Open Innovation management strategy& implementation
Companies consider innovation as a major engine to enhance their
performance and to strengthen their competitive position in the market. Many
firms have paid most of their management attention to a greater focus on
internal efficiencies of the development process, team structures, decision
making and cross functional interaction. However, as more and more
companies bring innovation straight to the heart of their corporate strategies,
developing internal innovation capabilities is no longer sufficient to gain and
sustain competitive advantage.
Since innovation strategies look increasingly similar and commoditized, more
and more organizations try to further improve their innovation performance
through intensifying collaboration across industry networks and
partnerships, opening up their innovation processes in line with the open
Chesbrough defines open innovation as: “the use of purposive inflows and
outflows of knowledge to accelerate internal innovation, and expand the markets for
external use of innovation, respectively. Open Innovation is 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”
Open innovation is characterized by the involvement of all company
functions, at different stages of the innovation process, not just R&D. Ideas
are investigated at the research stage and the best and most promising of
these make it to development and commercialization phases. Less promising
ideas are dropped.
Open innovation as a management model is currently gaining grounds in
many industries. For instance, open innovation modes have been identified as
one of the main trends in pharmaceutical innovation today. Since it is too
costly to have all competences in-house, pharmaceutical companies have
started to concentrate on core competencies evolving around technology
platforms and therapy areas, in the same time as collaborations with the right
partners is increasingly important. Balancing the right size and structure of
R&D is one of main objectives in R&D management today to analyze the
impact of open innovation on several parts of the organization. For example
Procter & Gamble is a company that has been a pioneer in this field of
innovation. They are global manufacturers and marketers of consumer
products with complex operational networks. P&G have been able to
maintain their position in the market by adopting various innovation
techniques and strategies.
The ideas of open innovation originated from experiences from open source
software (OSS) development where new principles for development projects
were identified and initially a lot of literature was based on technology
transfer and spin out/spin in, but the scope has rapidly broadened.
Today, open innovation is becoming a paradigm that connects research from
various parts of management sciences. The term is still being debated and
many authors agree that open innovation has a much broader application
than first proposed by Chesbrough. The research field is expanding in many
directions and the ongoing debates cover a multitude of areas connected
through the overall aim of understanding how firms can become more
Open innovation has received increasingly attention in scientific research, but
so far it has mainly been analyzed in large, high-tech multinational
enterprises (MNEs) drawing on in-depth interviews and case studies. A few
studies have demonstrated that open innovation also exists in early stage of
implementation in smaller organizations.
Prior studies have not yet systematically analyzed the notion of open
innovation in SMEs. Hence, it still remains to a large extend an unanswered
question how small firms adopt to open innovation. In spite of increasing
interest in open innovation management strategy, discussion about the
concept and its potential application to the SME sector has been excluded
from mainstream literature. SMEs are the largest number of companies in an
economy, but they are under researched in the open innovation literature.
Open innovation research recognizes that small firm’s plays a prominent role
in the contemporary innovation landscape because are by nature more open.
In addition Open innovation strategies are discussed in the context of large
R&D intensive firms However, good practices from large organizations
cannot be transferred to SMEs directly.
Finally there is limited conceptualization of open innovation strategies. In
existing research openness is regularly treated as a binary variable. Despite a
large body of literature on innovation, there is little said on how the process
of innovation actually takes place. When attempts have been made, they have
often ended in descriptions and analyses on how you prepare for, and what
the contingency factors are.
Although the era of open innovation has begun for many firms, we still lack a
clear understanding of the mechanisms, inside and outside of the
organization, when and how to fully profit from the concept.
It might be helpful to address some of the research questions – knowledge
gaps in an interesting field – to develop such a theory: firstly, we know that
intellectual property will play a core role in open innovation, but the
determinants of successful tradable patents still need to be identified.
Patent valuation remains quite problematic, as most patent transactions are
not reported publicly, and patents are highly idiosyncratic by their very
construction. Secondary markets require better information on valuation if
they are to advance materially in the medium term. A longitudinal analysis of
an auctioning firm’s patents or of a patent fund might be very helpful.
Secondly, the next logical open innovation step is trading intellectual
property and, especially, patents, which holds huge potentials for both patent
owners as well as traders. But the crucial question for policy makers remains
whether this is good for the economy. It seems clear that some minimal
protection is essential to stimulate risk-taking, and it seems equally clear that
extremely strong patents strangle any follow-on inventions that build on
them. Balancing risk-taking and promoting cumulative innovation are
challenging social questions.
Thirdly, SMEs are the largest number of companies in an economy, but they
are under researched in the open innovation literature. There are large sample
studies that show that open innovation policies benefit (Laursen and Salter,
2006), but these same studies also show that larger size benefits.
A crucial question for SMEs is how they can manage open innovation despite
the liability due to their smallness. This is especially relevant when a firm is
dependent on a few strong customers, such as the automotive sector.
Fourthly, the existing work does not focus sufficiently on open innovation’s
spatial aspect. Opening up the innovation process creates a challenging
situation of managing dispersed virtual R&D teams. These teams are more
difficult to energize, coordinate and enable in their knowledge creation. The
operational functioning of open innovation depends on firms’ ability to
manage decentralized innovation processes and often includes participants
who are not even on the company’s payroll. At the same time, large firms
internationalize their own R&D with two dominant motives: to be closer to
their markets and lead users and to access the best talents worldwide by
increasing their absorptive capacity.
A great deal of management research has to be carried out to merge these two
young research fields. Last, but not the least, there is as yet no holistic model
of open innovation that includes the innovation process’s determinants and
industry specifics, as well as the limits to opening it up.
The field of open innovation is still at an early stage; it offers a wide field in
which academics, practitioners and policy makers can be active.
This proposal will be focused on the development of open innovation
management strategy support tools for Small and Medium Enterprises
(SMEs) in order to:
• Design and develop sustainable products and processes
• Service customers better through more sustainable business models
Today, open innovation has changed its status from the research interest of a
few to a mainstream research area. Initiated by scholars in the field
technology and innovation management, it is currently often also cited in
strategy, general management and organization behavior journals. The
question is: How far will open innovation go and how long will it last? A real
paradigm shift is irreversible and differs from fashion and science hypes in
terms of its long-term impact.