A short description of Open Innovation

Open Innovation is a powerful concept that in recent years has come to the forefront of the management of innovation. While different names are used to describe it – for instance P&G, the highest profile users of the idea, call their programme “Connect and Develop" – Henry Chesbrough coined the term in his seminal book “Open Innovation: The New Imperative for Creating and Profiting from Technology” published in 2003. Chesbrough’s innovation was to create and publish a common language for people and companies to describe to the world and each other what they do. This common vocabulary has enabled people to examine and implement ideas much more quickly and coherently than was the case before Chesbrough wrote up his ideas.

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Closed Innovation, which pertained for most of the 20th Century, is where ideas are dreamed up and developed within corporate R&D labs and sold to a grateful market place. Closed Innovation follows a linear path from idea to market.

The concept of Open Innovation, conversely, is that by looking outside their own boundaries, companies can gain better access to ideas, knowledge, technology and markets than would be the case if they relied solely on their own resources. A relatively uncomplicated concept which makes many people dismiss it as too simple or that it merely describes what they have been doing for years. Indeed in IBM’s 2006 Global CEO study Academia and Internal R&D came at the bottom of a list of eleven key sources for innovation, with Employees, Business Partners and Customers topping the list

So why is Open Innovation such a powerful concept? It is undoubtedly true that most companies will have been doing some aspects of Open Innovation long before 2003 but the world has truly changed over the last few years making Open Innovation both easier to undertake and more essential. The list of reasons is long and includes; globalisation; the spreading of education (especially higher education); the world wide web; the creation of on-line knowledge market places and communities, such as Yet2, Innocentive and Your encore; the rapid rise in Venture Capital leading to a 100 fold increase of technologically advanced start ups and small companies; the increasing proportion of R&D being done by small companies relative to large ones; increasingly rapid technology development and obsolescence; rapidly increasing technological complexity; the relative decline of corporate R&D (great labs such as AT&T’s bell labs used monopolistic cash flows to develop ideas such as transistors as gifts to the world) etc etc.

Open Innovation involves culture change; looking outside intelligently for ideas; changes in staff incentivisation; the building of networks, and networking and collaboration skills, different leadership styles; all the while retaining the internal capacity to both know a good idea when ones comes through the door and to be able to develop it for the market – Open Innovation is not an excuse to close down all internal R&D – it is essential to retain the expertise that it brings, just to deploy it differently and perhaps to grow it more slowly relative to the size of the company’s overall growth.