Dr Sabine Brunswicker

Open Innovation in Action - Modes of Open Innovation

Dr. Sabine Brunswicker

Fraunhofer-Institute for Industrial Engineering & ESADE Business School

Open Innovation 2.0 Conference, Dublin May 21, 2013

Open Innovation in Action: Modes of Open Innovation

The innovation game has

changed¹

Source: 1) Chesbrough (2003)


The orginial concept of open innovation describes a cognitive framework for a firm’s strategy to profit from innovation

Open Model

existing

market

new market

other firm’s

market

idea sourcing

running/successful innovation projects discarded innovation projects

Closed Model

market +

+

+

new

product/

service

internal

innovation

resources

internal

innovation

resources

external

innovation

resources

technology

sourcing

co-development

partnerships

spin-out

Source: see also Chesbrough (2003, 2006)


Since 2003, the phenomenon is widely discussed and firms experiment with a range of different practices; do we know which ones matter?

Google Search Open Innovation

Nov 2011 > 8 million hits

May 2013 > 700 million hits

Widely discussed phenomena Multiple case studies Lack of insights

? Adoption and

pervasiveness of

of different

modes of open

innovation


In our new executive survey we found that open innovation is on the rise; it receives increasing management support at the top executive level

Executive study

UC Berkeley and

Fraunhofer

Sampling among the largest firms in Europe and

US

Firm criteria: >1000 employees and >250

million USD in sales

Key informants: CEO, COO, or CTO at

headquarter

Data collection

October– December 2012

125 datasets

(5 % response rate)

Adoption of

open innovation

Abandonment

Open innovation

experience

Management

support

Intensity

78% practice open

innovation today

No firm has abandoned

open innovation

Median of 5 years

71 % have increased

management support

82 % have increased

open innovation activity

Source: Open Innovation Executive Survey Fraunhofer & UC Berkeley; n = 125


There is not „one“ single open innovation strategy; it involves a „bunch“ of practices


Large firms like GE experiment with start-up competitions and idea contests to implement inbound open innovation and create new innovation ecosystems

Challenge

Powering the

Grid

Powering your

Home

B2B Entrants

Opportunity to

develop commercial

relationship with GE

GE investment

Nearly 4000 ideas

75,013

entrepreneurs

23 partnerships ($

200 USD investment)

Source: www.ge.com, Chesbrough (2012) California Management Review

Co- investment &

venture partners

Emerald Capital

Foundation Capital

….

http://www.ge.com/


Open innovation intermediaries are on the rise; various types of firms have been experimenting with their services and learn their lessons

Intermediary

Searcher

Medium-sized firm (in

collaboration with

assocation)

Solver Community

Reseachers, scientist, etc.

“Request for

proposal”

Ideas and

Solutions

Market for Ideas and Technologies

Problem: Strong durable

gear materials that do not

require lubrication

Solutions:

26 Solutions submitted

16 new Solutions

8 Solutions with potential for

development

http://www.wittenstein.de/index.html


We can differentiate between inflows and outflows of knowledge; they do not necessarily imply a direct financial compensation

Direction

Inbound

Outbound

Pecuniary Non-pecuniary Financial flows

Source: Chesbrough & Brunswicker (2013); Dahalander (2010)

Inbound &

pecuniary

Inbound

& non-

pecuniary

Outbound

&

pecuniary

Outbound

& non-

pecuniary

Source. siehe auch Chesbrough (2003, 2006); Dahlander (2010)


There are various inbound practices to implement open innovation

IP In-licensing

Informal networking

Publically funded

R&D projects

Contracting external

R&D services

Open Innovation

Intermediaries

Inbound

University grants

Supplier

innovation awards

Own crowdsourcing

initative

Customer and

consumer co-creation

Idea and start-up

competition


Co-creation and informal networking are the top inbound practices; new practices score rather low

2.34

2.64

2.66

3.37

3.71

3.73

3.87

4.19

4.38

4.43

1 2 3 4 5 6 7

3.80

4.09

3.76

4.01

4.47

4.04

4.11

4.28

4.12

4.68

1 2 3 4 5 6 7

Customer and consumer co-creation

Informal networking

University research grants

Publically funded R&D consortia

Contracting of external R&D service

Idea and start-up competitions

IP in-licensing

Supplier innovation awards

Crowdsourcing (unknown problem solvers)

Specialized services OI intermediaries

Not important Highly important

Significant decrease

Significant increase

No change


Importance in 2011 (mean values)

Change of importance 2008-2011 (mean values)

Inbound practices


Joint venturing is the top outbound mode of open innovation; spin-offs and donations score very low in terms of priority

2.26

2.43

2.84

3.45

3.75

3.85

4.21

1 2 3 4 5 6 7

3.91

3.74

4.20

4.63

3.97

4.39

4.62

1 2 3 4 5 6 7

Joint venture activities

Selling of market-ready products

Participation in public standardization

Corporate business incubation & venturing

IP out-licensing & patent selling

Donations to commons or nonprofits

Spin-offs


Significant decrease

Significant increase

No change

Importance in 2011 (mean values)

Change of importance 2008-2011 (mean values)

Outbound practices


Trusted Network

New

partners

Pearlfinde

r

Supplier

Government

Researcher Development

partner


Indeed, we found that new partnerships and innovation networks are the driving force of openness; IT offers firms new affordances for new kinds of innovation networks and empowers individuals

Pearlfinder

• Company owned digital community

• Challenge-driven innovation

• Multi-staged process and individual

Terms + Conditions

• Link with other open innovation

practices

Partner and partner selection

• Suppliers, universities,

developmant partners,

• No start-ups

• Selection based on„manageral fit“

and stabiltiy, IPR-Policy,

„Academic Excellence“ and

concrete idea

• Selection process based on new

methods such as incubation lab

Challeng

e Uni


Large firms do not yet recognize the value of connected communities; however, the gravity is shifting….

The gravity is shifting….

People-centric and digital networks

Bottom-up innovation

Connected citizen


There is an internal component of openness; managing the journey from closed to open innovation is the biggest challenge

3.69

4.55

4.53

4.53

4.89

5.26

3.61

4.28

4.49

4.6

4.97

5.6

1 2 3 4 5 6 7

Avoidance of external or already existing knowledge

Effectiveness of intellectual property protection

Identifying new innovation sources

Protecting internal critical know-how

Management of external relationship with innovation sources

Managing the organizational change internally

Challenges of engaging in open innovation (mean values, 1=not important to 7= highly important)

when firm's started

today




There are different maturity stages of open innovation; it is a journey of experimentation and learning

Closed system First experiment

Creating of

innovation

ecosystem

Systematic

processes to

manage internal

and external

innovations Pe

rfo

rma

nc

e

Maturity levels

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

Self-sustaining

system

(Platform player)

Fokales

UnternehmenKonkurrenten

Kunden

Kunden der

Kunden

Lieferanten

2nd tier

Lieferanten

Unis/ Forschungs-

einrichtungen

Komplementoren

Intermediäre

Communities

Interne

Technologie-

Basis

Aktueller

Markt

Aktueller

Markt

Gescheiterte Ideen/

abgebrochene Projekte

Erfolgreiche Ideen/ erfolgreiche

Projekte

Interne

Technologie-

Basis

Aktueller

Markt

Aktueller

Markt

Gescheiterte Ideen/



Projekte

Gescheiterte Ideen/



Projekte

Source: Brunswicker and Ehrenmann (2012)

New capabilities and processes:

Design-led experimentation

IP by design

Network orchestration…

Open Innovation A „new“ paradigm for managing innovation?

It is not easy to implement open innovation; it requires a systemic shift and re‐thinking of many aspects of one’s business to utilize it effectively

„If you’re not failing every

now and again, it’s a sign you’re not

doing anything very innovative.“

Woody Allen

Managing Open

Innovation in Large

Firms

Survey report - Executive Study

Open Innovation 2013

Henry Chesbrough

Sabine Brunswicker

Contact:

[email protected];

[email protected]

Back up

Open Innovation A „new“ paradigm for managing innovation?

We are observing a shift towards the network level of open innovation activities; innovation communities and partnerships become more and more important

Source: Pisano and Verganti (2008)

Elite Circle Consortium

Innovation Mall Innovation Community

Governance

Pa

rtic

ipa

tio

n

Flat Hierarchy

Clo

sed

O

pen