Sunday, May 11, 2014

Open Innovation vs. Closed Innovation

The very nature of open innovation is to take advantage of all sources of creativity in a more open way and leap innovation management to the next level.

Innovation has different types: Radical innovation/breakthrough innovation; evolutionary innovation or incremental innovation; innovation also has different flavors: open innovation or closed innovation: Open innovation = innovation whereby a company uses the ideas, sources or help of people outside the company. These people are normally business partners, customers or crowd-sourcing consultants. Closed innovation = Innovation whereby a company uses its internal R&D or talent across-company for managing innovation lifecycle.

The value of open innovation is increasing: Open Innovation not only lies in an industry that is rapidly growing and market participants are small and fragmented; but also in the mature sectors or traditional companies that only innovation can rejuvenate their business via breaking down the bureaucratic culture. The smaller players can gain economies of scale through collaboration. The paradigm shifts when these clusters morph into larger entities that have sufficiently large internal resources to develop closed innovation. The well-established large organizations can also benefit from open innovation to fully involve with their partners or customers and take outside-in perspectives. The challenge to innovate (both open or closed way) is a problem when these entities transform into bureaucratic corporations!

The company has to determine what can be open and what can be closed: “Openness” and “closedness” are decisions relating to the architecture of new products generation model. But, different from another “open” propositions, like open source and creative commons, open innovation doesn’t have the assumption of total information openness. There´s no obligation of abdicating of property in the open innovation model. Open innovation uses all the information sources available in developing a robust innovation pipeline to improve innovation management effectiveness.

Open innovation makes the pie of creative ideas grow biggerInnovations simply benefit from being developed in, and subsequently commercialized in a more open ecosystem: There is more flow of creative ideas, the more is happening, the pie gets bigger. Now the debate seems to be in which conditions this more open cooperative ecosystem paradigm can never ever work for all eternity; or whether it is simply a matter of getting used to these forms of working and commercializing value at the digital era with the new characteristics of hyper-connectivity and convergence.

Open innovation is a new business paradigm: Open Innovation is about monetizing the value of specific technologies, which would otherwise, if remain closed, have little or no value. At least to the extent big corporations are involved. The greater good of humanity, of course, maybe a side product. It is for finding better pastures off the fence for an innovation experiment. Though, open innovations are not as open as one may think; it requires participants to seek legal licenses with limitations and restrictions that benefit the originator of the innovation. Either open or closed way, businesses are hunting for revolutionary, path-breaking, disruptive or substantially incremental technologies, not just in “me too” or marginally incremental innovations only.

Digitalization stipulates companies work together in a hyper-connected and continuously converging environment that provides structural analysis and a certain extent of serendipity. The evolution of innovation only exists in these more open environments that create insights, take advantage of all sources of creativity in a more open way and leap innovation management to the next level.


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