Why companies are moving from Closed to Open Innovation
The Open Innovation concept appeared for the first time with the publication of "Open Innovation: The New Imperative for Creating and Profiting From Technology" (HBS Press, 2003) by Henry Chesbrough.
As originally explained by Chesbrough, Open Innovation is a paradigm that 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 technology.
Outside there is "raw material" of such high quality that even most brilliant companies cannot afford to ignore.
The Open Innovation paradigm is therefore a new strategic model to manage knowledge, a view that look at the external environment as an opportunity to enhance the set of internal skills also through the acquisition of external expertise finalized to develop of business innovations. In the Web 2.0 era, knowledge is no longer a resource owned by a single enterprise, but it is shared transversally between employees, suppliers, customers, competitors, universities, and academic researcher. Is precisely this continuos flow of shared knowledge the foundation of proactive collaborations that generate added value for actors involevd in a network.
The closed innovation paradigm requires that the whole process of identification and experimentation of innovative outputs is entirely carried out by R&D function, which inevitabily remains in its operational perimeter, whitout connession or comparision with others stakeholder of the innovation panorama. This path of internal developement of business innovation has begun to show its criticy with the technology developement, which inevitabily, has reduced products life-cycle and, at the same time, has increased the availability of intangible resources available for enterprises.
The philosophy of collaboration, has expanded the company boundaries, making them permeable to the increasing availability of external resources that can be integrated in various ways in business processes. Open Innovation, therefore, allows organizations to acquire different benefits from a continuous contamination with the external environment.
First, the dialogue with network enables companies to intercept technological product or service innovations that are plasming outside the organization, and to internalize them in order to increase the competive advantage.
Using external resource allows companies to be more focused and responsive to real market needs, with a lower R&D expenditure and fast time-to-market. These benefits configure a more flexibile innovation process with clear advantage in terms of limited investments, lowe risks and better market fit.
Another feature of the open innovation model is the possibility to commercialize innovation developed inside the organization but not applied to the same business. In the closed innovation process, innovation that not meet the innovation criteria of a certain organization is rejected, even if expresses a commercial potential. This sounds as wasted profit opportunity.
Adopting an open view, organizations could offer innovative inputs to an external team or start-up that could complete the development of a new product. In this way, the innovation cycle continues and the parent company can extract profit form the transfer of knowledge and could finance its innovating processes.
So, we can state that the real innovation of this new paradigm lies in a non organizational myopia. An enterprise that look outside it own boundaries is able to don't waste or understimate alternative development paths of its strategic business areas.
Finally, adopting an open innovation model, help organization to create and strengthen trust relationship with stakeholders, gain more legitimacy and mitigate external frictions.