innovation : open innovation

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ITS - MMT - Manajemen Proyek - Manajemen Teknologi dan Inovasi

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Innovation Innovation is the implementation of a new or significantly improved idea,good, service, process or practice which is intended to be useful Rubenstein defined innovation as the process whereby new and improved product, processes, materials, and services are developed and transferred to a plant and/or market where they are appropriate

Relation between Technology & Innovation Technology is the practical implementation of learning and knowledge by individuals and organizations to aid human endeavor. Technology is the knowledge, product, procesess, tools, and system used in the creation of goods or in the provision of services (Margaret A. White and Garry D Bruton) Technology enables innovation innovation enables technologyInnovation

Technology

and

Technology = input for innovation Innovation = resulted on new technology

Open InnovationTHE BASIC PREMISE Opening up the innovation process DEFINITION The use of purposive inflows and outflows of knowledge to accelerate internal innovation, and to expand the markets for external use of innovation, respectively (Chesbrough et al., 2006:1) The first process is called inbound open innovation and the second out-bound open innovation Henry Chesbrough connected the processes of acquiring external knowledge and exploiting internal knowledge externally by placing them both under the open innovation umbrella with the labels INBOUND AND OUTBOUND OPEN INNOVATIONHuizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Based on these terms Herzog (2011) defined the open innovation as...

A holistic approach to innovation management as systematically encouraging and exploring a wide range of internal and external sources for innovation opportunities, consciously integrating that exploration with firm capabilities and resources, and broadly exploiting those opportunities through multiple channels

Herzog, P. 2011. Open and Closed Innovation, Different Cultures for Different Strategies. 2nd Ed. Gabler Verlag, Springer. p. 1-8.

Difference between Open & Closed Innovation"Closed" Innovation Viewpoint Nobody can know what we are innovating Spending more on internal R&D will improve our market position and help us grow First-to-patent = highest profit We need more R&D staff to close our knowledge gaps "Open" Innovation Viewpoint Nobody can know the confidential ideas that we are working on "Smart" innovators engage with the global innovation community and reap the highest returns First-to-market = highest profit

We need our R&D staff focused on our core competencies, allowing outside solution providers to provide the rest

OPEN INNOVATION IS USUALLY CONTRASTED WITH CLOSED INNOVATION Supposedly its predecessor, where companies generate their own innovation ideas, and then develop, build, market, distribute, service, finance, and support them on their own (Chesbrough, 2003a, p. 20)

Comparison between....

Closed Innovation Paradigm

Open Innovation Paradigm

Perusahaan melakukan riset dan pengembangan dengan resource dari internal perusahaan, dan hasil/produk-nya dilindungi oleh perusahaan sampai diluncurkan ke pasar/market

Perusahaan melakukan riset dan pengembangan dengan resource dari internal dan eksternal perusahaan, demikian pula hasil penelitian internal dapat dipakai oleh eksternal perusahaan

Why we need to applied OPEN INNOVATION PARADIGM?To increase investment in new business development Firms expect to further reduce their internal basic reserach efforts To make more use of acquiring technology from external sources Deepen their competence base in their current technologies and markets

To managing the product portofolioTo be competitive, to create the basis for innovation strategies

Technologies and markets sooner or later will be mature

Firms need to initiate new businessesFirms need to focus on their current business Firms need to identify, acquire, and develop new competencies, simultaneouslyHerzog, P. 2011. Open and Closed Innovation, Different Cultures for Different Strategies. 2nd Ed. Gabler Verlag, Springer. p. 1-8.

RELEVANT DEVELOPMENTS IN THE WIDER INNOVATION ENVIRONMENT INCLUDE : Social and economical changes in working patterns, Increased labor division due to globalization, Improved market institutions for trading ideas, And the rise of new technologies to collaborate across, Ggeographical distances (Dahlander and Gann, 2010) THE DO-IT-YOURSELF MENTALITY IN INNOVATION MANAGEMENT JUST BECAME OUTDATED (GASSMAN, 2006) Trends such as outsourcing, agility, and flexibility had already forced companies to reconsider their strategies and processes in other areas, and to become network organizations

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Content of Open InnovationOpen innovation is a relatively new and rich conceptTHE 3 CONTENT OF OPEN INNOVATION: Classifications of openness The two main activities of inbound versus outbound open innovation The focus shifts to the various aspects of open innovation effectiveness

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Classification of Openness The various knowledge flows in open innovation. Lichtenthaler and Lichtenthaler (2009) distinguish between three knowledge processes: Knowledge exploration, Retention, Exploitation that can be performed either internally or externally Open innovation practices can grouped by distinguishing between Process Outcome also be

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Various ways of innovation based on the openness of both the process and the outcome of innovationINNOVATION PROCESS INNOVATION OUTCOME CLOSED CLOSED OPEN 1. CLOSED INNOVATION 2. PRIVATE OPEN INNOVATION OPEN 3. PUBLIC INNOVATION 4. OPEN SOURCE INNOVATION

CLOSED INNOVATIONProprietary innovation is developed in-house (Chesbrough, 2003a), both the process and the outcome are closed

PRIVATE OPEN INNOVATION The outcome is closed (a proprietary innovation) but the process is opened up, either by using the input of external partners or by externally exploiting an internally developed innovation. Such as Procter & Gamble (Huston and Sakkab, 2006)Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

PUBLIC INNOVATION Devoting scarce resources to innovation and then to give away the outcome for free seems highly unlikely for economists (e.g., Lerner and Tirole, 2005; Kogut and Metiu, 2001), but in some cases it makes good economic sense (von Hippel and von Krogh, 2006). The example is standard setting, where the original innovators do not exclude others to use an innovation in order to reap the benefits of a de facto market standard, examples include the introduction of JVCs VHS videotape in 1976 and the IBM PC in 1981

OPEN SOURCE INNOVATION Where both the innovation process and the outcome are open. Open source software is the best known example of this category example ms office by microsoft & open office by oracle

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Inbound vs Outbound Innovation INBOUND OPEN INNOVATION refers to internal use of external knowledge OUTBOUND OPEN INNOVATION refers to external exploitation of internal knowledgeThis relates to the three knowledge processes of knowledge exploration, retention, and exploitation that can be performed either inside or outside a firms boundaries (Lichtenthaler and Lichtenthaler, 2009)

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

INBOUND INNOVATIONEmpirical studies have consistently found that companies perform more inbound than outbound activities : Chesbrough and Crowther, 2006; Bianchi et al., Cheng and Huizingh, 2010; Chiaroni et al.Procter & Gamble reportedly only uses 10 percent of its technologies (Huston and Sakkab, 2006)

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

OUTBOUND INNOVATIONPossible explanations for external under exploitation include: Historical reasons The possibility to use existing relation- ships The fear of diffusing relevant knowledge (Rivette and Kline, 2000) To give away corporate crown jewels (Kline, 2003)

A rise in efforts of companies to license out their technologies (Fosfuri, 2006; Granstrand, 2004) Motorola estimates the potential of licensing out as $10 billion annually (Lichtenthaler, 2007)

18Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

EffectivenessInteresting issue is what aspects of open innovation activities make the concept effective: Lower costs Shorter time to market More sales Licensing technologies increases company profits Exploiting companys own market to focus at the expense of its customers Offensive reasons (stimulating growth) were more important than defensive reasons (decreasing costs and risks) The chain of open innovation effects, from immediate to long term, strategic consequences: Strategic benefits of outbound open innovation include getting access to new markets and enhancing the firms technological position (Lichtenthaler,2007; Nagaoka and Kwon, 2006)Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Context of Open InnovationI. INTERNAL CONTEXT CHARACTERISTICS: Company characteristics related to demographics and strategiesDemographics include: Number of employees, Sales, Profits, Age, Location, Market sh