International Competitiveness and Innovation Topic 08: Open Innovation
International Competitiveness and Innovation
Topic 08: Open Innovation
International Competitiveness and Innovation Topic 08: Open Innovation
S05
S06
S07
Topic 01: Introduction Topic 02: What is Innovation and Why does it Matter?
Topic 03: Managing Capabilities in the Firm Topic 04: Design and Selection Technology Strategies
Topic 05: Knowledge and Technology Sourcing Topic 06: Managing Collaborations and Alliances
Topic 07: The Role of IPR in Protecting Innovations Topic 08: Open Innovation
Topic 09: Sectoral Patterns of Innovations Topic 10: Nations and Innovation Capacity
Topic 11: Public Policy for Promoting Innovation and Competitiveness Topic 12: Globalization of Research and Technology
Topic 13: MNCs and their Global Research and Development Operations Topic 14: International Transfer of Knowledge and Technology
S01 Topic 01: Introduction Topic 02: What is Innovation and Why does it Matter?
Topic 03: Managing Capabilities in the Firm Topic 04: Design and Selection Technology Strategies
Topic 05: Knowledge and Technology Sourcing Topic 06: Managing Collaborations and Alliances
Topic 07: The Role of IPR in Protecting Innovations Topic 08: Open Innovation
Topic 09: Sectoral Patterns of Innovations Topic 10: Nations and Innovation Capacity
Topic 11: Public Policy for Promoting Innovation and Competitiveness Topic 12: Globalization of Research and Technology
Topic 13: MNCs and their Global Research and Development Operations Topic 14: International Transfer of Knowledge and Technology
seminar sessions outline
S02
agenda
S03
S04
International Competitiveness and Innovation Topic 08: Open Innovation
………………………………what is open innovation? ………closed innovation and industrial ecology of R&D
…..……key principles and benefits of open innovation
………………internal and external corporate venturing
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Open innovation is…
A paradigm that assumes firms can and should use external ideas as well as internal ideas, and internal & external paths to market, as firms look to advance their technology.
Firms that can harness outside ideas to advance their own business, while leveraging their internal ideas outside their current operations will likely thrive in this new era of open innovation.
Source: H. Chesbrough (2003, 2006)
what | closed innovation & R&D | why | spin-in/out
endogenous
exogenous
International Competitiveness and Innovation Topic 08: Open Innovation
Our current market
Our new market
Other firm´s market
External technology insourcing
Internal technology base
External technology base Source: H. Chesbrough UC Berkeley, Open Innovation: Renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27, 2004
Internal/external venture handling
Licence, spin out, divest
Chesbrough’s Open Innovation business model
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Open Innovation Principles
Closed innovation Open innovation Hire the best people so that the smartest people in the industry work for us.
Not all the smart people work for us – we need to engage with best inside & outside our company.
To bring new products to the market we must discover them.
External R&D can create significant value; internal R&D is needed to claim some portion of that value.
We need to discover it ourselves to profit from it.
We don’t need to originate the research to profit from it.
Company getting innovation first to market will usually win.
Building a better business model is better than getting to market first.
Industry leaders in R&D investments will discover the best & most ideas & will come to lead the market as well.
Companies that make the best use of internal and external ideas will win.
Control intellectual property to ensure that competitors do not profit from our ideas
Company can profit from others’ use of IP & we should buy others’ IP whenever it advances our own business model.
Source: H. Chesbrough (2003)
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Closed innovation Open innovation Hire the best people so that the smartest people in the industry work for us.
Not all the smart people work for us – we need to engage with best inside & outside our company.
To bring new products to the market we must discover them.
External R&D can create significant value; internal R&D is needed to claim some portion of that value.
We need to discover it ourselves to profit from it.
We don’t need to originate the research to profit from it.
Company getting innovation first to market will usually win.
Building a better business model is better than getting to market first.
Industry leaders in R&D investments will discover the best & most ideas & will come to lead the market as well.
Companies that make the best use of internal and external ideas will win.
Control intellectual property to ensure that competitors do not profit from our ideas
Company can profit from others’ use of IP & we should buy others’ IP whenever it advances our own business model.
what | closed innovation & R&D | why | spin-in/out Open Innovation Principles
International Competitiveness and Innovation Topic 08: Open Innovation
Closed innovation paradigm (Chesbrough, 2003)
• Hire the best & brightest so that the smartest people in the industry work for us.
• To bring new products and services to the market, we must discover and develop them ourselves.
• The company that gets an innovation to market first will usually win.
• Industry leaders in R&D investment will discover the best and most ideas & will come to lead the market as well.
• Control intellectual property to ensure that competitors do not profit from our ideas.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Challenges to closed innovation paradigm
• Increasing availability and mobility of skilled workers
• Growth of venture capital market
• Growth of knowledge base and increasing capabilities of external knowledge suppliers
• Increasing complexity of products and services
• Difficulty of R&D pull through to commercialisation
• Costs and risks of internal R&D
• More flexibility required inside company
• Growing pressure on R&D budgets
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
New industrial ecology of R&D (Coombs & Georghiou, 2002)
• Historically large corporate laboratories have played a central role in the research & development system.
• Economic and technological change leading to a “new industrial ecology of R&D” characterised by network relationships and:
- complementary role of smaller companies - outsourcing of some R&D to specialist CROs - increased business funding of university R&D - collaborative R&D - globalisation
• Innovation process increasingly ‘distributed’ across organisations
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Why are technological capabilities increasingly distributed?
• Increasing complexity of products and services – – single firms cannot hope to internalise all the scientific and
technological knowledge required to design, develop, manufacture & market modern products and services.
• R&D is increasingly interdisciplinary in nature – – encouraging collaboration between organisations with
strengths in different fields.
• Costs and risks of R&D – – driving collaboration and division of labour.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Complementary Assets Teece, D. (1986)
• Successful commercialisation of a technological innovation requires other capabilities or assets for exploitation.
• These complementary assets include: marketing; manufacturing; after sales support etc..
• Access to complementary assets that reside outside the firm is increasingly important to successful innovation.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Facilitators of an open innovation system
• World Wide Web
• Intermediaries
• IPR regimes
• Growth of venture capital market
• Policy
Firms should look beyond their own boundaries to enhance competitiveness.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
The logic of “Open Innovation”
• Good ideas are widely distributed today. No one has a monopoly on useful knowledge anymore.
• Innovation is now done within networks of firms, rather than within a single firm.
• Not all the smart people in the world work for us.
H. Chesbrough (2006)
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
BeneIits of an open innovation system
• Leverage in-house knowledge and gain access to new applications.
• Access specialist techniques and to tap additional manpower.
• Achieve critical mass whilst remaining lean.
• Window on the world – more ideas & better ideas.
• Dynamic SME sector / Entrepreneurial economy.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Internal corporate venturing/ new business development
Rationales:
- Creating value for shareholders
- Providing the possibility for a star performer
- Creating a more business-orientated environment in R&D function
- Creating new revenue stream where R&D operates with P&L account.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Internal corporate venturing/ new business development
• Typically sponsors developments that:
– lie outside the company’s core business, but are potentially valuable technologies that may be spun-out;
– cannot flourish within traditional company structures (can also be termed as ‘Skunk works’)
• Internal ‘incubators’ at companies like BT and France Telecom turn technical projects into spin-out companies.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Skunk Works
Used to offer designers tasked with working on advanced or secret projects :
– a high degree of autonomy
– unhampered by bureaucracy
• Companies recognise that if they are to attract & retain the best scientists they have to offer scientific freedom.
• The name ‘skunk works’ can be traced back to US aircraft manufacturer Lockheed. Here it was created to design & develop the XP-80 Shooting Star, The US’s first production jet aircraft.
• Skunk works have also appeared in other companies like
Apple, when the Macintosh was first designed.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
When should a company consider spinning-out?
• The technology is potentially valuable • BUT does not fit well with current portfolio • AND is not of immediate value to existing businesses.
• The in-house barriers to developing the technology are high • AND requires higher flexibly • OR a more entrepreneurial environment than is available.
• When a competent and entrepreneurial team exist that wish to pursue the opportunity.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Spinning-in to access external sources of technology
• Acquisition
• Licensing
• Corporate venturing
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
• Established company sponsors young firms through equity participation and other resources.
• Objective is to gain access to new markets, new technologies & new business models.
• Corporate venture funds of various types: – fund used in a wholly owned company for direct investment. – the company may buy equity in an external venture capital fund. – the fund may be managed by third parties.
what | closed innovation & R&D | why | spin-in/out
External Corporate Ventures
International Competitiveness and Innovation Topic 08: Open Innovation
When should a company consider spinning-in?
• Rejuvenate technology portfolio
• Provide a ‘window on the world’
• Bring in new technology and ‘boost’ innovation efforts
• Shorten time to development to market.
• Make R&D more cost effective
• Enhance the potential for long-term profitable growth
• Increased competitive pressure requires new ways of doing things.
• It is impractical to develop everything in-house.
what | closed innovation & R&D | why | spin-in/out
International Competitiveness and Innovation Topic 08: Open Innovation
Open Innovation: The Next Frontier in R&D
Presentation to ALA 2008
Henry Chesbrough Executive Director, Center for Open Innovation
Haas School of Business UC Berkeley
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
The Current Paradigm: A Closed Innovation System
The Market
Science &
Technology Base
R D&E © 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Great Successes from the Closed Innovation Model
• The Chemicals Industry – Germany and later US
• Edison, GE, and the rise of electrification
• Rockefeller and Standard Oil
• World War II scientific achievements
• Chandler: Internal R&D key to the rise of the modern US corporation in 20th century
(Strategy and Structure: Chapters in the History of the Industrial Enterprise, 1962)
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Rising Costs of R&D
Then (25 years ago)
• <$ 30 million for a fab
• <$ 50 million for a new drug
• < $ 10 million for a new consumer product
Now
• > $ 3 billion for a fab
• > $ 800 million for a new drug
• > $50 million for a new consumer product
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Shorter Shipping Lives
• Disk drives • Cell phones • Generic drugs • “80% of the senior executives we surveyed
indicated that the productive lives of their strategies were getting shorter.”
» Chris Zook, HBR April 2007
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Diminishing Economies of Scale: US Industrial R&D
by Size of Enterprise
Company Size 1981 1989 1999 2003
< 1000 employees 4.4 % 9.2% 22.5% 22.5% 1,000 – 4,999 6.1 % 7.6 % 13.6% 14.8% 5,000 – 9,999 5.8 % 5.5% 9.0% 7.5% 10,000 – 24,999 13.1% 10.0% 13.6% 13.4% 25,000 + 70.7% 67.7% 41.3% 40.9%
Sources: National Science Foundation, Science Resource Studies, Survey of Industrial Research Development, 1991, 1999, 2001, 2003.
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Diminishing Economies of Scale: US Industrial R&D by Size of Enterprise
Sources: National Science Foundation, Science Resource Studies, Survey of Industrial Research Development, 1991, 1999, 2001, 2003.
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
1981 1989 1999 2003
< 1000 employees
1,000 – 4,999
5,000 – 9,999
10,000 – 24,999
25,000 +
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
What changed? Five Erosion Factors
1. Increasingly mobile trained workers
2. More capable Universities
3. Diminished US hegemony
4. Erosion of oligopoly market positions
5. Enormous increase in Venture Capital
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Hidden Assumptions in the Internally-Focused Innovation System
If I discover it, I will find a market for it.
If I discover it first, I will own it.
The important technologies I will need can be anticipated in advance.
“Misfits” are regrettable, but are a cost of doing business.
The best people in this field work for us.
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Type I and Type II: Xerox and PARC
Designed to minimize “false positive” errors Ignores risk of “false negative” errors
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
A Classic Example: the Xerox 914 copier
• Chester Carlson develops electrostatic method to place toner on paper, a “dry” process for copying documents
• In 1955, existing processes (wet or thermal) used to make 15-20 copies per day. Machines cost ~ $300.
• Joe Wilson estimates cost of building dry process copiers at ~$2000
• Wilson seeks manufacturing and distribution partners – IBM, Kodak, GE
• IBM engages ADL to study: “Although it may be admirably suited for a few specialized copying applications, the Model 914 has no future in the office-copying-equipment market.”
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Wilson’s Business Model
• ADL’s study (and the other companies) viewed the dry process technology through a traditional business model – charge for the equipment (dry technology very high cost) – charge for the supplies as needed (no savings vs. wet)
• Joe Wilson ignored these rejections, and took the technology to market through a new Business Model – $95/ month for first 2000 copies, 4 cents each for additional – Low barrier for customer trial, Haloid/Xerox bore the risk – Enormous usage: 2000 copies per day – Revenues grow 41% compounded for next 20 years
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
3Com
• Metcalfe left PARC in Jan. 1979
• Did consulting work until Feb. of 1981 – DEC, GE, Exxon
• Brokered alliance between Xerox, DEC, and Intel for IEEE 802 (aka Ethernet)
• Initial plan: sell to Unix workstations, via direct sales force
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Then….
• As part of consulting, created directory of LAN dealers and VARs across US – first of its kind – sold many hundreds of copies at $125 each – did this for 5 years
• IBM PC took the world by storm
• 3Com formed, Krause joined from HP – VCs financed:
• New plan: add-on boards for IBM PCs, sold through IBM retailers and VARs
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Different Financial Processes
Chess: Type I errors • Plan several moves
ahead • No new
information needed • You know what
you’ve got, what opponent has
• NPV
Poker: Type II errors • Pay to play • Pay for new
information • You discover what
you’ve got, what other players have
• Options © 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
0
5000
10000
15000
20000
25000
30000
35000
40000 U
S D
olla
rs (m
illio
ns)
Year
Xerox: Great at Chess, Lousy at Poker
Xerox 3Com Adobe Doc Sci Documentum FileNet Komag Objectshare SynOptics SDLI VLSI Sum (10)
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Current Market
Internal Technology
Base
R D
The Open Innovation Paradigm
Technology Insourcing
New Market
Technology Spin-offs
External Technology
Base
Other Firm’s Market Licensing
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Open Innovation
Our current market
Our new market
Other firm´s market
External technology insourcing
Internal technology base
External technology base
Stolen with pride from Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27, 2004
Internal/external venture handling
Licence, spin out, divest
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
The Division of Innovation Labor
• Open Innovation separates innovation into multiple stages – From a marathon to a relay race
• Lab and Test Equipment are Fundamental to this division of labor – Customer’s ability to verify that spec was met
– Supplier’s confidence that good product was delivered
– Enables the innovation baton to be passed efficiently and effectively
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
IBM: Its Closed Value Chain
All IBM – pre 1993
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
IBM’s Open Business Model
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
IBM’s Open Source Business Model
• Spends about $100M each year on Linux – 50% for general improvement – 50% for specific improvements for IBM gear
• Others spend another $800M a year
• IBM creates value through Linux – Also donates development tools, patents
• IBM captures value through value-added services and software “up the stack”
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Procter & Gamble
• P&G used to be a VERY closed organization – “We invented Not Invented Here” – J. Weedman
• P&G financial crisis, in 2000 – Missed a series of quarterly financial estimates
– Stock market lost confidence in the company
– Stock price fell by more than half in 4 months!
– CEO (Jagr) was fired
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
P&G’s Stock Price: 8/1998-3/2000
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Searching for the Root Cause
• “We fundamentally had a growth problem. Our current brands were performing well. But we weren’t developing many new brands.” – C. Wynett
• To get new brands, P&G needed to open up.
• Connect and Develop – SpinBrush, Swiffer, Regenerist
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
The New P&G
• Many processes to enable open innovation – Technology scouts – Legal templates for IP, partnering – Investments in Innovation Intermediaries
• The Goal Now: Become the open innovation partner of choice
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Balancing Internal and External R&D Funding: P&G
100
100 0
0 % from internal
% from External
Westinghouse
Raytheon
TI
Nokia
Hitachi
P&G 2002
Source: Gassmann, v. Zedtwicz (2002)
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Balancing Internal and External R&D Funding: P&G
100
100 0
0 % from internal
% from External
Westinghouse
Raytheon
TI
Nokia
Hitachi
P&G
2002 2007
Source: Gassmann, v. Zedtwicz (2002)
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Finding Partners: A Massive Filtering Problem
The Unwashed
The Suspects
The Prospects The
Finalists
The Partner(s)
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
IP Management Innovations
• Scouting technologies (utilizing public domain information)
• Two Innovative Intermediaries: Nine Sigma and Yet2.com
– Outbound email “RFPs”/ Contacts and Competencies
– Requires (public) Problem Statement from Client
• A problem well-defined is half-solved
• Establishes context for potential solutions
• Must not “tip your hand” to competitors
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
How can one identify promising sources of innovation (without contamination)?
• Another innovative Intermediary: InnoCentive
– Start with public domain Problem Statement
– Solver Agreement (Solver owns solution being proposed)
– Private “rooms” on site for Solver to propose solution
– InnoCentive staff validates potential of idea prior to sharing idea with Client
– Client pays only for valid solution
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Other Innovative IP Intermediaries
Inbound • Innovation Exchange • SSIPEX • YourEncore.com
Outbound • IpValue, ThinkFire (patents) • Utek, Flintbox (university technology) • New Venture Partners, LLC (spinoffs)
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
Current Market
Internal Technology
Base
R D
Intermediaries & Open Innovation
Technology Insourcing
New Market
NVPLLC: spinoffs
External Technology
Base
Other Firm’s Market
IP Value, Yet2 - licensing
InnoCentive NineSigma Yet2.com
Investment Banks
Sequoia/ Cisco
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
The Logic of “Open Innovation”
• Good ideas are widely distributed today. No one has a monopoly on useful knowledge anymore.
• Financial managers must play poker, as well as chess, to capture the value in false negatives.
• We must manage IP in order to manage research: – need to access external IP to fuel our business model – need to profit from our own IP in others’ business
model
• Not all of the smart people in the world work for us.
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
R.I.P
2007
R.I.P
Proudly Found Elsewhere!
A New Perspective Towards R&D
And verified by Lab and Test Equipment!
© 2007 Henry Chesbrough – Accessed via the Internet and presented via “fair use” for educa?onal purposes only – no prin?ng!
International Competitiveness and Innovation Topic 08: Open Innovation
questions…
Questions?