An overview of the What, the Why and the How of Open Innovation and it's application to a UK Industrial company.

1. Rob Munro, Principal Consultant at The Growth Engine
Opening Innovation: Succeeding within an Established Technology Company, 2012
@RobMunro4

2. Contents
 What? Key Open Innovation Ideas
 Why? Benefits, Risks and Success Factors
 How? Design of an Open Innovation System
 Implementation of The OI System
 High Innovation Performance: The “X Factor”
 Summary and Conclusions

3. Preconceptions?
1) What do you understand Open Innovation to be?
2) What would you like to know/understand about OI?

4. Many Examples

6. Key OI Ideas: Origins
Open Innovation, Henry
Chesbrough (2003)
Distributed Innovation,
Georges Haour (2004)
5th Generation Models,
Amidon-Rogers (1996)
Old Wine in New
Bottles, Trott &
Hartman (2009)
Abraham Darby,
Ironbridge, Shropshire
1779

7. Key OI Ideas: Definitions
The knowledge-based view… “Open innovation is the use of purposive inflows and
outflows of knowledge to accelerate internal innovation and expand the markets for
external use of innovation respectively.” Vanhaverbeke, West, & Chesbrough, (2006)
The knowledge management angle… “Systematically exploring knowledge
exploration, retention and exploitation inside and outside an organizations boundary
throughout the innovation process.” U. Lichtenthaler, (2011)
Capabilities focus… “…systematically encouraging and exploring a wide range of
internal and external sources for innovation opportunities, consciously integrating
that within the firm’s capabilities…” West & Gallagher, (2004)

8. Key OI Ideas: Closed v Open
The Era of Open Innovation, (Chesbrough, 2003b)
Innovation as a Continuum?
Vertical
Integration
Go to
Market
Equity
Alliance
Specifications
Contracts
Relation-Based
Alliance

9. Key OI Ideas: Porous Boundaries
Representation of OI,
(Herzog 2011:23)
Outside-In
Inside-Out“Coupled”

10. Why Open Innovation? Drivers
 Ubiquity of Information – porosity and availability.
 Mobility of Skilled Employees.
 New sources of investment capital - e.g. VC
 Globalization of Innovation – Locations, Cost, Quality.
 Trend to R&D outsourcing – Cost, Quality.
 Integration of users and suppliers into the innovation
process.
 To access resources, knowledge, facilities, market access.
 To dominate an industry product standard.

12. Why Open Innovation? Benefits
 Innovation Performance:
 To increase product, process and service innovation performance.
 To discover combinations of products features that would be hard to envision
under vertical integration.
 Innovate faster and to self-disrupt.
 Financial Performance:
 Determined Open innovators outperform all others.
 Out-licencing – revenue from latent IPR.
 Establishing New Ventures away from the heartland markets.
 Strategic Fitness: Flexibility and responsiveness to market pressures.
 Societal Benefits: Ultimately, better performing firms benefit society at
large through improved wealth creation.
 Risk Management: OI projects share the risks and costs of uncertainty.

13. Why Open Innovation? Risks
 IP: Loss of the “crown jewels”.
 Losing Revenue: Judging a fair shares of future revenues.
 Management Ability: New management challenge.
 Higher Costs: Transaction costs in managing contracts
and opportunistic behaviours.

14. Why Open Innovation? Success
 Firm Context: Size, Sector, Strategies, Staff
 Innovation Management: In-house R&D Processes
 Capability: Readiness to Embark (CMM)
 Leadership and Governance
 When to do OI
 To access skills, knowledge, resources, markets
 When firms can appropriate their fair share
 Particularly for modular systems

16. The OI Ecosystem: Key Ideas
 Systems Thinking, (Peter Senge, 1990)
 Elements and Activities
 Foresight workshops, Executive Forums, Customer
integration, Endowed chairs, Consortia projects,
Internet platforms, Joint development, Strategic
alliances, Spin-outs, Test Market, Corporate
Venturing…
“…working cooperatively and competitively with other businesses in order to co-
evolve capabilities, to support new products, satisfy customer needs and incorporate
a new round of innovations, the company builds a business ecosystem.” (Moore cited
in Rohrbeck et al. (2009).
Ref: Methodologies for OI Management, (Rohrbeck et al., 2009)

17. Case Study: An OI Eco-system

18. The OI Eco-System
Governance Systems
•Organizational and Project
•Technology Council, Office of OI
Tools, Techniques and Processes
•Strategic Mapping, Project Management, Portfolio Selection etc
•New Decision-making Routines
Skills, Behaviours and Incentives
•Managerial Visibility, Networking, OI Contract Management
•Rewards to Connect, as well as invent. Appropriate Risk Taking
Open Innovation Roles
•Communities of Practice, Technology Entrepreneurs, Knowledge Leaders
•Change Initiators and Agents

20. Implementing OI: The Issues
 Organizational Inertia
 Absence of Burning Platforms
 Cultural Resistance
 Perception of OI as a Fad
 Not Invented Here Syndrome
 Establishing new Routines
 Not destroying the Good, with the Bad
 Investment of resources

21. Implementing OI: Good Practice
 Top-Level Commitment
 Leadership and Governance
 Manage the Change
 Integrating Innovation Practices
 Working within the Culture
 Visible, “Quick Wins”

22. Implementing OI: Approach
Ref: Summary of OI Implementation, (Chiaroni et al., 2010)

23. Summary and Conclusions
 OI has become a widespread management paradigm
 Open innovation is not always superior to closed -
contingent on firm-specific factors
 OI is necessary, but not sufficient
 A Systemic approach is required
 Change Management is essential - New role for R&D

24. Rob Munro, Principal Consultant at The Growth Engine
Opening Innovation: Succeeding within an Established Technology Company, 2012
@RobMunro4