April 29, 2012

The Power of Henry Chesbrough

Earlier today, Nathan Mattise posted an article on the celebrations at PARC marking the 10th anniversary of its (quasi) spinoff.

Veteran OI researchers know that OI started at PARC, with Henry Chesbrough’s research on Xerox PARC that led to Chesbrough & Rosenbloom (2002) and then his original Open Innovation book. And apparently Chesbrough gave the opening presentation Thursday afternoon at the event entitled “The Power of 10,” celebrating open innovation.

But what really caught my eye was the picture of the live illustration that Heather Willems did for the event. (Live illustrating is a local fad in the Valley, which I find interesting but less concrete than live blogging.)

In the Ars picture, the signboard starts with “The Power of 10” in the stylized PARC design for the event. But at first glance, the signboard says “The Power of Henry Chesbrough.”

I’ve made a few contributions to OI, open source and standards research, but nothing to earn a slogan with my name in it. I’m not sure how (or if) I’m going to get there, but then I don’t think Henry necessarily anticipated this outcome when he started a decade ago.

Photograph by Ars Technica.

April 20, 2012

What "innovations" are inbound?

In doing several lit reviews of open innovation, I was struck by how often studies of inbound “open innovation” weren’t about innovation — at least as it has been defined 40 or 50 years of innovation studies. This sort of sloppiness fogs the interpretations of empirical findings and the cumulative nature of the scientific process. Here is my first cut in this blog at trying to cut through some of this fog.

First, let’s leave aside the question of non-innovative content. Sourcing Wikpedia articles or product reviews from consumers isn’t innovation, any more than newspaper reporters or Consumer Reports are creating innovations. It’s just content. Yes, some text would fall under the “creativity” lit, but writing a tertiary semi-encyclopedia and movie reviews doesn’t seem like it would even fit that category.

However, what seems to the most common mess is when “innovation” is used as a synonym for “knowledge” or “invention” or other things that tend to be antecedents of innovations.

We know that an “invention” is not an “innovation” — from various sources including Joseph Schumpeter, Chris Freeman, Ed Roberts and Henry Chesbrough. For example, in my AOM conference paper with Marcel Bogers (Bogers and West, 2010: 4) we wrote:
As conceptualized by innovation scholars, the industrial innovation process comprises both a technical component (invention) and also the commercialization of that technology (innovation). Schumpeter (1934: 88) concluded that technical inventions “not carried into practice ... are economically irrelevant,” while Freeman (1982: 7)† argued that “inventions ... do not necessarily lead to technical innovations. In fact the majority do not. An innovation in the economic sense is accomplished only with the first commercial transaction.” …

[Another] definition of innovation … is given by Roberts (2007: 36): “Innovation is composed of two parts: (1) the generation of an idea or invention, and (2) the conversion of that invention into a business or other useful application.”
This very same sentiment is articulated in the Chesbrough’s prequel to his open innovation manifesto:
The inherent value of a technology remains latent until it is commercialized in some way. (Chesbrough and Rosenbloom, 2002: 530).
But that’s only part of the mess, which goes beyond the invention vs. innovation distinction. Other inputs include the provision of knowledge, components or complements, as Marcel and I wrote in a paper published earlier this year (Bogers and West, 2012: 62):
Discussions of distributed innovation processes tend to blur the distinctions between innovation and its origins and effects. However, all the firm-centric perspectives consider how firms access external sources of knowledge to supplement their own knowledge as an input to their innovation efforts. …

In some cases, firms will rely on external actors to supply knowledge that serves as an input to creating their own innovations. This includes basic scientific research produced and disseminated through open science1 processes, knowledge of market needs and demands obtained from customers, or broad- cast search used to identify promising avenues for future innovation (David, 1998; Lilien et al., 2002; Jeppesen & Lakhani, 2010).

The external innovator may also commercialize his or her innovation in the form of a product that is sold to the focal firm (cf. Shah & Tripsas, 2007). These products may be components or other materials that are integrated by the firm into its own products, as has become the norm in the personal computer industry (Dedrick & Kraemer, 1998). Alternatively, the research and development (R&D) of an equipment supplier is used to produce innovations incorporated in tools purchased by producers, as when domestic machine tools improved the post-war German auto industry. Supplier innovations may thus come in the form of materials, components and equipment; Laursen and Salter (2006) found that suppliers were the most common source of external knowledge for innovation among 2,707 UK manufacturers.

Finally, complementary innovations produced by external participants may be provided directly to users. In some cases, these complementary products are sold by for-profit firms, as is common with third party computer software (West, 2006). In other cases, the complements are provided by individuals, whether in the form of user support (Lakhani & von Hippel, 2003), synthesized musical instruments (Jeppesen & Frederiksen, 2006) or game modifications (West & Gallagher, 2006). While such information, goods or services do not directly involve the firm, they do increase the value of the firm’s products and thus improve its ability to profit from its innovations (cf. Teece, 1986).
Nothing in this discussion is meant to suggest that scholars shouldn’t study the various external sources of inputs that firms use in their innovative efforts. The only point is to draw the distinction between the firm’s innovations and its various antecedents and correlates — just as we distinguish between purchase intention and actual purchase, or market share and profitability.

Similarly, the OI processes can be used to study external sourcing of things other than innovations, as long as the distinctions are clear. The “open source software” model and “open innovation” are not the same thing — even though there are important theoretical and empirical overlaps.

In the same way, nothing here would say we can’t study other processes and draw parallels to open innovation. For example, I think many of the OI processes might apply to nonprofits, even though Chesbrough (2003; Chesbrough and Rosenbloom, 2002) requires alignment to business models. (Perhaps someone should first try to extend the concept of a revenue or business model to nonprofits or even government agencies.)

Also, sometimes we can’t measure innovation process directly, but we can measure something else: patents. That’s why thousands of papers use patents as a proxy for “innovation” when (per Schumpeter, Freeman, etc.) we know they are just inventions. It would be foolish of me to suggest that such patent studies should (or would) go away, but we still need to remind ourselves that the output of a technical invention process is only imperfectly correlated (even at the most efficient firm) with a firm’s output of technological innovations.

† Although Chris Freeman’s (1982) original edition is out of print, the identical point is made by Freeman and Soete (1997: 6).

References

Bogers, Marcel and Joel West. 2010. “Contrasting Innovation Creation and Commercialization within Open, User and Cumulative Innovation,” Working Paper, http://ssrn.com/abstract=1751025

Bogers, Marcel and Joel West, “Managing Distributed Innovation: Strategic Utilization of Open and User Innovation,” Creativity and Innovation Management, 21, 1 (March 2012): 61–75. DOI: 10.1111/j.1467-8691.2011.00622.x

Chesbrough, Henry and Richard S. Rosenbloom, "The role of the business model in capturing value from innovation: evidence from Xerox Corporation's technology spin‐off companies," Industrial and Corporate Change 11, 3 (June 2002): 529-555. DOI: 10.1093/icc/11.3.529

Freeman, Christopher. 1982, Economics of Industrial Innovation, Cambridge, Mass.: MIT Press.

Freeman, Christopher & Luc Soete, 1997, Economics of Industrial Innovation, 3rd edition, Cambridge, Mass.: MIT Press.

April 16, 2012

A deluge of Open Innovation research

I just wanted to say that submissions for the June conference on open innovation at Imperial College London are now closed. The editors are reviewing the manuscripts in hopes of meeting our self-imposed May 1 deadline for notifying people.

As expected, most of the papers were from European authors, validating our decision to hold the conference in London. However, we received far more papers than expected, and the number of attendees is limited by budget and room size, so the review process will be far more difficult than anticipated.

For those who did not submit, I want to reiterate a key point. While the conference is intended to develop papers for the special issue of Research Policy, papers that are accepted in the special issue will be determined by what we receive (through the RP manuscript system) by August 31. Submitting (or having accepted) a paper for the workshop is not a pre-requisite for participating in the special issue. That said, I expect that the conference papers that we are forced to reject will be those that are less well developed, or where there was not a clear effort to integrate the research design and contribution with prior research on open innovation.