open innovation
Open innovation is a term promoted by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at the University of California, Berkeley. The concept is related to user innovation, cumulative innovation, know-how trading, mass innovation and distributed innovation.
“Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology”. Alternatively, it is "innovating with partners by sharing risk and sharing reward." The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward.
The open innovation paradigm can be interpreted to go beyond just using external sources of innovation such as customers, rival companies, and academic institutions, and can be as much a change in the use, management, and employment of intellectual property as it is in the technical and research driven generation of intellectual property. In this sense, it is understood as the systematic encouragement and exploration of a wide range of internal and external sources for innovative opportunities, the integration of this exploration with firm capabilities and resources, and the exploitation of these opportunities through multiple channels.
The case of Procter and Gamble provides a good example of this shift in approach.In the late 1990s, there were concerns about its traditional inward-focused approach to innovation. While it worked, there were worries not least concerning the rapidly rising costs of carrying out R&D. Additionally, there were many instances of innovations which it may made but which it passed on only to find someone else doing so and succeeding. As CEO Alan Lafley explained: ‘Our R&D productivity had levelled off, and our innovation success rate, the percentage of new products that met financial objectives had stagnated at about 35 percent.
“Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology”. Alternatively, it is "innovating with partners by sharing risk and sharing reward." The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward.
The open innovation paradigm can be interpreted to go beyond just using external sources of innovation such as customers, rival companies, and academic institutions, and can be as much a change in the use, management, and employment of intellectual property as it is in the technical and research driven generation of intellectual property. In this sense, it is understood as the systematic encouragement and exploration of a wide range of internal and external sources for innovative opportunities, the integration of this exploration with firm capabilities and resources, and the exploitation of these opportunities through multiple channels.
The case of Procter and Gamble provides a good example of this shift in approach.In the late 1990s, there were concerns about its traditional inward-focused approach to innovation. While it worked, there were worries not least concerning the rapidly rising costs of carrying out R&D. Additionally, there were many instances of innovations which it may made but which it passed on only to find someone else doing so and succeeding. As CEO Alan Lafley explained: ‘Our R&D productivity had levelled off, and our innovation success rate, the percentage of new products that met financial objectives had stagnated at about 35 percent.