August 31, 2010

The definitive Open Innovation primer

Today was the kickoff of the UC Berkeley Open Innovation Speaker Series, including an updated version of the O/U/CI overview talk I gave in Göttingen in May. (More later).

However, before I spoke, the students (mostly M.S. students from engineering) got a 15 minute introduction to open innovation from the founder/oracle/sage of open innovation himself, Hank Chesbrough.

I don’t have the slides in front of me, but let me share the big picture for anyone who has to teach this to a class.

What is “open innovation”? Chesbrough used his 2006 definition from our book:
Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.
Noting the linkage of open innovation back to practice, he said "This is a way of thinking that emerged from observing what companies do in their practices."

The idea of spillovers predates open innovation, but in the past it was an afterthought, ignored or neglected — treated as an unintended byproduct. "In the world of open innovation, we argue that you can harness these flows and you can begin to direct the: you can direct them to you, and you can direct your flows to (specific) others outside." There are two main modes of open innovation: the inside out and the outside in.

Chesbrough summarized some of the findings from his Xerox field studies that led to his various papers and several chapters of the 2003 book. For example, he showed a number of interesting graphs from the various studies, including the Xerox “CIC/XNE Project funnel”
which looks a lot like Chesbrough’s open innovation funnel (Figure 1.3 of the 2006 book).
In the Xerox diagram, it allowed for three outcomes for internal innovations:
  • Commercialization via a business group willing to pay for it
  • Assignment to an internal “new enterprises” incubator
  • Licensing or spinout of the technology to external companies
Still, the Xerox strategy was more worried about false positives than false negatives. He noted that at one point, the aggregate market cap of 10 Xerox PARC spinouts (including 3Com, Adobe, Documentum) was more than twice that of Xerox.

He also showed a metaphor I hadn’t seen, the “holey” (not holy) funnel, where the holes represent the permeability of the boundaries of the firm. I didn’t catch the name of the author, but it was a new perspective, also capturing the need of a firm focus to focus on multiple “targets.”
At the end, Chesbrough listed some Frequently Asked Questions. Below are his answers [and mine, when I didn’t have a chance to capture his]:
  • As this the same as open source? [see Chapter 5 of the 2006 book]
  • What does a business model have to do with innovation? [see the 2003 book and his 2002 paper]
  • Is this anything new? Aren't companies already doing this? Yes, but there is a difference of degree today and integration of the various alternatives.
  • Why have companies struggled to adoption open innovation? This topic will be covered by many of the speakers this semester, who talk about best practice.
  • What are examples of good open innovation practice today? We have invited some of the most successful practitioners, so you may get a biased sample from our speakers.


Ferran said...

Shouldn't it be Henry instead of Hank Chesbrough?

Thanks for sharing the session insights, it is a very good update on the key OI concepts.

Fern said...

Thanks Joel for keeping us up to date. I continue to live vicariously with your help - most valuable. I look forward to further posts.