I’ve caught up on some essential reading this weekend to be able to offer you a selection of the most inspiring thought pieces and research by world-renowned scholar and management thinker, Professor Henry Chesbrough.
Let’s dive in.
A bit of background on Henry Chesbrough
Do a quick Google search on “open innovation” (OI) and it will quickly get you acquainted with Henry Chesbrough, the scholar who coined the term in his widely referenced book: Open Innovation: The New Imperative for Creating and Profiting from Technology.
Chesbrough was also ranked the 24th most influential management thinker of 2015, making it even more important to familiarize yourself with his ideas and work.
What is open innovation according to Henry Chesbrough?
Open innovation is essentially a philosophy that helps make sense of a company’s vast knowledge base - its architecture and the unique ways in which that knowledge can be leveraged so that what was unspecified and unmanageable in the closed innovation model can now be specified and managed.
The shift from the closed innovation to the open innovation model was influenced by several factors including greater employee mobility; engineering schools having better business models than business schools (ironic, right?) when it came to academic collaboration, enormous venture capital under management, and small and medium-sized organizations accounting for an increasing amount of R&D spending.
“At its root, open innovation is based on a landscape of abundant knowledge, which must be used readily if it is to provide value for the company that created it.”
Henry W. Chesbrough
Open innovation implementation
What about implementation? To date, there are three main models of achieving open innovation:
- Outside-in: for example, scouting, in-licensing, and funding start-ups;
- Inside-out: for example, out-licensing, donating IP, corporate incubators;
- Coupled processes: for example, strategic alliances, and consortia.
In their Managing Open Innovation in Large Firms Survey Report (2013), Henry Chesbrough and Sabine Brunswicker rank the popularity of these practices among large firms. What the investigation revealed is that customer or consumer co-creation, informal networking, and university research grants are the leading inbound practices, while joint ventures are the most important outbound practices.
Intriguingly, “new” practices, such as crowdsourcing or specialized open innovation intermediary services, play a fairly minor role despite rising media coverage and plenty of research attention.
The most important aspect of open innovation, however, remains the effective combination of all available options and a healthy variety of partners.
To implement open innovation practices, businesses work with a variety of different innovation partners and sources, with customers and universities rated as the most important.
“Both [the closed and open innovation] models are employed today and each has its place, depending on a company’s innovation goals.”
Henry W. Chesbrough
The essential thoughts by Henry Chesbrough
Prof. Chesbrough is no doubt a practical man. Browse the Garwood Centre for Corporate Innovation’s website and you will find a useful list of his articles grouped by readers’ interest or level of expertise.
These categories are:
- Introductory - for those new to open innovation;
- Recommended - articles to read after you’ve understood the basics;
- Background - articles providing more depth on a topic;
- Extensions - articles that take open innovation into new directions;
- General innovation - articles that go beyond open innovation;
- Academic - articles for academic readers.
Here are some of my favorite reads in “Introductory and recommended”, “Background”, and “Extensions:
1. Open innovation is all about combining external ideas with internal know-how.
Strict control of new product development, self-reliance, and aggressive protection of IP all made successful innovation happen in the 20th century. In the era of open innovation, however, these guidelines are harmful, and not helpful to organizations.
To create value, organizations large and small must combine external ideas with internal know-how and R&D. Equally, companies should master the art of planning several moves ahead, know how to define resources, and adapt as new information arrives in order to successfully manage their innovation process.
As for why bad things happen to good technology, new ideas can only take an organization so far. The main culprit is often the business model. Open innovation strategy should focus not only on the offer itself but also on how that innovative offer makes its way onto the market.
2. Open innovation is all about learning new tricks.
Whether an outside-in, an inside-out, or a coupled process, open innovation requires “old” organizations to learn new tricks, tricks like changing the role of research staff from not just generating knowledge but facilitating and brokering it or ensuring access to external ideas as well as profiting from one’s own IP.
Increasingly, OI concepts are not employed primarily as a rationale for cost reduction or outsourcing the R&D function. Instead, research external to the company functions as a complement.
3. Open innovation is all about partnerships.
The open innovation mindset makes it easier for small companies to join forces with large ones. For example, a large organization might look to a networked incubator in search of strategic partnerships with promising start-ups. Institutionalized networking is therefore an important tool in accelerating the partnering and innovation process as well as maintaining a healthy entrepreneurial drive in an industry.
4. Open innovation is all about sustainability.
Balancing value creation with value capture requires the continued participation of resourceful individuals, innovation communities, and collaborative initiatives. This can be best achieved with the help of an open strategy focused on the sustainability of the innovation ecosystem.
One great example is Chez Panisse, where open innovation initiatives such as the open kitchen concept encouraged ideas to bloom and co-evolve in terms of menu, food design, and customer interaction as early as the 1970s.
In this example, experimentation with business models, and “sabbatical” programs for head chefs were all part of the open innovation initiatives that created a true ecosystem, where R&D spillovers were not losses, but fuel for further development and connectedness with the food innovation world.
Cases like this help shape the frontiers of open innovation and help create new standards for creating and delivering new products, services, and processes into the world.
If you have a little more time at your disposal, you might wish to explore other leading (open) innovation scholars too: Robert Cooper, Eric von Hippel, Michael L. Tushman, John Bessant, Karim Lakhani, Charles O'Reilly, Wim Vanhaverbeke, Joel West are a few important names to keep in mind.