The document discusses open innovation, particularly its incorporation of suppliers, outlining various perspectives and forms of innovation such as user innovation and cumulative innovation. It emphasizes the importance of integrating external sources of innovation and the challenges related to motivating and managing ongoing streams of external innovations. Additionally, it raises questions about defining innovation and ongoing research topics in open innovation practices.

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