Open Innovation

OPEN INNOVATION AND DYNAMIC CA PA BILITIES FOR INDUSTRY & GROWTH Alar Kolk [email_address] [email_address] www.alarkolk.com

B uilding New Innovation Capability to Identify Future Opportunities

I dentify N ew G rowth O pportunities

D efine & Implement New Innovation Strategies

G enerate & Deliver Better Ideas

R enew Organizatonal Capabilities

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

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.

idea!

but there is no common language

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

interdisciplinary approach

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 well 1 . 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 era 2 . CLOSED & OPEN BUSINESS MODEL OPEN INNOVATION! 1,2 H.Chesbrough, 2003

D ynamic capabilities as the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments 1 . S ome 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 exit routines) 2 . EXPLORATION & TRANSFORMATION DYNAMIC CAPABILITIES Roald Amundsen, Robert Scott, Umberto Nobile 1 Teece et al 1997 2 Eisenhardt and Martin 2000

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

think outside-of-the box

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 around what its internal repertoire is likely to be in the future 1 . Collaborative know-how is a particular type of knowledge that determines whether companies can develop specialized knowledge via expertise and then use it to obtain further benefits 2 . STEP OUT OF THE BOX!!! PATH DEPENDENCY We had become stuck in our past and weren’t stretching far enough to innovate new ideas , to “step out of the box.” D avid O. Swain , ex. CTO, Boeing 1 Teece et al, 1997 2 Simonin 1997

we re-invent the wheel

.. . improve it

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

user-centered

P latform 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)

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 outputs 1 . A business model has two functions: 1.Value creation 2.Value capture 1 Chesbrough, Roosenbloom 2002

20 senti 2 0 krooni 2 krooni 30 – 70 krooni

.. . execute -> project portfolio

the big picture (business model)

how do you earn your money with this business model?

Traditional (product) value chain versus Modern (business model) value chain

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.

Business Model:

market segment

value proposition

value chain

c/profit mechanism

value network

competitive strategy

Economic Outputs: e.g., value, price, profit Technical Inputs: e.g., feasibility, performance Measured in technical domain Measured in economic domain

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

how do you change a business model and innovate ?

how do you measure the success of a business model?

strategic fit

… evaluate, learn and redesign -> manage improvement

.. . select the right teams and people -> make responsible

.. . outline key indicators to follow -> choose measures

OPEN INNOVATION AND DYNAMIC CA PA BILITIES FOR INDUSTRY & GROWTH Alar Kolk www.alarkolk.com [email_address] [email_address]