Open Innovation
A critical examination of open innovation theory and practice.
Jonash R.S & Sommerlatte.T. (1999) refer to Joseph Schumpeters’ view on innovation; he defined innovation as “encompassing the entire process, starting from a kernel of an idea continuing through all the steps to reach a marketable product that changes the economy.” However in this current economic climate there are ranging views on the area of innovation differing in many ways. In theory there are two types of innovation; Open Innovation and Closed Innovation.
Closed Innovation was the initiative that all innovation took place within the workforce. That a company should be able to control and implement their own ideas, produce the product, market it, distribute it, service and finance it and support it solely within the organisation. The characteristics of open innovation were that the employees were very intelligent thus able to process everything needed without external help. Research and development was a key focus as management seen this as the area which would be most profitable. Companies felt that controlling their IP would disable competitors from profiting from their ideas. However they had to be the first to discover products and new ideas which proved to be quite difficult. Chesbrough discovered that several factors lead to the erosion of closed innovation. These included better education thus highly intelligent students, venture capital was available and other companies among the supply chain have an insight now. As a result of this firm have taken other approaches to innovation and gained the help of external sources to achieve a more efficient and effective innovation process, this was seen by “Open Innovation”. Fowles and Clark (2005:46) denote that “Many innovative companies relied almost entirely on their in-house scientists and assessed their innovation ability based on the number of patents turned out in a year.” Firms, mainly those in the technology industry, are starting
Jonash R.S & Sommerlatte.T. (1999) refer to Joseph Schumpeters’ view on innovation; he defined innovation as “encompassing the entire process, starting from a kernel of an idea continuing through all the steps to reach a marketable product that changes the economy.” However in this current economic climate there are ranging views on the area of innovation differing in many ways. In theory there are two types of innovation; Open Innovation and Closed Innovation.
Closed Innovation was the initiative that all innovation took place within the workforce. That a company should be able to control and implement their own ideas, produce the product, market it, distribute it, service and finance it and support it solely within the organisation. The characteristics of open innovation were that the employees were very intelligent thus able to process everything needed without external help. Research and development was a key focus as management seen this as the area which would be most profitable. Companies felt that controlling their IP would disable competitors from profiting from their ideas. However they had to be the first to discover products and new ideas which proved to be quite difficult. Chesbrough discovered that several factors lead to the erosion of closed innovation. These included better education thus highly intelligent students, venture capital was available and other companies among the supply chain have an insight now. As a result of this firm have taken other approaches to innovation and gained the help of external sources to achieve a more efficient and effective innovation process, this was seen by “Open Innovation”. Fowles and Clark (2005:46) denote that “Many innovative companies relied almost entirely on their in-house scientists and assessed their innovation ability based on the number of patents turned out in a year.” Firms, mainly those in the technology industry, are starting
References: Jonash, R.S. & Sommerlatte, T. (1999). The innovation premium. How next generation companies are achieving peak performance and profitability. Reading: Perseus Books Chesbrough, H.W. (2003). Open Innovation: The new imperative for creating and profiting from technology. Boston: Harvard Business School Press Fowles, S. & Clark, W. 2005, "INNOVATION NETWORKS: GOOD IDEAS FROMEVERYWHERE IN THE WORLD", Strategy & Leadership, vol. 33, no. 4, pp.46 Chesbrough, H.W. 2007, "WHY COMPANIES SHOULD HAVE OPEN BUSINESSMODELS", MIT Sloan Management Review, vol. 48, no. 2, pp. 22