March 31, 2011

Will OI save advanced economies?

On Saturday, I was privileged to be invited to the launch party for Henry Chesbrough’s newest book, Open Services Innovation.

Open Services Innovation: Rethinking Your Business to Grow and Compete in a New EraThe party was at Henry and Katherine Chesbrough’s Bay Area home. The staff of the Center for Open Innovation (at UC Berkeley) were there, as were many other locals that the Chesbrough thought would be interested.

COI† associate director Solomon Darwin introduced me to people as being the kickoff speaker every semester for the COI speaker series. Darwin joked although my definition of open innovation was not the same as Henry’s, it was close enough that Henry was comfortable with my introducing the Berkeley graduate students to the ideas of open innovation every semester.

At an appropriate time, Henry stood up to make a few brief remarks in his library (which reminds me of Baker Library back at Harvard with floor to ceiling books.) He first acknowledged his parents in the audience, Dick & Joyce Chesbrough, to whom he dedicated the book.

He also acknowledged Syed Hasanain, executive VP of Computers & Structures, Inc., who is featured on pp. 145-147 of the book where CSI is Henry’s example of a “specialist” small services firm.

In his remarks, Henry said that his book was not just about open innovation. He also hoped that — in a era of commodity priced-based competition for products — that Open Services Innovation provided an example of how developed economies could create and sustain high paying jobs that wouldn’t go offshore.

As I noted last fall, the idea of Open Services Innovation is about bundling services and products to better meet customer needs. As with any new management proscription, we will need a few years to see how much of a difference the book makes, but obviously it is targeting a pressing need for companies in these advanced economies.

† In Berkeley-speak, the "center" has become the "Program for Open Innovation". I forgot to ask Henry or Solomon what exactly that means.

March 17, 2011

Open innovation and system integration

Open Innovation: Researching a New ParadigmPeople who read Chapter 6 of the 2006 Open Innovation book know that I’m particularly interested in how open innovation happens in component-based industries — like the PC and mobile phone industries I’ve been studying for more than 15 years.

It’s always a pleasure to hear that the ideas in that paper — particularly Figure 6.1 — are having an impact on people’s thinking, even if it’s a small fraction of Henry Chesbrough’s opening chapter from the book or his many other books and articles. As it turns out, this morning a friend sent me a picture of a Nokia slide presented at a Finnish standardization workshop Wednesday that used a version of Figure 6.1.
One of the things that I tried to do in my chapter (and in the final joint chapter) was to link the open innovation literature to the systems integration work, as represented by the excellent book edited by Andrea Prencipe, Andrew Davies and Michael Hobday. (Chesbrough had his own chapter in the book.)

The Business of Systems IntegrationTo me, the role of the system integrator is quite obviously that of a firm leveraging external innovations. Both perspectives lead to the same question: how does the integrating firm create (and capture) unique value if it’s leveraging the same external components as everyone else? I tried to provoke OI scholars to think more about system integration research — that there isn’t more research linking the two is perhaps my greatest disappointment about the book’s impact.

One of the few authors to consider this issue has been Jens Frøslev Christensen, who in his chapter (in our book) and his 2005 co-authored Research Policy article looked at how large consumer electronics companies reacted to the shift from analog to digital (Class D) amplifiers. The chapter in particular asks what open innovation means for the concept of core competencies.

However, coming at the same question another way is Mary Tripsas of Harvard, who presented a paper on digital cameras in UC Berkeley at its Open Innovation Speaker Series. The presentation was adapted from her forthcoming Strategic Management Journal paper with Mary Brenner (U. Minnesota) that is available on SSRN. Her presentation has now been posted to YouTube; below are some thoughts from listening to the presentation in person Monday.

Although not explicitly seeking to test an open innovation hypothesis, the design and empirical findings of the Brenner-Tripsas paper bear directly on this idea of integration, open innovation and core competencies.

The authors look at the features of digital cameras sold in the US 1991-2003. Why this period? Starting in 2004, a majority of the models conformed to the dominant design:
  • optical zoom
  • digital zoom
  • removable storage
  • high (1 MP+) resolution
  • lcd display
  • ability to record brief movie clips
What is interesting about the paper — and the context — is that the battle to establish a DD and win sales was taking place at the convergence of photography, consumer electronics (i.e. camcorder) and PC peripheral industries. So they test both industry- and firm-level effects as to how quickly firms adopt the newest (and eventually successful) features.

Since they got into SMJ, you know they have significant effects. With the seven features (including webcams, which did not become part of the DD), they see different effects for industry-level cognitive framing, firm-level cognitive framing and industry-specific imitation (i.e. copying your traditional rivals rather than the new ones created by the convergence smackdown.)

This suggests a chance to link open innovation back to the early cognitive strategy work of Tripsas, Anne Huff and others. (I once knew this literature, because my original dissertation plan was to look at the cognitive effects that expected demand had on the rollout strategies for cellphones in the US, Sweden and Japan.)

To put it more directly, perhaps knowing how to integrate is not the only skill that successful open innovation firms bring to the table — but also, as Brenner and Tripsas might suggest, knowing what and when to integrate as well.

March 1, 2011

Master class: open innovation and corporate entrepreneurship

ESADE is reprising its master class on Open Innovation and Corporate Entrepreneurship. It will be held in Barcelona from June 6-10 2011.

The main presenters are:
  • Henry Chesbrough of the UC Berkeley Center for Open Innovation
  • Ken Morse of the MIT Entrepreneurship Center
  • Wim Vanhaverbeke of Hasselt University

For more information, see the ESADE website.