Open innovation is a term used to promote an information age mindset toward innovation that runs counter to the secrecy and silo mentality of traditional corporate research labs. The benefits and driving forces behind increased openness have been noted and discussed as far back as the 1960s, especially as it pertains to interfirm cooperation in R&D. Use of the term 'open innovation' in reference to the increasing embrace of external cooperation in a complex world has been promoted in particular by Henry Chesbrough, adjunct professor and faculty director of the Center for Open Innovation of the Haas School of Business at the University of California, who articulated a modern perspective in his book Open Innovation: The new imperative for creating and profiting from technology (2003).
The term was originally referred to as "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". More recently, it is defined as "a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization's business model". This more recent definition acknowledges that open innovation is not solely firm-centric: it also includes creative consumers and communities of user innovators. The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward between firms and other firms and between firms and creative consumers, resulting in impacts at the level of the consumer, the firm, an industry, and society.
Because innovations tend to be produced by outsiders and founders in startups, rather than existing organizations, the central idea behind open innovation is that, in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (i.e. patents) from other companies. In addition, internal inventions not being used in a firm's business should be taken outside the company (e.g. through licensing, joint ventures or spin-offs).
The open innovation paradigm can be interpreted to go beyond just using external sources of innovation such as customers, rival companies, and academic institutions, and can be as much a change in the use, management, and employment of intellectual property as it is in the technical and research driven generation of intellectual property. In this sense, it is understood as the systematic encouragement and exploration of a wide range of internal and external sources for innovative opportunities, the integration of this exploration with firm capabilities and resources, and the exploitation of these opportunities through multiple channels.
Open innovation offers several benefits to companies operating on a program of global collaboration:
Implementing a model of open innovation is naturally associated with a number of risks and challenges, including:
In the UK the Knowledge Transfer Partnerships (KTP) is a funding mechanism encouraging the partnership between a firm and a knowledge-based partner. A KTP is a collaboration program between a knowledge-based partner (i.e. a research institution), a company partner and one or more associates (i.e. recently qualified persons such as graduates). KTP initiatives aim to deliver significant improvement in business partners’ profitability as a direct result of the partnership through enhanced quality and operations, increased sales and access to new markets. At the end of their KTP project, the three actors involved have to prepare a final report that describes KTP initiative supported the achievement of the project’s innovation goals.
This approach involves developing and introducing a partially completed product, for the purpose of providing a framework or tool-kit for contributors to access, customize, and exploit. The goal is for the contributors to extend the platform product's functionality while increasing the overall value of the product for everyone involved.
Readily available software frameworks such as a software development kit (SDK), or an application programming interface (API) are common examples of product platforms. This approach is common in markets with strong network effects where demand for the product implementing the framework (such as a mobile phone, or an online application) increases with the number of developers that are attracted to use the platform tool-kit. The high scalability of platforming often results in an increased complexity of administration and quality assurance.
This model entails implementing a system that encourages competitiveness among contributors by rewarding successful submissions. Developer competitions such as hackathon events fall under this category of open innovation. This method provides organizations with inexpensive access to a large quantity of innovative ideas, while also providing a deeper insight into the needs of their customers and contributors.
While mostly oriented toward the end of the product development cycle, this technique involves extensive customer interaction through employees of the host organization. Companies are thus able to accurately incorporate customer input, while also allowing them to be more closely involved in the design process and product management cycle.
Similarly to product platforming, an organization incorporates their contributors into the development of the product. This differs from platforming in the sense that, in addition to the provision of the framework on which contributors develop, the hosting organization still controls and maintains the eventual products developed in collaboration with their contributors. This method gives organizations more control by ensuring that the correct product is developed as fast as possible, while reducing the overall cost of development. Dr. Henry Chesbrough recently supported this model for open innovation in the optics and photonics industry.
Similarly to idea competitions, an organization leverages a network of contributors in the design process by offering a reward in the form of an incentive. The difference relates to the fact that the network of contributors are used to develop solutions to identified problems within the development process, as opposed to new products. Emphasis needs to be placed on assessing organisational capabilities to ensure value creation in open innovation.
In Austria the Ludwig Boltzmann Gesellschaft started a project named "Tell us!" about mental health issues and used the concept of open innovation to crowdsource research questions. The institute also launched the first "Lab for Open Innovation in Science" to teach 20 selected scientists the concept of open innovation over the course of one year. On Facebook the Ludwig Boltzmann Gesellschaft informs about the lab, the participants and teachers and on news on open innovation in science.
A European startup has proved that engineering crowdsourcing delivers good results for open innovation in technology. This startup, ennomotive, organizes competitions to solve real-life engineering challenges coming from companies. Its global community of engineers submits solutions through an online platform and, after a multi-round filtering process, the company selects and awards the best solutions. This way, complex issues like asphalting in the rain or monitoring wildfires in the forest through IoT have been solved.
The paradigm of closed innovation holds that successful innovation requires control. Particularly, a company should control the generation of their own ideas, as well as production, marketing, distribution, servicing, financing, and supporting. What drove this idea is that, in the early twentieth century, academic and government institutions were not involved in the commercial application of science. As a result, it was left up to other corporations to take the new product development cycle into their own hands. There just was not the time to wait for the scientific community to become more involved in the practical application of science. There also was not enough time to wait for other companies to start producing some of the components that were required in their final product. These companies became relatively self-sufficient, with little communication directed outwards to other companies or universities.
Throughout the years several factors emerged that paved the way for open innovation paradigms:
These four factors have resulted in a new market of knowledge. Knowledge is not anymore proprietary to the company. It resides in employees, suppliers, customers, competitors and universities. If companies do not use the knowledge they have inside, someone else will. Innovation can be generated either by means of closed innovation or by open innovation paradigms. There is an ongoing debate on which paradigm will dominate in the future.
Modern research of open innovation is divided into two groups, which have several names, but are similar in their essence (discovery and exploitation; outside-in and inside-out; inbound and outbound). The common factor for different names is the direction of innovation, whether from outside the company in, or from inside the company out:
This type of open innovation is when a company freely shares its resources with other partners, without an instant financial reward. The source of profit has an indirect nature and is manifested as a new type of business model.
In this type of open innovation a company commercialises its inventions and technology through selling or licensing technology to a third party.
This type of open innovation is when companies use freely available external knowledge, as a source of internal innovation. Before starting any internal R&D project a company should monitor the external environment in search for existing solutions, thus, in this case, internal R&D become tools to absorb external ideas for internal needs.
In this type of open innovation a company is buying innovation from its partners through licensing, or other procedures, involving monetary reward for external knowledge
Open source and open innovation might conflict on patent issues. This conflict is particularly apparent when considering technologies that may save lives, or other open-source-appropriate technologies that may assist in poverty reduction or sustainable development. However, open source and open innovation are not mutually exclusive, because participating companies can donate their patents to an independent organization, put them in a common pool, or grant unlimited license use to anybody. Hence some open-source initiatives can merge these two concepts: this is the case for instance for IBM with its Eclipse platform, which the company presents as a case of open innovation, where competing companies are invited to cooperate inside an open-innovation network.
In 1997, Eric Raymond, writing about the open-source software movement, coined the term the cathedral and the bazaar. The cathedral represented the conventional method of employing a group of experts to design and develop software (though it could apply to any large-scale creative or innovative work). The bazaar represented the open-source approach. This idea has been amplified by a lot of people, notably Don Tapscott and Anthony D. Williams in their book Wikinomics. Eric Raymond himself is also quoted as saying that 'one cannot code from the ground up in bazaar style. One can test, debug, and improve in bazaar style, but it would be very hard to originate a project in bazaar mode'. In the same vein, Raymond is also quoted as saying 'The individual wizard is where successful bazaar projects generally start'.
In 2014, Chesbrough and Bogers describe open innovation as a distributed innovation process that is based on purposefully managed knowledge flows across enterprise boundaries. Open innovation is hardly aligned with the ecosystem theory and not a linear process. Fasnacht's adoption for the financial services uses open innovation as basis and includes alternative forms of mass collaboration, hence, this makes it complex, iterative, non-linear, and barely controllable. The increasing interactions between business partners, competitors, suppliers, customers, and communities create a constant growth of data and cognitive tools. Open innovation ecosystems bring together the symbiotic forces of all supportive firms from various sectors and businesses that collectively seek to create differentiated offerings. Accordingly, the value captured from a network of multiple actors and the linear value chain of individual firms combined, creates the new delivery model that Fasnacht declares "value constellation".
The term Open Innovation Ecosystem consists of three parts that describe the foundations of the approach of open innovation, innovation systems and business ecosystems.
While James F. Moore researched business ecosystems in manufacturing around a specific business or branch, the open model of innovation with the ecosystem theory was recently studied in various industries. Traitler et all. researched it 2010 and used it for R&D, stating that global innovation needs alliances based on compatible differences. Innovation partnerships based on sharing knowledge represents a paradigm shift toward accelerating co‐development of sustainable innovation. West researched open innovation ecosystems in the software industry, following studies in the food industry that show how a small firm thrived and became a business success based on building an ecosystem that shares knowledge, encourages individuals' growth, and embeds trust among participants such as suppliers, alumni chef and staff, and food writers. Other adoptions include the telecom industry or smart cities.
Ecosystems foster collaboration and accelerate the dissemination of knowledge through the network effect, in fact, value creation increases with each actor in the ecosystem, which in turn nurtures the ecosystem as such.
A digital platform is essential to make the innovation ecosystem work as it aligns various actors to achieve a mutually beneficial purpose. Parker explained that with platform revolution and described how networked Markets are transforming the economy.
Business ecosystems are increasingly used and drive digital growth. and pioneering firms in China use their technological capabilities and link client data to historical transactions and social behaviour to offer tailored financial services among luxury goods or health services. Such open collaborative environment changes the client experience and adds value to consumers. The drawback is that it is also threatening incumbent banks from the U.S. and Europe due to its legacies and lack of agility and flexibility.
BT Research is part of the Technology division of BT Group, a provider of communications and services operating in 170 countries.
The organisation embodies an 'open innovation' approach, drawing on external resources such as partnerships with universities, suppliers, partners, customers and start-ups to complement the BT's internal research and innovation programme. BT Group is also a partner in collaborative research projects that are part of the UK's Technology Strategy Board programme, the EU Seventh Framework Programme, and the EU Competitiveness and Innovation Framework Programme.Background, foreground, sideground and postground intellectual property
In the context of research and development (R&D) collaborations, background, foreground, sideground and postground intellectual property (IP) are four distinct forms of intellectual property assets. These are included in the broader and more general categories of knowledge in R&D collaborations or open innovation. While background and foreground IP and knowledge are fairly established concepts, sideground and postground IP and knowledge have more recently been added to the conceptual vocabulary. This set of four concepts was first introduced by Prof. Ove Granstrand in a European Commission report in 2001.The four knowledge/IP types are defined by Granstrand and Holgersson (2014):
Background knowledge/IP is knowledge/IP that is relevant to a collaborative venture or open innovation project that is supplied by the partners at the start of the project.
Foreground knowledge/IP is all the knowledge/IP produced within the collaborative venture or open innovation project during the project’s tenure.
Sideground knowledge/IP is knowledge/IP that is relevant to a collaborative venture or open innovation project, but produced outside the project by any of the partners during the project’s tenure.
Postground knowledge/IP is knowledge/IP that is relevant to a collaborative venture or open innovation project that is produced by any of the partners after the project ends.Cambrian House
Cambrian House began as a crowdsourcing community that pioneered the technology to tap crowds for the best software ideas. To power open innovation in other businesses, they developed a crowdsourcing platform Chaordix – the technology to harness a crowd for breakthrough ideas.Closed innovation
Before being open, innovation happened in closed environments often performed by individuals, scientists or employees. However, the expression closed innovation was coined later and not before the paradigm of open innovation became popular by works of Henry Chesbrough and Don Tapscott et Anthony D. Williams Closed innovation was described in March 2003 by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at UC Berkeley, in his book Open Innovation: The new imperative for creating and profiting from technology. The concept is related to user innovation, know-how trading and mass innovation and subject of recent research projectsCommunities of innovation
Communities that support innovation have been referred to as communities of innovation (CoI), communities for innovation, innovation communities, open innovation communities, and communities of creation.Henry Chesbrough
Henry William Chesbrough (born 1956) is an American organizational theorist, adjunct professor and the faculty director of the Garwood Center for Corporate Innovation at the Haas School of Business at the University of California, Berkeley. He is known for coining the term open innovation.INCJ
The Innovation Network Corporation of Japan(INCJ) (株式会社産業革新機構, Kabushiki-gaisha Sangyō Kakushin Kikō), headquartered in Tokyo, is a public-private partnership between the Japanese government and 19 major corporations.
The INCJ was established as a temporary (15 years) corporate entity on July 27, 2009; with the prime objective of "boosting the competitiveness of Japanese firms by promoting a philosophy of 'open innovation' and creating next-generation businesses in promising new technologies by providing capital and managerial support, through private-public partnership."The business and investments of INCJ are supervised by the Ministry of Economy, Trade and Industry of Japan (METI).InnoCentive
InnoCentive is an open innovation and crowdsourcing company with its worldwide headquarters in Waltham, MA and their EMEA headquarters in London, UK. They enable organizations to put their unsolved problems and unmet needs, which are framed as ‘Challenges’, out to the crowd to address. In the case of InnoCentive, the crowd can either be external (i.e. their network of over 380,000 problem solvers) or internal (i.e. an organization's employees, partners or customers). Awards, typically monetary, are given for submissions that meet the requirements set out in the Challenge description. The average award amount for a Challenge is $20,000 but some offer awards of over $100,000. To date, InnoCentive have run over 2,000 external Challenges and over 1,000 internal Challenges, awarding over $20 million in the process.InnovationXchange
The InnovationXchange, also known as IXC UK, is a Birmingham, UK-based open innovation services provider, whose purpose is to identify and create collaborative business, research and policy opportunities.Innovation Exchange
Innovation Exchange Inc. (IX) was an open innovation vendor. IX operates a website which acts as a platform for companies and non-profit organizations to present innovation challenges to a community of innovators. This community is constituted of individuals as well as small and midsize businesses. In contrast to vendors focused primarily on innovation in the physical sciences, Innovation Exchange fosters product, service, process and business model development.Innovation intermediary
Innovation Intermediaries is a concept in innovation studies to help understand the role of firms, agencies and individuals that facilitate innovation by providing the bridging, brokering, knowledge transfer necessary to bring together the range of different organisations and knowledge needed to create successful innovation. The term open innovation intermediaries was used for this concept by Henry Chesbrough in his 2006 as "companies that help other companies implement various facets of open innovation".List of MDPI academic journals
This is a list of academic journals published by MDPI, a publisher listed on Jeffrey Beall's list of predatory open access publishing companies in 2014 but which was removed in 2015. As of April 2018, MDPI published 197 journals.Manufacturing Advisory Service
The Manufacturing Advisory Service is a former government agency in England and Scotland that advised manufacturing companies.Neopost
Neopost is a global technology provider of digital communications, shipping and mail solutions. Neopost provides products ranging from physical mail processing systems (mailing systems and folders-inserters) to digital communications management (Customer Communications Management and Data Quality applications), as well as supply chain and e-commerce process optimization solutions, from point of sale to delivery, including associated tracking services.With a direct presence in 29 countries and close to 5,800 employees, Neopost reported annual sales of €1.1 billion in 2017. Its products and services are sold in more than 90 countries. Neopost is listed in compartment A of Euronext Paris and belongs to the SBF 120 index.Neuros Technology
Neuros Technology was a Chicago, Illinois–based company that produced a number of audio and video devices under the brand name Neuros. Founded by Joe Born in 2001 as a division of Digital Innovations, it previously operated under the name Neuros Audio. Like Digital Innovations, Neuros distinguished itself by its use of open-innovation and crowdsourcing techniques to bring products to market, as well as by its prominent use of open-source software and open-source hardware. In its development model, end users were involved throughout the product development process from reviewing initial concepts to beta testing initial product releases.Open banking
Open banking is a financial services term as part of financial technology that refers to:
The use of open APIs that enable third-party developers to build applications and services around the financial institution.
Greater financial transparency options for account holders ranging from open data to private data.
The use of open-source technology to achieve the above.Open banking, as a concept could be considered as a subspecies to the open innovation concept, a term promoted by Henry Chesbrough. It is linked to shifts in attitudes towards the issue of data ownership illustrated by regulations such as GDPR and concepts such as the Open Data movement.Open collaboration
Open collaboration is "any system of innovation or production that relies on goal-oriented yet loosely coordinated participants who interact to create a product (or service) of economic value, which they make available to contributors and noncontributors alike." It is prominently observed in open source software, but can also be found in many other instances, such as in Internet forums, mailing lists and online communities. Open collaboration is also thought to be the operating principle underlining a gamut of diverse ventures, including bitcoin, TEDx, and Wikipedia.Open collaboration is the principle underlying peer production, mass collaboration, and wikinomics. It was observed initially in open source software, but can also be found in many other instances, such as in Internet forums, mailing lists, Internet communities, and many instances of open content, such as creative commons. It also explains some instances of crowdsourcing, collaborative consumption, and open innovation.Riehle et al. define open collaboration as collaboration based on three principles of egalitarianism, meritocracy, and self-organization. Levine and Prietula define open collaboration as "any system of innovation or production that relies on goal-oriented yet loosely coordinated participants who interact to create a product (or service) of economic value, which they make available to contributors and noncontributors alike." This definition captures multiple instances, all joined by similar principles. For example, all of the elements — goods of economic value, open access to contribute and consume, interaction and exchange, purposeful yet loosely coordinated work — are present in an open source software project, in Wikipedia, or in a user forum or community. They can also be present in a commercial website that is based on user-generated content. In all of these instances of open collaboration, anyone can contribute and anyone can freely partake in the fruits of sharing, which are produced by interacting participants who are loosely coordinated.
An annual conference dedicated to the research and practice of open collaboration is the International Symposium on Wikis and Open Collaboration (OpenSym, formerly WikiSym). As per its website, the group defines open collaboration as "collaboration that is egalitarian (everyone can join, no principled or artificial barriers to participation exist), meritocratic (decisions and status are merit-based rather than imposed) and self-organizing (processes adapt to people rather than people adapt to pre-defined processes)."Technology scouting
Technology scouting is an element of technology management in which
(1) emerging technologies are identified,
(2) technology related information is channeled into an organization, and
(3) supports the acquisition of technologies.It is a starting point of a long term and interactive matching process between external technologies and internal requirements of an existing organization for strategic purposes. This matching may also be aided by technology roadmapping. Technology scouting is also known to be part of competitive intelligence, which firms apply as a tool of competitive strategy. It can also be regarded as a method of technology forecasting or in the broader context also an element of corporate foresight. Technology scouting may also be applied as an element of an open innovation approach. Technology scouting is seen as an essential element of a modern technology management system.The technology scout is either an employee of the company or an external consultant who engages in boundary spanning processes to tap into novel knowledge and span internal boundaries. He or she may be assigned part-time or full-time to the scouting task. The desired characteristics of a technology scout are similar to the characteristics associated with the technological gatekeeper. These characteristics include being a lateral thinker, knowledgeable in science and technology, respected inside the company, cross-disciplinary orientated, and imaginative personality. Technology scouts would also often play a vital role in a formalised technology foresight process.Wayra
Wayra is a start-up accelerator which was started in Latin America and Spain in 2011 as an initiative of Telefónica's chief executive in Europe, José María Álvarez-Pallete.The start-up companies receive funding, office space and mentoring. The country manager of the Wayra Academy in London explained their business strategy, "It's not just about the ideas. We are using Wayra as a way of acquiring great talent for Telefónica."The first Wayra started in Colombia in mid 2011 and expanded to ten more countries that year. In 2013, there were 14 Wayra academies in 12 countries in Europe and Latin America and Telefónica planned to support about 350 startups altogether. In March 2015, Telefónica closed down the Wayra in Prague, as part of Telefónica's general exit from that market. In 2015, Volo, which had been started at the Munich Wayra, was sold to Rocket InternetUnder its new management with Telefonica's Chief Innovation Officer Gonzalo Martín Villa and Global Entrepreneurship Director Miguel Arias, Wayra was re-launched in September 20th, 2018. Its redefined mission is to connect Telefonica and technological disruptors around the world. As their preferred strategic partner, Wayra will scale them up to accelerate both their business and Telefonica's. Its new motto is "We scale startups".
Telefonica Open Innovation Initiatives are:
Wayra, which operates in 10 countries: Argentina, Brazil, Chile, Colombia, Germany, Mexico, Peru, Spain, the United Kingdom and Venezuela. This global presence allows Wayra to be the most global, connected and technological open innovation hub in the world, acting as the interface between Telefonica and entrepreneurial ecosystems across the globe.
Via Open Future_, Telefonica is present in a total of 16 countries on 2 continents. Thanks to strong alliances with both public and private partners, Telefonica supports local early-stage start-ups. In particular, with these partners, it has created Open Future_ hubs that offer mentorship and other support, though they do not offer investment. Companies that do not have minimum viable products or meaningful traction are not ideal candidates to engage with a multinational like Telefonica, but the best of these earlier-stage companies from the Open Future_ network are invited to apply for investment via a local Wayra program, once they are sufficiently mature to fruitfully engage with Telefonica. There are now more than 50 Open Future_ hubs throughout the globe.
•+400 active start-ups in the portfolio.
•+100 of the portofolio startups have developed services and applications that are already integrated with Telefonica; 60% of them were Latin American, and 40% were European.
•+100 public and private partners choose Telefonica as its open innovation partner;
•+60 start-ups invested by Telefonica have been acquired by other corporations.
•+160 million euros have been invested in start-ups from seed phase to scale- up via the different initiatives.
•+€1.2+ Billion euros have been invested by third parties in companies in Telefonica's global portfolio companies.
•+60 Hubs: 11 Wayra, 52 Open Future, 3 scouting (Silicon Valley, Beijing, Israel).