Open innovation

• Pages: 4-6

What is this recent trend? It is a paradigm shift for

managing innovation that involves companies

linking up with external partners to satisfy their in-

novation needs. It is known as “open innovation.“

In an age of rapidly changing technological land-

scapes and challenging economic conditions,

maintaining a company’s competitive edge can

hinge on its willingness to open up to outside

ideas and inventions. In the words of Bill Joy, co-

founder of Sun Microsystems, “No matter who

you are, most of the smartest people work for

someone else“. This commercial reality encour-

ages companies to look beyond their own re-

search and development (R&D) structures and to

tap into external knowledge resources. Moving

from the traditional model of closely-guarded

company research and purely internal problem-

solving toward a more outward-looking model

can take time but such a move promises to gen-

erate tangible benefits in terms of a firm’s growth

and long-term viability.

The term “open innovation“ was coined by Prof.

Henry Chesbrough, Executive Director, Center for

Open Innovation, University of California

(Berkeley), in 2003. His book,

Open Innovation –

The New Imperative for Creating and Profiting from

Technology

, defines it as the growing tendency for

companies to seek out external ideas and talent.

He explains that open innovation “assumes that

firms can and should use external ideas as well as

internal ideas, and internal and external paths to

market, as the firms look to advance their tech-

nology.“ A commitment to open innovation can

enhance business strategies and maximize a

company’s chances of success.

An evolving innovation

landscape

The emergence of a knowledge market makes

open innovation a savvy choice for a number of

reasons:

Companies can take advantage of an increas-

ingly mobile and highly educated workforce.

When employees change jobs, they take what

they know with them and effectively facilitate a

flow of knowledge between companies.

An expanding venture capital market in certain

fields creates the conditions for promising ideas

to be further developed or commercialized be-

yond the originating firm, and the possibilities

for licensing or establishing spin-offs are also

on the rise.

Instead of one company single-handedly man-

aging the research, development, financing

and commercialization of a product, any or all

of these stages can be shared among several

entities. In this way, many more companies in

the value chain can contribute to the innova-

tion process.

Finding partners

To adopt an open innovation approach, compa-

nies need access to information on the latest

breakthroughs in a given field, and on potential

partners with whom they can pool resources in

developing new technologies. As a consequence,

there is rising demand for Internet-enabled open

innovation mechanisms that provide these vital

services.

One online community in this niche is the U.S.-

based iBridge Network, which offers tools, re-

sources and relationship opportunities to help

users identify and exchange early stage innova-

tion and research opportunities. This enables in-

dustry, scientists, researchers and entrepreneurs

to find information on best practices and initiate

collaborative research projects across a wide

range of fields. The forum allows users to establish

licenses directly with research labs. By giving ac-

cess to automated patent numbers linking to

Google Patents and to WIPO, users consulting the

network can easily see where, for example, there

are patents pending on interesting new ideas.

Seekers and solvers

Recognizing that intelligent ideas abound in

many fields of knowledge and in all parts of the

world, Messrs. Alpheus Bingham and Aaron

Schacht, Eli Lilly executives, established

InnoCentive in 2001. InnoCentive, dubbed the “e-

Bay of innovation“, is a global, Internet-based plat-

form designed to help connect “seekers,“ those

OPEN INNOVATION –

Collective solutions for tomorrow

JUNE 2010

4

A new way of collaborating, of harnessing expertise from around the world, in a wide range of fields; a new

way of heightening business success and of delivering creative solutions to pressing global problems.