Rob Munro Opening Innovation: Succeeding within an Established Technology Company,

Contents What? Key Open Innovation Ideas Why? Benefits, Risks and Success Factors How? Design of an Open Innovation System Implementation of The OI System High Innovation Performance: The “X Factor” Summary and Conclusions

Preconceptions? 1) What do you understand Open Innovation to be? 2) What would you like to know/understand about OI?

Many Examples

Key OI Ideas: Origins Open Innovation, Henry Chesbrough (2003) Distributed Innovation, Georges Haour (2004) 5 th Generation Models, Amidon-Rogers (1996) Old Wine in New Bottles, Trott & Hartman (2009) Abraham Darby, Ironbridge, Shropshire 1779

Key OI Ideas: Definitions The knowledge-based view… “Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation respectively.” Vanhaverbeke, West, & Chesbrough, (2006) The knowledge management angle… “Systematically exploring knowledge exploration, retention and exploitation inside and outside an organizations boundary throughout the innovation process.” U. Lichtenthaler, (2011) Capabilities focus… “…systematically encouraging and exploring a wide range of internal and external sources for innovation opportunities, consciously integrating that within the firm’s capabilities…” West & Gallagher, (2004)

Key OI Ideas: Closed v Open The Era of Open Innovation, (Chesbrough, 2003b) Innovation as a Continuum? Vertical Integration Go to Market Equity Alliance Specifications Contracts Relation-Based Alliance

Key OI Ideas: Porous Boundaries Representation of OI, (Herzog 2011:23) Outside-In Inside-Out “Coupled”

Why Open Innovation? Drivers Ubiquity of Information – porosity and availability. Mobility of Skilled Employees. New sources of investment capital - e.g. VC Globalization of Innovation – Locations, Cost, Quality. Trend to R&D outsourcing – Cost, Quality. Integration of users and suppliers into the innovation process. To access resources, knowledge, facilities, market access. To dominate an industry product standard.

Why Open Innovation? Benefits Innovation Performance: To increase product, process and service innovation performance. To discover combinations of products features that would be hard to envision under vertical integration. Innovate faster and to self-disrupt. Financial Performance: Determined Open innovators outperform all others. Out-licencing – revenue from latent IPR. Establishing New Ventures away from the heartland markets. Strategic Fitness: Flexibility and responsiveness to market pressures. Societal Benefits: Ultimately, better performing firms benefit society at large through improved wealth creation. Risk Management: OI projects share the risks and costs of uncertainty.

Why Open Innovation? Risks IP: Loss of the “crown jewels”. Losing Revenue: Judging a fair shares of future revenues. Management Ability: New management challenge. Higher Costs: Transaction costs in managing contracts and opportunistic behaviours.

Why Open Innovation? Success Firm Context: Size, Sector, Strategies, Staff Innovation Management: In-house R&D Processes Capability: Readiness to Embark (CMM) Leadership and Governance When to do OI To access skills, knowledge, resources, markets When firms can appropriate their fair share Particularly for modular systems

The OI Ecosystem: Key Ideas Systems Thinking, (Peter Senge, 1990) Elements and Activities Foresight workshops, Executive Forums, Customer integration, Endowed chairs, Consortia projects, Internet platforms, Joint development, Strategic alliances, Spin-outs, Test Market, Corporate Venturing… “…working cooperatively and competitively with other businesses in order to co- evolve capabilities, to support new products, satisfy customer needs and incorporate a new round of innovations, the company builds a business ecosystem.” (Moore cited in Rohrbeck et al. (2009). Ref: Methodologies for OI Management, (Rohrbeck et al., 2009)

Case Study: An OI Eco-system

The OI Eco-System Governance Systems Organizational and Project Technology Council, Office of OI Tools, Techniques and Processes Strategic Mapping, Project Management, Portfolio Selection etc New Decision-making Routines Skills, Behaviours and Incentives Managerial Visibility, Networking, OI Contract Management Rewards to Connect, as well as invent. Appropriate Risk Taking Open Innovation Roles Communities of Practice, Technology Entrepreneurs, Knowledge Leaders Change Initiators and Agents

Implementing OI: The Issues Organizational Inertia Absence of Burning Platforms Cultural Resistance Perception of OI as a Fad Not Invented Here Syndrome Establishing new Routines Not destroying the Good, with the Bad Investment of resources

Implementing OI: Good Practice Top-Level Commitment Leadership and Governance Manage the Change Integrating Innovation Practices Working within the Culture Visible, “Quick Wins”

Implementing OI: Approach Ref: Summary of OI Implementation, (Chiaroni et al., 2010)

High Innovation Performance Ref: Components of a High Performance Innovation System, (Sommerlatte 2010:83) More-than-the-sum-of-the-parts …

Summary and Conclusions OI has become a widespread management paradigm Open innovation is not always superior to closed - contingent on firm-specific factors OI is necessary, but not sufficient A Systemic approach is required Change Management is essential - New role for R&D

Rob Munro Opening Innovation: Succeeding within an Established Technology Company,