“…innovation is the process of
turning ideas into value and
perspectives…”

Open Innovation & Smart
Business Models
Alar Kolk
www.alarkolk.com
kolk@cc.hut.fi

Building New Innovation Capability
to Identify Future Opportunities
- Identify New Growth Opportunities
- Define & Implement New Innovation Strategies
- Generate & Deliver Better Ideas
- Renew Organizatonal Capabilities

different levels of innovation
business model innovation
product & service innovation
process innovation
technology innovation

New Knowledge
& Innovation…

idea!

Knowledge Creation as the
Self-Transcending Process
i : individual
g : group
o : organization
Nonaka & Konno 1998

week’s worth of The Times…

Knowledge Leadership
Nonaka, Toyama, Konno 2000

Knowledge Creation as the
Self-Transcending Process
Nonaka & Konno 1998

Financial
Innovation…

The Dow-Jones index of the largest companies
traded on the U.S Stock…
market declined 22%, the worst week in the index's 118-
year history

Growth &
Innovation…

Growth is top of mind for business
executives. Strong, value creating
revenue growth lies within reach of
corporations that pursue best practice in
innovation, strategy, marketing,
operations and organizations.
WHERE and HOW
to Grow?
For companies aspiring to grow, where to
compete is just as important as how. To
choose the right battlegrounds, they must
match their distinctive capabilities with
sectors where profitability growth is likely
to occur.

How to Grow?

Service
Innovation…

Transformative Business
Disciplines…

Correlating Service Innovation Outcomes to The
Ten Types of Innovation

The Five Lessons of the (Service)
Innovation Journey

Open
Innovation…

CLOSED & OPEN BUSINESS MODEL
OPEN INNOVATION!
Open Innovation means that
valuable ideas can come from
inside or outside the company
(industry) and can go to market
from inside or outside the
company (industry) as well1.
This approach places external ideas
and external path to market on
the same level of importance as
that reserved for internal ideas
and paths to market during the
Closed Innovation era2.
1,2
H.Chesbrough, 2003

Open innovation
Other firm´s
market
Licence, spin Our new
out, divest market
Internal
technology base
Internal/external Our current
venture handling market
External technology
insourcing
External technology base
Henry Chesbrough, 2004

STEP OUT OF THE BOX!!!
PATH DEPENDENCY
At any given point in time, firms
must follow a certain
trajectory or path of
competence development. This
path not only defines what
choices are open to the firm
today, but it also puts bounds
We had become stuck in our past and
weren’t stretching far enough to around what its internal
innovate new ideas, to “step out of repertoire is likely to be in the
the box.” future1.
David O. Swain, ex. CTO, Boeing
1
Teece et al, 1997

Learning & Diversity
Boeing VP Dick Paul & CTO David O. Swain went to P&G and asked how they were
getting ideas and how they were thinking about R&D. After the visit they remarked, “P&G
had some great thoughts, which affected what we did; we went home and did a couple of
things differently and that was an example of us beginning to open our eyes to the world
and trying to integrate that into our planning process

EXPLORATION & TRANSFORMATION
DYNAMIC CAPABILITIES
Dynamic capabilities as the firm's
ability to integrate, build, and
reconfigure internal and external
competences to address rapidly
changing environments1.
Some dynamic capabilities integrate
resources (product development;
strategic decision making), others
focus on reconfiguration of recourses
(knowledge brokering) within firm
and other dynamic capabilities are
related to the gain and release of
recourses (knowledge creation
routines; alliance, acquisition and
Roald Amundsen, Robert Scott, Umberto Nobile
exit routines)2.
1
Teece et al 1997 2Eisenhardt and Martin 2000

Developing Portfolio of Capabilities
Innovation
Dynamic Capabilities
Sensing Seizing Transforming Technological
Capabilities
Open
Capabilities
Operational Capabilities
Learning

1995 1998 2000 2003 2004 2005 2006
?
Core Search Ads Monetization Communications Collaboration ?

Microsoft® Sync

Platform leaders (companies that drive industry wide innovation for an
evolving system of separately developed pieces of technology) are
navigating challenges from wannabes (companies that want to be
platform leaders) and complementors (companies that make ancillary
products that expand the platform’s market. Platform leadership is the
ability of a company to drive innovation around a particular platform
technology at the broad industry level.
Cusumano and Gawer (2002)

Outside-in
Innovation…

Space
Innovation…

EADS Space Plane from
London to Sydney – 2,5 hours

MEETING THE CHALLENGES OF
SPACE TOURISM
Space Tourists International Space Station
(ISS) uus äri ning hotell?

L-Commerce…

LOCATION COMMUNITY
LOCATION COMMERCE
E-Commerce
+
M-Commerce
=
L-Commerce

GPS-Enabled LBS Subscribers by Region, World
Market: 2005 to 2011*
* ABI Research

Social
Communities…

Platforms &
Innovation…

PLATFORMS & Business Models
Google & Microsoft
Microsoft Virtual Earth
Google Earth

Business Model
Innovation…

GROWTH & OPEN
BUSINESS MODEL
The business model provides a
coherent framework that takes
technological characteristics
and potentials as inputs, and
converts them through
customers and markets into
economic outputs1.
A business model has two
functions:
1.Value creation
2.Value capture
1Chesbrough, Roosenbloom 2002

Traditional (product) Value Chain
vs.
Modern (business model) Value Chain

30 – 70 krooni
20 krooni
2 krooni
20 senti

Business Model:
• market segment
Technical Economic
• value proposition Outputs:
Inputs:
• value chain e.g.,
e.g.,
feasibility, • c/profit mechanism value,
performance price,
• value network profit
• competitive strategy
Measured in technical domain Measured in economic domain
The business model mediates between
technical and economic domains
Over the years, entrepreneurs have been mostly known for technical
innovations. And there are many great companies that have been built on top of
technical innovations like Intel, Cisco, Oracle, Apple, and arguably Microsoft.
If you think of Federal Express, Google, Netflix, these companies were built on
business model innovations.

Focus in Business Model
A business model is a conceptual tool that contains a big set of elements and their
relationships and allows expressing the business logic of a specific firm. It is a
description of the value a company offers to one or several segments of customers
and of the architecture of the firm and its network of partners for creating,
marketing, and delivering this value and relationship capital, to generate profitable
and sustainable revenue streams.
Osterwalder, Pigneur and Tucci (2005)

... improve it

Portfolio
Operational
Capabilities
Open Dynamic
Capabilities Capabilities
Technology
Capabilities
Portfolio of Capabilities
& Business Model

how do you measure the
success of a business model?

Revenue Growth, Life Cycle &
Innovation Dynamics
Business model innovation has captured the attention of executives tasked with achieving
growth in the face of increasing competitive pressure. Business model innovation suggests
that if you took an existing product and repackaged how you sold it, you can hold off
competitive pressures and even capture entirely new market segments.

Business Model & Culture