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What is Open Innovation?

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Open innovation is a hot topic these days and has gone from nowhere to everywhere in just over a decade.

Open innovation is a hot topic these days.  Yet, just 13 years ago, if you had done a Google search on that term, you would not have found any useful responses.  Today that Google search would return hundreds of millions of responses.  Open innovation has gone from nowhere to everywhere in just over a decade.

Open Innovation is based on the fundamental idea that useful knowledge is now widespread throughout society.  No one organization has a monopoly on great ideas, and every organization, no matter how effective internally, needs to engage deeply and extensively with external knowledge networks and communities.  An organization that practices open innovation will utilize external ideas and technologies as a common practice in their own business and will allow unused internal ideas and technologies to go to the outside for others to use in their respective businesses.

Open innovation practices originated inside certain large firms like IBM, Philips and Unilever.  It can be applied to small firms even in low-tech industries. Open innovation practices have now spread to governments and social sector organizations as well.  Agencies like NASA are finding vital new insights from crowdsourcing some of their biggest challenges. Nonprofits like Emergencia in Italy build collaborative partnerships effectively, in conflict zones where that might seem impossible. Open Data and Open Cities initiatives are sharing that useful knowledge with citizens, providing new ways to empower people to enhance their lives.  With Open Innovation 2.0, new innovation policies are now developing to accelerate these trends.

The reason why open innovation has spread so widely is that this open approach corresponds much more closely to the state of knowledge in most industries today.  Traditional approaches used to develop an innovation inside a single organizational structure.  The journey from the lab to the market was done through a single, vertically integrated firm.  Think of Bell Labs, or a major pharmaceutical firm or a major consumer package goods firm, circa 1995. This closed approach assumed that useful knowledge was scarce, so one had to innovate by creating the useful knowledge you need.

Open innovation assumes that useful knowledge is widespread, so that one needs to innovate by developing effective mechanisms to access this useful knowledge, and to share useful knowledge with others.  The closed approach requires too much money, too much time, and carry too much risk for the innovating organization.  Whenever useful knowledge is abundant, open innovation approaches can perform better on all three dimensions of money, time and risk than the earlier closed method.

At the level of the economy, a number of studies employing the Community Innovation Survey have found that organizations with more external sources of knowledge achieve better innovation performance than those with fewer sources, controlling for other factors.  A recent survey of 125 large firms also found that firms that employed open innovation were getting better innovation results.

Where is all this going?  One major new thrust is the Open Innovation 2.0 initiative, led by the European Commission.  This takes open innovation beyond individual partnerships and collaborations, to networks of collaboration, ecosystems, and communities.  As noted above, this invites new perspectives on innovation policy as well, from dissemination of data to protection of IP to public repositories of information.

 

Esteve Almirall holds a PhD in Management Sciences (ESADE), a MRes in Management Scienes, a MCIS, DEA and MRes in Artificial Intelligence (UPC

Wim Vanhaverbeke is professor Strategy and Innovation at the University of Hasselt.

The content of this opinion piece does not reflect the official opinion of the European Union. Responsibility for the information and views expressed therein lies entirely with the author(s).

Author: 
Esteve Almirall (ESADE), Wim Vanhaverbeke (Hasselt University), Henry Chesbrough (Center for Corporate Innovation)