Two Flavors of Open Innovation

Abstract

Since Henry Chesbrough published Open Innovation (2003), the paradigm he described has been a subject of great interest and experimentation in corporations. Chesbrough defined open innovation as breaking down the boundaries of the corporation so that valuable ideas can come from inside or outside the company and can go to market from inside or outside the company, as well. He contrasted this open paradigm with the more-traditional closed innovation paradigm based on the captive R&D laboratory. Chesbrough's work encouraged companies to create porous innovation pipelines and to become more aggressive about licensing, working with start-up companies, spinning out concepts that don't fit with the core business, and partnering with other organizations to produce innovations. These approaches have created increased value for firms as diverse as P&G and GE, but they may be only the start of the redefinition of innovation. The emergence of open-source intellectual property (IP) and online communities for innovation and customer input is forcing continued rethinking. Open innovation approaches are designed to source new technology and concepts broadly, seeking the seeds of the next innovation both within and outside of the corporate firewall (see, for example, Slowinski et al. 2009). Such initiatives are often supported by companies like Innocentive or Gen3 Partners, which help to frame the problem, connect the firm with external sources of expertise, and manage resulting IR Control of the IP is a critical part of the management model. Similarly, control of the innovation process itself remains with the firm, which defines priorities, chooses how to source them, selects providers, and integrates them into its product roadmap. Open innovation stretches the role of R&D in important ways, but it operates within the current management paradigm. Open-source innovation, on the other hand, redefines the corporation itself Two critical factors distinguish the approaches: the treatment of intellectual property and control of the direction of innovation. Open-source innovation is a more radical model that is increasingly important in the development of everything from software to sports equipment. Economic research indicates that it may soon dominate corporate innovation in a steadily increasing number of fields. It is best known today in software development, where open-source software projects such as Linux and Apache are both communities and platforms that enable users to develop and share code that they need. In the open-source software model, there is no owned IP. Anyone can access, use, and modify the code. A large, and largely anonymous, crowd contributes to the development of the software. Although there are governance structures for deciding which code is incorporated into which release of the software, it is users, acting both individually and as a community, that decide what gets worked on. The users, therefore, dictate the direction of the product. Open innovation in this context means open governance, open IP, open direction. Open-source innovation requires three large changes in corporate innovation thinking, each of which is difficult. First, it requires that firms take a modified view of IP, trading patent control for other sources of competitive advantage (speed, customer intimacy, voluntary contributions to the product). …

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