI celebrate free spillovers
        • Open source software
        • Other collaborative communities
      • OI emphasizes monetization
        • Universities chasing patent royalties
        • Impact on open science?
      • Which is socially optimal?
    • Tied to IPR policy
      • Ongoing debates over patent trolls, patent reform
  • Conclusions
  • Summary
    • Rapidly growing research on distributed innovation
      • Distinct but overlapping O/U/CI domains
    • Need for
      • Increasing conceptual clarity
      • Understanding of emergent phenomena
  • Future Research
    • Competing hypothesis O/U/CI study
      • Which one predicts better?
    • Joint maximization problem
      • … for all stakeholders in value network
    • Scope of knowledge and innovation
      • Knowledge vs. innovation boundaries?
      • Is there a value to knowledge for innovations other than those that we sell? (cf. Brusoni et al 2001)
  • Danke sehr!
    • Joel West
    • blog.OpenInnovation.net