Open Innovation is a new model of innovation that has become more relevant in the last decade. This is an innovation process that comes after the use of what we know as closed innovation. Closed innovation focuses only on the use of internal knowledge and resources to promote innovation. Open Innovation is a new paradigm that takes this process one step further by incorporating the use of external technology and information to better develop and distribute new innovations throughout the market. This helps ideas become realized as projects with other organizations and external partners to develop new products for the benefit of the internal and external business market.
Open Innovation promotes the use of information flowing from within the company as well as from external sources, in order to speed up the internal innovation and enlarge the markets for external use of innovation (Chiaroni, D 2011). This concept has often stemmed from the desire to change and improve innovation management practices in firms. (Chesbrough, H. W., Vanhaverbeke, W., & West, J. 2017). Throughout the years the meaning of Open Innovation has started to focus heavily on the flows of knowledge over business boundaries. This type of thinking affects the strategy that researchers must use by changing their responsibilities to include “moving knowledge into and out of the silos”. This means that the external knowledge can be just useful as knowledge created from within (Chesbrough, H. W. 2011).
One of the early concepts associated with Open Innovation is the Open Innovation Funnel, which is considered a starting point. It not only summarizes the key aspects of open innovation but also connects it to the existing management and theories used within the company. The funnel shows that there are multiple types of inter-organizational agreements to gather ideas and technologies into the funnel or to re-introduce unused technologies (Chesbrough, H. W., Vanhaverbeke, W., & West, J. 2017). The funnel diagram shows how research can end up being used for their current market within the company but also outsourced to others for the use of new market ventures. A major decision in this concept involves whether to develop technology internally or externally. Outsourcing knowledge takes place via alliances, licensing agreements, and spin offs. On the other hand, insourcing knowledge related to research agreements, co-development ideas, corporate venturing, in-licensing agreements, and outright acquisitions. (Chesbrough, H. W., Vanhaverbeke, W., & West, J. 2017)
Since Open Innovation is a rather new concept in the business world, it is still being explored how to efficiently manage and implement this concept. It has been found that many firms fail in the category of internal organization. Although the satisfaction rate of those who have switched to this process are rather high numbers, the means of managing open innovation needs improvement. Since it is complicated to find a balance between successfully integrating new technology internally as well as introducing it to the external environment, it is important that there is already a stabile internal organization in place to benefit from open innovation. In a recent study, they found that in order to find harmony, it is necessary to adjust the management characteristics on a micro and macro level. Macro level referring to the main external characteristics that could be affected using this innovation process, such as the market, industry, and technology. On the other hand, the micro aspect of this managing approach focuses on the corporate culture, politics, internal technological capabilities and corporate knowledge management tools. (Chesbrough, H. W., Vanhaverbeke, W., & West, J. 2017). Once the management aspect of the process has been determined, it is necessary to focus on the implementation process. Implementation strategy changes depending on which dimension is involves. In Open Innovation there is said to be 4 major dimensions involved including, networks, organizational structures, evaluation processes and knowledge management systems. However, no matter which dimension is being dealt with there is a common 3 phase process which is often used for implementing open innovation. This includes unfreezing, moving, and institutionalizing (Chiaroni, D., Chiesa, V., & Frattini, F. 2011).
- Chesbrough, H. W. (2011). Open innovation: The new imperative for creating and profiting from technology. Boston, MA: Harvard Business School Press.
- Chesbrough, H. W., Vanhaverbeke, W., & West, J. (2017). New frontiers in open innovation. Oxford: University Press.
- Chiaroni, D., Chiesa, V., & Frattini, F. (2011). The Open Innovation Journey: How firms dynamically implement the emerging innovation management paradigm. Technovation,31(1), 34-43. doi:10.1016/j.technovation.2009.08.007
Author: Elin Andren Eriksson and Thirza Martens