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.

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