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Open Innovation: Incorporating Suppliers

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Talk by Joel West at a Academy of Management PDW (Professional Development Workshop) in Montréal, August 7, 2010. See http://www.openinnovation.net/Conference/AOM2010/ for full program

Talk by Joel West at a Academy of Management PDW (Professional Development Workshop) in Montréal, August 7, 2010. See http://www.openinnovation.net/Conference/AOM2010/ for full program

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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.
  • 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
  • Franke’s term
  • Transcript

    • 1. Open Innovation: Incorporating Suppliers Joel West blog.OpenInnovation.net San José State University “ Open Innovation With Suppliers” Academy of Management Professional Development Workshop August 7, 2010
    • 2. Today’s Story
      • Distributed perspectives on innovation
        • Some explicitly incorporate suppliers
      • Innovation takes different forms
        • Some of which only apply to suppliers
      • Interesting unresolved questions
        • Some specific to supplier integration
    • 3. Distributed Perspectives on Innovation
    • 4. 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
    • 5. Vertically Integrated R&D Research Investigations Development New Products & Services The Market Science & Technology Base Source: Chesbrough (2006)
    • 6.
      • 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
    • 7. 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
    • 8. 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
    • 9. 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)
    • 10. User Innovation
      • From von Hippel (1988, 2005)
        • 1988 talks about supplier contributions
      • 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
    • 11. 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
    • 12. Innovation Flows Suppliers Focal Firm Comple- mentors Users Rivals Open Innovation User Innovation Cumulative Innovation all forms
    • 13. Distinct Commercialization Paths Source: West & Bogers (2010) Tuesday 1:15pm! 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
    • 14. Open Issues in Open Innovation Research
    • 15. 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)
    • 16. Form of “Innovation”
      • External innovation may take many forms:
      • Knowledge (or “sticky information”)
        • Must it be codified/codifiable?
      • Formal IP (i.e. patent)
      • Component (e.g. chip)
      • Tool (e.g. machine tool)
      Source: Bogers & West (2010)
    • 17. Ongoing OI Research Topics
      • Open innovation motivation/willingness
        • E.g. Pecuniary vs. non-pecuniary (West & Gallagher, 2006; Dahlander & Gann, 2010)
      • Processes for open innovation
        • Search
        • Use/incorporation vs. “not invented here”
      • Integration with communities
    • 18. Possible OI/Supplier Topics
      • Is captive outsourced production OI?
        • or a different form of VII? (Toyota)
      • What are the best incentives?
        • Direct or indirect (i.e. purchase)
      • Does supplier OI help/hurt profits?
        • Can improve scale efficiencies, TTM
        • Could decrease differentiation
      • How is supplier search like OI search?
    • 19. Thank You!
      • Joel West
      • blog.OpenInnovation.net