Question

• Review Chesbrough's Principles of Open Innovation.
• Pick three out of his six principles of open innovation.
• Analyze and evaluate the selected statements.
• Provide at least one example supporting the selected statements.

Answer 1

Recently, growing attention has been devoted to the concept of “Open Innovation”, both in academia as well as in practice. Chesbrough, who coined the term “Open Innovation” describes in his book “Open Innovation: The New Imperative for Creating and Profiting from Technology” (2003) how companies have shifted from so-called closed innovation processes towards a more open way of innovating.

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

The Principles are:

1. Nurturing a culture of innovation- The corporate culture embraces the written and unwritten values, norms and attitudes in an organization that influence the way employees think and act. And an innovation culture is part of the corporate culture and determines how much innovation is supported and promoted by management and employees.

The culture of innovation is therefore the framework for every innovation activity. If the culture is not positive, it can hinder innovation, even if the idea and the innovation team are still perfect. It is thus a decisive factor in the success of innovation.

Give employees unstructured thinking time

The idea of giving people a chunk of time to just kick ideas around and carry out innovation projects might seem strange but that’s exactly what business and financial software company Intuit has done. Employees are trained as innovation catalysts. Then they apply those skills to their own teams as well as spending up to 10% of their time coaching, mentoring and inspiring employees outside the team. Intuit also provides time to employees who want to work on their own innovation projects. I love the principle behind all this, a principle that can be applied in pretty much any company – give employees permission to experiment with ‘unstructured thinking’ time.

2. Engage strategic partners- More and more companies rely on their partners for indirect sales and as a means of reaching additional customers. Therefore, having a partner communication and engagement strategy in place is crucial to ensure the success of all parties. Additionally, partners and resellers have multiple suppliers making it even more important that the supplier stands out and establishes an engagement plan to build partner loyalty.

Developing programs and content that are responsive to channel partners’ needs

Take some time to understand partners’ challenges and be sure to structure programs to address those challenges and needs. This will only help drive partners to sell the products and services to the end customer and increase ROI. If channel partners are not receiving relevant marketing materials from a supplier, focus will shift to a different supplier that is taking their needs into account.

3. Incentivize Innovation-

• Recognition – people value recognition of their efforts and work no matter how small they seem. The company Yum Brands (parent of Taco Bell and KFC) gives out ‘rubber chicken’ awards while Advertising agency Grey hands out “Heroic Failure” awards. Whatever the outcome of the venture, reward innovation efforts with recognition to encourage more.
• Open doors – provide new avenues for personal exploration and innovation. Wade says “Answer the “what’s in it for me?” question. This may mean that you have to offer prizes to encourage ideas and participation… offer development opportunities or experiences that are highly sought or exclusive. You will know what chimes in your organization.”
• Level up – increasing the intensity and level of innovation challenges means innovators are entrusted with greater responsibilities – and that the firm believes they can handle it.

4. Provide operational support
5. Measure Impact

Under the open innovation paradigm there is an important flow of external knowledge into the organization which turns into projects in co-operation with external partners and causes the purchase and incorporation of external technologies. At the same time, the innovations generated within the company can be sold as technology and/or industrial property to other organizations since either they are not applicable within their business model or because the company has no capacity or experience to develop the invention. The final result is that some products reach the market by using exclusively internal resources from the initial idea up to the commercialization of the final product. Other products are the result of incorporating external knowledge at different stages of their development.

There are clear advantages of opening the innovation process to the flow of ideas and knowledge in both directions. They can be summed up as follows:

• Reduction in the time and cost of innovation projects
• Incorporation of solutions and innovations in the form of ideas, patents, products and technologies which would have never been generated by the company due to lack of time, knowledge and technological resources
• Commercialization of inventions which due to lack of ability or to strategic reasons cannot be places in the market by the company owning them