Open Innovation: Not a Fad but a Phenomenon

1,141 views

Published on

Given by Sabine Brunswicker at the 2013 Red Hat EMEA Partner Conference

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,141
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
27
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Open Innovation: Not a Fad but a Phenomenon

  1. 1. OPEN INNOVATION NOT FAD BUT A PHENOMENON THE ROLE OF OPEN INNOVATION IN TODAY’S GLOBAL AND DIGITAL ECONOMY Prof. Sabine Brunswicker Purdue University, USA and Fraunhofer Society, Germany
  2. 2. INNOVATION IS OFTEN THOUGHT TO BE ABOUT SPECIAL PEOPLE
  3. 3. THE INNOVATION GAME HAS CHANGED¹ Source: 1) Chesbrough (2003)
  4. 4. SINCE 2003… FIRMS ENGAGE IN SO CALLED “OPEN INNOVATION PRACTICES” Google Search Open Innovation : 10/2011 > 8 Mio Hits 05/2013 > 700 Mio Hits
  5. 5. Open Model existing market new market other firm’s market idea sourcing running/successful innovation projectsdiscarded innovation projects Closed Model market + + + new product/ service internal innovation resources internal innovation resources external innovation resources technology sourcing co-development partnerships spin-out Source: Brunswicker (2011); see also Chesbrough (2003, 2006) LET‘S RECAP – WHAT‘S OPEN INNOVATION OPEN INNOVATION DESCRIBES A COGNITIVE FRAMEWORK FOR A FIRM’S STRATEGY TO PROFIT FROM INNOVATION
  6. 6. INNOVATION “CROWDSOURCING” HAS BECOME POPULAR… Firms outsource the task to solve an innovation problem to the public “crowd” - rather than to a designated group of actors - via an open call
  7. 7. CROWDSOURGING IS BUILD UPON THE IDEA THAT „DIVERSITY“ IS THE GENERATIVE MECHANISM FOR INNOVATION source: Chris Anderson (2004), Lakhani (2006), Laursen & Salter (2006) Popularity of resources In-house resources Access to a small number of experts and disciplines „Long tail“ of resources outside the firm‘s boundaries Access to large number of different competencies and various disciplines Range of potential problem solving resources
  8. 8. THE GOLDCORP STORY…. Crowdsourcing challenge: GoldCorp put 000’s of pages of complex geological data online to help discover new veins of gold at its Red Lake mine, Ontario, Canada. US ~$500,000 in prize money Over 1,400 corporations, consultants and universities from 50 countries entered the contest. More than 8 million ounces of gold found. Company’s value rocketed from $100M to $9B Participation and outcome Over 1,400 corporations, consultants and universities from 50 countries entered the contest. More than 8 million ounces of gold found. Company’s value rocketed from $100M to $9B
  9. 9. OPEN SOURCE IS DIFFERENT FROM OPEN INNOVATION…. Value Capture Company Ecosystem In-House Community-driven Value Creation e.g. Microsoft OS e.g. MySpace e.g. pirated music complementors e.g. Linux Kernel …….with the right business model it can be a successful open innovation practice
  10. 10. OPEN INNOVATION IS ABOUT „PROFITING“ FROM INNOVATION Open Source Versus Open Innovation …….Open Innovation requires a business model to ensure both value creation AND value capture
  11. 11. CASE STUDIES SUGGEST THAT THERE IS PERFORMANCE IMPACT Idea-fairs, e.g. tinkerers or suppliers Technology acquisition Research institutes Strategic suppliers Customer integration Further partners Universities Internal/externa l ventures Internet platform Licensing Outside-In Inside-Out Co-Development/Networks Source: Huston & Sakkab (2006), Enkel, Gassmann (2009) “ In Connect & Develop we set the goal to acquire 50% of our innovations externally “ (VP of Innovation) Improvement of the R&D productivity by 60% Within two years P&G has marketed more than 100 new products
  12. 12. OUR RESEARCH SUGGESTS THAT OPENESS IMPROVES PERFORMANCE Success rate of innovation projects (share of successful innovation projects; median) Comparison of firms from different age classes Income from new products/services that are younger than 3 years (median) Comparison of firms from different age classes 11 to 25 years Older than 25 years 6 t 10 years 2 to 5 years Datasource: IMP3rove, Oktober 2010; N=1469; see also Brunswicker (2011): Beyond open innovation in large organisations 47.0% 23.0% 29.0% 19.0% 19.0% 10.0% 15.0% 9.0% 50.0% 20.0% 50.0% 25.0% 60.0% 50.0% 50.0% 5.0% 11 to 25 years Older than 25 years 6 to 10 years 2 to 5 years Wide and diverse open innovation sourcing* Closed/selective approach towards innovation sourcing**
  13. 13. 10 YEARS LATER A FAD OR A PHENOMENON ?
  14. 14. Executive study UC Berkeley and Fraunhofer  Study among the largest firms in Europe and US  Firm criteria: >1000 employees and >250 million USD in sales  Key informants: CEO, COO, or CTO at headquarter  Data collection October– December 2012  125 datasets Adoption of open innovation Abandonment Open innovation experience Management support Intensity 78% practice open innovation today No firm has abandoned open innovation Median of 5 years 71 % have increased management support 82 % have increased open innovation activity IN OUR NEW EXECUTIVE SURVEY WE FOUND THAT OPEN INNOVATION IS ON THE RISE
  15. 15. THERE IS A BUNCH OF OPEN INNOVATION PRACTICES
  16. 16. Challenge  Powering the Grid  Powering your Home Source: www.ge.com, Chesbrough (2012) California Management Review Co-investment strategy  VCs: Emerald Capital, Foundation Capital LARGE FIRMS LIKE GE EXPERIMENT WITH IDEA COMPETITIONS High participation  4000 ideas  75013 entrepreneurs participating Innovation partnerships  23 partnerships  USD 200 million investment GE
  17. 17. OTHERS USE OPEN INNOVATION INTERMEDIARY SERVICES Open Innovation Marketplaces Searcher Solver Community (Technology experts, individuals, entrepreneurs, etc.)Request for proposal Proposes solution and ideas Market for Ideas and Technologies Problem: Strong durable gear materials that do not require lubrication • 26 solutions submitted • 16 new solutions • 8 solutions with potential for development
  18. 18. INNOVATION CO-CREATION WITH USERS IS POPULAR… More than 27 000 visitors More than 350 design contributions 884 members 3980 hours spent
  19. 19. LET‘S TRY TO CLASSIFY THEM…. Direction Inbound Outbound Pecuniary Non-pecuniary Financial flows Acquiring Sourcing Selling Free revealing
  20. 20. THERE ARE A RANGE OF INBOUND PRACTICES IP In-licensing Informal networking Publically funded R&D projects Contracting external R&D services Open Innovation Intermediaries Inbound University grants Supplier innovation awards Own crowdsourcing initative Customer and consumer co-creation Idea and start-up competition
  21. 21. CO-CREATION WITH USERS MATTERS THE MOST 2.34 2.64 2.66 3.37 3.71 3.73 3.87 4.19 4.38 4.43 1 2 3 4 5 6 7 3.80 4.09 3.76 4.01 4.47 4.04 4.11 4.28 4.12 4.68 1 2 3 4 5 6 7 Customer and consumer co-creation Informal networking University research grants Publically funded R&D consortia Contracting of external R&D service Idea and start-up competitions IP in-licensing Supplier innovation awards Crowdsourcing (unknown problem solvers) Specialized services OI intermediaries Not important Highly important Significant decrease Significant increase No change Source: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 91 Importance in 2011 (mean values) Change of importance 2008-2011 (mean values) Inbound practices
  22. 22. Corporate business Incubation and business venturing Donations to commons or non-profits IP out-licensing and patent selling AND THERE ALSO DIFFERENT KINDS OF OUTBOUND PRACTICES Participation in standardization Participation in standardization Selling of market-ready ideas Joint venture activities with external partners Inbound
  23. 23. TRADITIONAL PRACTICES ARE THE MOST POPULAR ONES 2.26 2.43 2.84 3.45 3.75 3.85 4.21 1 2 3 4 5 6 7 3.91 3.74 4.20 4.63 3.97 4.39 4.62 1 2 3 4 5 6 7 Joint venture activities Selling of market-ready products Participation in public standardization Corporate business incubation & venturing IP out-licensing & patent selling Donations to commons or nonprofits Spin-offs Not important Highly important Significant decrease Significant increase No change Importance in 2011 (mean values) Change of importance 2008-2011 (mean values) Outbound practices Source: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 91
  24. 24. CUSTOMERS ARE THE MOST CRITICAL EXTERNAL PARTNER 2.13 2.47 2.54 3.67 3.82 3.82 4.22 4.30 4.51 4.88 5.17 5.54 1 2 3 4 5 6 7 Unrestricted communities Restricted communities Competitors External consultants Contracted R&D service providers Entrepreneurs and start-ups Public research organisations Indirect customer or final consumer Suppliers Universities Customers Internal employees Importance of open innovation partners (mean values; 1= not important to 7=highly important) Average = 3.9* not important highly important Source: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 82
  25. 25. IT IS NOT ABOUT THE INDIVIDUAL PRACTICE AND SOURCE 1 2 3 Supply-chain oriented Technology oriented Ecosystem-wide  Supplier programs  Supplier awards etc.  Direct customer co- creation  University grants  Developercommunities  ContractedR&D services  Third-party developers and service providers  Trusted partner network  Complementarynetwork partners 3 categories of Open Innovation orientation
  26. 26. IT IS NOT ABOUT THE INDIVIDUAL PRACTICE AND SOURCE
  27. 27. ….BUT OPEN INNOVATION IS HARD SOME PEOPLE THINK OPEN INNOVATION REDUCES RESOURCES AND EFFORTS
  28. 28. Source: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 91 THERE IS AN INTERNAL COMPONENT OF OPEN INNOVATION THEY JOURNEY FROM CLOSED TO OPEN REQUIRES NEW CAPABILITIES, ROLES, AND VALUES 3.69 4.55 4.53 4.53 4.89 5.26 3.61 4.28 4.49 4.6 4.97 5.6 1 2 3 4 5 6 7 Avoidance of external or already existing knowledge Effectiveness of intellectual property protection Identifying new innovation sources Protecting internal critical know-how Management of external relationship with innovation sources Managing the organizational change internally Challenges of engaging in open innovation (mean values, 1=not important to 7= highly important) when firm's started today Not important Highly important
  29. 29. WHY ARE FIRMS NOT SATISFIED WITH CROWDSOURCING AND CHALLENGES? Task description Start: Submission of Ideas Many are designed for COMPETITION … And not for COLLABORATION and CO- CREATION
  30. 30. THERE IS A SOCIAL DIMENSIONS OF CO-CREATION 1 4 2 3 Fun Fullfillment Fame Furtune
  31. 31. New SCN platform Gamified TechEd 2011 12 months rolling points THE EVOLUTION OF SAP‘S SCN SUGGESTSTHAT GAMIFICATION MATTERS 2003 2005 2007 2009 2011 2013 Ask the Expert Points introduced Top Contributors Annual Contest SAP Mentoring Program Launch of Gamification Module 10 years SCN Some outcome measures  Activity up by 1,113%  Community feedback up by 250%  Points up by 147 %
  32. 32. OUTLOOK: OPEN INNOVATION IS EVOLVING FINAL SLIDE WITH “WEB” AND NEW MODELS OF INNOVATION The GRAVITY IS SHIFTING EVEN MORE… ..people-centric & decentralized innovation ecosystems
  33. 33. COMPLEMENTORY PARTNERS ARE CRUCIAL IN TODAY‘S BUSINESS ECOSYSTEM ^^ Internet ISP T T T Phone WiFi Enduser system Handset Distribution GUI Shop OS APIs Audio- Dateiformat A A A Millions of songs Thousands of Apps Assembly C C C C Hundreds of components Hardware interface BIOS Betriebs- system iTunes Design Closed IP External supplier Complementor Open Source Closed Standard Open Standard Legend
  34. 34. A LIFECYCL-ORIENTED PERSPECTIVE IS BECOMING MORE AND MORE IMPORTANT BOUNDARIES ARE BLURRING DATA Con- tinued Value Creation Lifecycle-oriented Innovation Ecosystems Standardize and open data Co-create app Application lifecycle Co- create service Users Application developers Application platform Service providers Service integrator Open data provider Launch app & service Operate & con- tinuously improve
  35. 35. FIRMS ESTABLISH DIVERSIFIED INNOVATION ECOSYSTEM Trusted Network New partners Pearlfinder Supplier Government ResearcherDevelopment partner Pearlfinder • Company owned digital community • Challenge-driven innovation • Multi-staged process and individual Terms + Conditions • Link with other open innovation practices Partner and partner selection • Suppliers, universities, development partners, customers • No start-ups • Selection based on„manageral fit“ and stabiltiy, IPR-Policy, „Academic Excellence“ and concrete idea • Selection process based on new methods such as incubation lab ChallengeUni Customers
  36. 36. …AND PROFESSIONALIZE THE MANAGEMENT OF NETWORK RELATIONSHIPS Internal net- works Expert communities Expert support New research partners Market places Web 2.0 Communities New suppliers New development partners Tier 1 Loose innovation contacts New opportunities „Leverage“ (invest) Tier 2/3 Trusted networks
  37. 37. Shifttowardsopenness Phase 1 Phase 2 Phase 3 Phase 4 Source: CAS 2010; Ehrenmann & Brunswicker (2012) Closed System Firm-centric innovation networks New infrastructures New decentralized innovation ecosystems Interne Technologie- Basis Aktueller Markt Aktueller Markt Gescheiterte Ideen/ abgebrochene Projekte Erfolgreiche Ideen/ erfolgreiche Projekte Interne Technologie- Basis Aktueller Markt Aktueller Markt Gescheiterte Ideen/ abgebrochene Projekte Erfolgreiche Ideen/ erfolgreiche Projekte Gescheiterte Ideen/ abgebrochene Projekte Erfolgreiche Ideen/ erfolgreiche Projekte THE SHIFT IS CONTINUING; IT REQUIRES MORE EXPERIMENTATION
  38. 38. New facilitation skills and leadership capabilities New socio-technical infrastructures Experimentation (rather than control) Lifecycle-oriented innovation ecosystems
  39. 39. „If you’re not failing every now and again, it’s a sign you’re not doing anything very innovative.“ Woody Allen Contact: Prof. Sabine Brunswicker, sbrunswi@purdue.edu
  40. 40. BACK-UP
  41. 41. AGENDA  Let‘s recap: 2003 – The emergence of Open Innovation as a new model of industrial innovation  10 years later - The Adoption of Open Innovation Practices in Large firms  Organizing and managing for open innovation – dynamics and socio-technical infrastructures  The emerging landscape of Open Innovation: Towards an Innovation Ecosystem Perspective

×