03.

The future of open innovation (Gassmann, Enkel, Chesbrough, 2010)

Open innovation has been defined as “the use of purposive inflows and outflows of knowledge to accelerate
internal innovation, and expand the markets for external use of innovation, respectively” (Chesbrough et al.,
2006). Open innovation is based on different research streams:
- The spatial perspective leads to research on the globalization of innovation.
Being physically close to regional centers of excellence enables a firm to increase its absorptive
capacity, therefore promoting access to the knowledge and competences of the best talents worldwide
without having to employ them. Access to resources is one of the main drivers of R&D’s
internationalization. Prominent examples are: Novartis research in New Jersey, BMW’s design center in
Palo Alto, Hitachi’s research lab in Dublin. New information and communication technologies enable
virtual R&D teams and decentralized innovation processes.
- The structural perspective shows that work division has increased in innovation.
There is a strong trend toward more R&D outsourcing and alliances. Industries’ value chains are
becoming more disaggregated. Drivers of this trend are cost reduction and greater specialization due to
more complex technologies and product systems. Open innovation approaches compensate for central
R&D units by not just focusing on short-term, customer-oriented business unit research activities.
- The user perspective.
Users are integrated into the innovation process to utilize the freedom available in its early phases in
order to under- stand potential customers’ latent requirements and to integrate users’ hidden application
knowledge (von Hippel, 1986). This research stream started with user-lead innovation.
- The supplier perspective.
Suppliers’ early integration into the innovation process can significantly increase innovation
performance in most industries.
- The leveraging perspective.
Most research and practice are oriented toward the existing market and business. Existing research
competencies and intellectual property’s multiplication into new market fields have often been
neglected, despite their potential to create new revenue streams.
- The process perspective.
There are three core processes in opening up the innovation process: outside-in, inside-out and coupled.
Sometimes, these processes complement one another, although the dominance of the outside-in process
is usually observed.
- The tool perspective.
Opening up the innovation process requires a set of instruments. Those tools, for example, enable
customers to create or configure their own product with tools kits or enable companies to integrate
external problem solvers or idea creators via websites. Ex. ‘The Sims’, where online game developers
add-on packages or Swarosvski, whose customers can create their own figures.
- The institutional perspective.
Open innovation can be considered a private-collective innovation model. Instead of the private
investment model of innovation with Schumpeter’s temporary monopolistic profits, the free revealing of
inventions, findings, discoveries, and knowledge is a defining characteristic of the open innovation
model.
- The cultural perspective.
Creating a culture that values outside competence and know-how is crucial for open innovation practice.
This culture is influenced by many factors: besides being influenced by the values of the company, it is
also influenced by concrete artefacts such as incentive systems, management information systems,
communication platforms, project decision criteria, supplier evaluation lists and its handling…

The future of open innovation

Earlier conceptions of innovation gave rise to anomalies in the Kuhnian sense, such as the inability of Xerox to
appropriate the value generated by its Palo Alto Research Center in the 1980s, or the inability of Lucent to
leverage its considerably greater research capabilities at Bell Labs against Cisco in the 1990s. Open innovation
provided a novel explanation for these anomalies.
The question that arises now is: “How far will open innovation go and how long will it last?” – to answer this,
the authors identify some trends:
1. Industry penetration: from pioneers to mainstream.
The principle of open innovation has, for example, penetrated pioneering industries such as software,
electronics, telecom, pharma, and biotech, while the software and electronics industries are
progressively building on the open innovation trend (Chesbrough, 2003). In software, the open-source
trend has been so strong that companies like SAP and Microsoft have started to build decentralized
research labs on university campuses to increase their absorptive capacity for outside-in innovation
processes. Even Apple had to open up its proprietary technology to its addicted high-tech users.
Prominent examples in the electronic industry are Philips’ open innovation park, Xerox’s Palo Alto
Research Center, Siemens’ open innovation program and IBM’s open-source initiatives.
The pharma and biotechnology sectors too have a broad spectrum of open innovation models. Open
innovation starts with simple outsourcing deals with contract service organizations to reduce
overcapacities, cut costs, grow through complementary assets, or reduce risks.
Overall, the trend toward open innovation is still growing. There are many reasons for driving open
innovation but there is also a bandwagon effect: in our executive education programs, we have observed
that CTOs with closed innovation models and strong internal R&D are under increasing pressure to
justify their refusal to cooperate with the outside world and exploit the open innovation wave.
2. R&D intensity: from high to low tech.
Open innovation mainly started in the high-tech sector, but there is a new trend for the low-tech sector to
exploit the potentials of opening up their innovation process. O.I. management has spread to sectors like
machinery, turbines, medical tools, fast moving consumer goods, food, architecture, and logistics. User-
driven innovation has the longest tradition; here, well-known examples are the construction and elevator
industries as well as the sports industry.
3. Size: from large firms to SMEs.
Some SMEs can overcome their “liability of smallness” by opening up their innovation process.
External technology commercialization can also be a core competence of such rapidly growing SMEs.
However, despite their smallness and lack of resources, which are acknowledged liabilities, they still
implement open innovation far less than multinationals do.
4. Process: from stage gate to probe-and-learn.
Open innovation is also prompted by a parallel trend in innovation processes. There is a new trend
towards more iterative and interactive probe-and-learn processes. In software development, this trend is
reflected by linear, top-down V model’s replacement with highly iterative processes, such as extreme
programming. These processes support early interaction with customers, suppliers, and R&D partners.
5. Structure: from standalone to alliances.
Modern technology is becoming so complex that even large firms cannot afford to develop a new
product alone. Consequently, there is a strong trend toward R&D partnerships and alliances. Vertical
alliances are complemented by horizontal alliances and cross-industry partnerships. Recent research,
however, focuses on how these inter-organizational relationships can enhance value creation. A recent
example is the iPod from Apple. he external entrepreneur Tony Fadell developed the idea and concept,
Apple hired a 35-person team and partners from Philips, Ideo, General Magic, Apple, Connectix, and
WebTV to develop the iPod system. The technical design was managed by Portal Player – a Wolfosn,
Toshiba, and Texas Instrument alliance that earned $15 per sold iPod.
6. Universities: from ivory towers to knowledge brokers.
Universities are still largely financed by public money, but in many regions of the world, this financing
will decrease despite soothing public statements. Large companies like Siemens and GE have already
reduced their corporate research activities or have increased third-party financing. This will force all
players in the innovation game to cooperate even further. Such open research also accelerates research
and energizes the involved research teams, as exemplified by the human genome project, which made
impossible results possible.
 7. Processes: from amateurs to professionals.
Similar to the first structured innovation processes, industry is starting to professionalize the internal
processes to manage open innovation more effectively and efficiently. Two important sources of
diffusion are the mobility of executives experienced in open innovation from initial adopters to newly
adopting organizations, and the availability of third-party intermediaries to help companies experiment
with these processes. Additionally, the measurement of open innovation activities’ value is increasingly
important. While the possibilities of opening the innovation process are growing, metrics systems are
not yet adapted to monitor and measure the value of activities.
8. Content: from products to services.
While today’s research mainly aims at product and, partly, process innovation, the huge potential of
innovating the largest sector in developed countries has been neglected: the service sec- tor is still
underdeveloped in terms of the innovation processes. Opening up the service sector to the innovation
process provides new opportunities, for example, Amazon’s Elastic Cloud computing service.
9. Intellectual property: from protection to a tradable good.
According to Schumpeter, patents are there to create incentives for inventors and entrepreneurs to invest
in innovations. This works by protecting innovators from imitators and, thus, enables them to gain
temporary monopolistic profits. Although this is valid, it will be complemented by an attractive
secondary market in which new players enter. The trade in IP has just begun, but in the near future, a
whole industry will arise around intellectual property’s secondary markets. New business models, of IP
aggregators, IP insurers and even intellectual commons where IP is pooled and shared, are all springing
up as part of this evolution. Taking stock of these different trends, it seems clear to us that open
innovation has quite a long life left ahead of it, as there is a long and growing list of phenomena that it
can help us understand and interpret.

Papers in this issue (this paper is part of some special issues that “R&D Management” dedicated to open
innovation, follows a review of the most interesting papers in the last years)
- Chiaroni, Chiesa and Frattini
Focus on the organizational change process through which a firm evolves from being a closed innovator
to becoming an open one. Results show that this journey involves four dimensions: (i) inter-
organizational networks, (ii) organizational structures, (iii) evaluation process, and (iv) knowledge
management systems, along which change can be managed and stimulated.
- Ili, Albers and Miller
Show that open innovation is far better at achieving better R&D productivity for companies in the
automotive industry than a closed innovation model by investigating 42 automotive companies.
- Enkel and Gassmann
Explore the phenomenon of cross-industry innovation, studying innovation created by using sources
outside the own industry. By analyzing 25 cases, they study the influence of a higher or a lower
cognitive distance on the outcome of analogical thinking in cross-industry innovation.
- Du Chatenier, Verstegen, Biemans, Mulder and Omta
Examine the competences that open innovation professional need to work in such teams and to cope
with the challenges they face. This resulted in a competence profile for open innovation professionals.
The profile adds a new perspective to the field of open innovation management by focusing on how
individuals involved in open innovation teams can enhance open innovation success. The ability to
broker solutions and be socially competent seems to be especially important for open innovation
professionals.
- Sieg, Wallin, von Krogh
Study an innovation intermediary to solve R&D problems. Using an exploratory case study design, they
investigate the managerial challenges in seven chemical companies working with the same innovation
intermediary. Three recurring challenges were identified in all the companies: (i) enlisting internal
scientists to work with the innovation intermediary; (ii) selecting the right problems; and (iii)
 formulating problems to enable novel solutions. They explain how these challenges arise from scientists’
differing work practices in internal vs external R&D problem solving. They furthermore identify and
discuss a number of solutions for these challenges.
- Chiang and Hung
Argue that accessing knowledge intensively from a limited number of external channels (open search
depth) can facilitate the innovating company’s incremental innovation performance. They also argue
that accessing knowledge from a broad range of external channels (open search breadth) can enhance the
innovating firm’s radical innovation performance. They find that open search depth is positively related
to the innovating firm’s incremental innovation performance and that open search breadth is positively
related to radical innovation performance.
- Haeussler
Empirically investigates the determinants of knowledge regulation. The author argues that when the
level of external knowledge inflow is considerable, firms regulate knowledge out- flows less strongly.
Firms that profit from external knowledge are less restrictive regarding outgoing knowledge in the hope
of future benefits. He finds that the type of competitive relationship, as well as the knowledge source
and the type of channel through which knowledge is accessed, governs the knowledge regulation
decision.
- Sofka and Grimpe
Argue that firms need to specialize with regard to their search strategy and that its effectiveness is
moderated by (i) R&D investments and (ii) potential knowledge spillovers from firms’ environment.
Both moderating factors have a crucial role to play: on the one hand, in-house R&D investments are
most effective when combined with a market-oriented search strategy. On the other, a technologically
advanced environment requires firms to reach out to sources of scientific knowledge in order to access
highly novel knowledge and to enhance innovation performance.