innovation : open innovation

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ITS - MMT - Manajemen Proyek - Manajemen Teknologi dan Inovasi

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Page 1: Innovation : Open Innovation
Page 2: Innovation : Open Innovation

Innovation is the implementation of a new or significantly improved

idea,good, service, process or practice which is intended to be useful

Innovation

Rubenstein defined

innovation as

the process whereby new

and improved product,

processes, materials, and

services are developed and

transferred to a plant

and/or market where they

are appropriate

Page 3: Innovation : Open Innovation

Technology

Relation between

Technology & Innovation

Innovation

Technology is the practical

implementation of learning and

knowledge by individuals and

organizations to aid human endeavor.

Technology is the knowledge, product,

procesess, tools, and system used in the

creation of goods or in the provision of

services (Margaret A. White and Garry D

Bruton)

Technology enables innovation and

innovation enables technology

Technology = input for innovation

Innovation = resulted on new technology

Page 4: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Henry Chesbrough connected the processes

of acquiring external knowledge and

exploiting internal knowledge externally by

placing them both under the open innovation

umbrella with the labels INBOUND AND

OUTBOUND OPEN INNOVATION

THE BASIC PREMISE

“Opening up the innovation process”

DEFINITION

„The use of purposive inflows and outflows of

knowledge to accelerate internal innovation, and to

expand the markets for external use of innovation,

respectively‟

(Chesbrough et al., 2006:1)

The first process is called inbound open innovation

and the second out-bound open innovation

Open Innovation

Page 5: Innovation : Open Innovation

Herzog, P. 2011. Open and Closed Innovation, Different Cultures for Different Strategies. 2nd Ed. Gabler Verlag, Springer. p. 1-8.

Based on these terms Herzog (2011) defined

the open innovation as...

A holistic approach to innovation management as

“systematically encouraging and exploring a wide

range of internal and external sources for

innovation opportunities, consciously integrating

that exploration with firm capabilities and

resources, and broadly exploiting those

opportunities through multiple channels”

Page 6: Innovation : Open Innovation

OPEN INNOVATION IS USUALLY CONTRASTED

WITH CLOSED INNOVATION

•“Supposedly its predecessor, where companies generate their own

innovation ideas, and then develop, build, market, distribute, service,

finance, and support them on their own”

(Chesbrough, 2003a, p. 20)

"Closed" Innovation Viewpoint "Open" Innovation Viewpoint

Nobody can know what we are innovating Nobody can know the confidential ideas

that we are working on

Spending more on internal R&D will

improve our market position and help

us grow

"Smart" innovators engage with the global

innovation community and reap the

highest returns

First-to-patent = highest profit First-to-market = highest profit

We need more R&D staff to close our

knowledge gaps

We need our R&D staff focused on our

core competencies, allowing outside

solution providers to provide the rest

Difference between

Open & Closed Innovation

Page 7: Innovation : Open Innovation

Comparison between....

Page 8: Innovation : Open Innovation
Page 9: Innovation : Open Innovation

Closed Innovation

ParadigmOpen Innovation

Paradigm

Perusahaan melakukan

riset dan pengembangan

dengan resource dari

internal perusahaan, dan

hasil/produk-nya dilindungi

oleh perusahaan sampai

diluncurkan ke

pasar/market

Perusahaan melakukan riset

dan pengembangan dengan

resource dari internal dan

eksternal perusahaan,

demikian pula hasil penelitian

internal dapat dipakai oleh

eksternal perusahaan

Page 10: Innovation : Open Innovation

Why we need to applied

OPEN INNOVATION PARADIGM?

To increase investment in new business development

Firms expect to further reduce their internal basic reserach efforts

To managing the product portofolio

To make more use of acquiring technology from external sources

To be competitive, to create the basis for innovation strategies

Deepen their competence base in their current technologies and markets

Technologies and markets sooner or later will be mature

• Firms need to initiate new businesses

Firms need to focus on their current business

• Firms need to identify, acquire, and develop new competencies, simultaneously

Herzog, P. 2011. Open and Closed Innovation, Different Cultures for Different Strategies. 2nd Ed. Gabler Verlag, Springer. p. 1-8.

Page 11: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Social and economical changes in

working patterns,

Increased labor division due to

globalization,

Improved market institutions for

trading ideas,

And the rise of new technologies to

collaborate across,

Ggeographical distances (Dahlander

and Gann, 2010)

Trends such as outsourcing, agility, and flexibility

had already forced companies to reconsider their

strategies and processes in other areas, and to

become network organizations

THE ‘DO-IT-YOURSELF’ MENTALITY IN INNOVATION MANAGEMENT

JUST BECAME OUTDATED (GASSMAN, 2006)

RELEVANT DEVELOPMENTS IN THE WIDER

INNOVATION ENVIRONMENT INCLUDE :

Page 12: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Open innovation is a relatively new

and rich concept

THE 3 CONTENT OF OPEN INNOVATION:

Classifications of openness

The two main activities of inbound

versus outbound open innovation

The focus shifts to the various aspects

of open innovation effectiveness

Content of Open Innovation

Page 13: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Classification of Openness

The various knowledge flows in open

innovation. Lichtenthaler and Lichtenthaler

(2009) distinguish between three knowledge

processes:

Knowledge exploration,

Retention,

Exploitation

that can be performed either internally or

externally

Open innovation practices can also be

grouped by distinguishing between

Process

Outcome

Page 14: Innovation : Open Innovation

Various ways of innovation based on the openness of

both the process and the outcome of innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

CLOSED INNOVATION

Proprietary innovation is developed in-house

(Chesbrough, 2003a), both the process and the

outcome are closed

PRIVATE OPEN INNOVATION

The outcome is closed (a proprietary innovation)

but the process is opened up, either by using the

input of external partners or by externally exploiting

an internally developed innovation. Such as Procter

& Gamble (Huston and Sakkab, 2006)

INNOVATION PROCESS INNOVATION OUTCOME

CLOSED OPEN

CLOSED 1. CLOSED INNOVATION 3. PUBLIC INNOVATION

OPEN 2. PRIVATE OPEN

INNOVATION

4. OPEN SOURCE

INNOVATION

Page 15: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

PUBLIC INNOVATION

Devoting scarce resources to innovation and then to give away the

outcome for free seems highly unlikely for economists (e.g., Lerner and

Tirole, 2005; Kogut and Metiu, 2001), but in some cases it makes good

economic sense (von Hippel and von Krogh, 2006). The example is

standard setting, where the original innovators do not exclude others to

use an innovation in order to reap the benefits of a de facto market

standard, examples include the introduction of JVC’s VHS videotape in

1976 and the IBM PC in 1981

OPEN SOURCE INNOVATION

Where both the innovation process

and the outcome are open. Open

source software is the best known

example of this category example ms

office by microsoft & open office by

oracle

Page 16: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

INBOUND OPEN INNOVATION

refers to internal use of

external knowledge

OUTBOUND OPEN INNOVATION

refers to external exploitation

of internal knowledge

This relates to the three knowledge

processes of knowledge exploration,

retention, and exploitation that can

be performed either inside or outside

a firm’s boundaries (Lichtenthaler

and Lichtenthaler, 2009)

Inbound vs Outbound Innovation

Page 17: Innovation : Open Innovation

Empirical studies have consistently found that

companies perform more inbound than

outbound activities :

Chesbrough and Crowther, 2006;

Bianchi et al.,

Cheng and Huizingh, 2010;

Chiaroni et al.

Procter & Gamble reportedly only uses 10

percent of its technologies (Huston and

Sakkab, 2006)

INBOUND INNOVATION

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Page 18: Innovation : Open Innovation

18

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

A rise in efforts of companies to

license out their technologies

(Fosfuri, 2006; Granstrand,

2004)

Motorola estimates the potential

of licensing out as $10 billion

annually (Lichtenthaler, 2007)

OUTBOUND INNOVATION

Possible explanations for external under

exploitation include:

Historical reasons

The possibility to use existing relation- ships

The fear of diffusing relevant knowledge

(Rivette and Kline, 2000)

To give away corporate ‘crown jewels’ (Kline,

2003)

Page 19: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Interesting issue is what aspects of open innovation

activities make the concept effective:

Lower costs

Shorter time to market

More sales

Licensing technologies increases company profits

Exploiting company’s own market to focus at the expense

of its customers

Offensive reasons (stimulating growth) were more

important than defensive reasons (decreasing costs and

risks)

The chain of open innovation effects,

from immediate to long term, strategic

consequences:

“Strategic benefits of outbound open

innovation include getting access to

new markets and enhancing the firm‟s

technological position” (Lichtenthaler,

2007; Nagaoka and Kwon, 2006)

Effectiveness

Page 20: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Demographics include:

Number of employees,

Sales,

Profits,

Age,

Location,

Market share,

Ownership type.

Strategy characteristics include:

Strategic orientation,

Aspects or goals of the innovation

strategy,

Incumbents versus new entrants,

Organizational culture.

I. INTERNAL CONTEXT CHARACTERISTICS:

Company characteristics related to demographics and

strategies

Context of Open Innovation

Page 21: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

Applying open innovation seems to be

more a matter of business strategy than

a matter of industry trends (Keupp and

Gassmann, 2009), open innovation

adoption the internal environment in

firms is more important than the

external environment.

Consumer electronics (Christensen et

al., 2005),

Food (Sarkar and Costa, 2008),

Financial services (Fasnacht, 2009),

Automotive (Ili et al., 2010),

Biotechnology (Fetterhoff and

Voelkel, 2006; Bianchi et al.,)

II. EXTERNAL CONTEXT CHARACTERISTICS:

The most obvious external context characteristic is

industry. Many open innovation studies focus on

specific industries :

Page 22: Innovation : Open Innovation

Huizingh, E. 2011. Open innovation: State of the art and future perspectives. Technovation, 31, 2-9.

I. TOWARDS OPEN INNOVATION

The transition process from closed to open

innovation

Chiaroni et al. (2010) identify four organizational

dimensions:

Inter-organizational networks,

Organizational structures,

Evaluation processes

Knowledge management systems

II. OPEN INNOVATION PRACTICES

The outside players range from suppliers, customers, and

competitors, to research institutions and organizations in very

different industries that either have solutions that can

improve the company’s innovations or that can exploit

solutions the company has developed.

Fetterhoff and Voelkel (2006) propose a model including the

following five stages:

(1) seeking opportunities,

(2) evaluating their market potential and inventiveness,

(3) recruiting potential development partners,

(4) capturing value through commercialization,

(5) extending the innovation offering.

Open Innovation Process

Page 23: Innovation : Open Innovation

Open innovation is a concept that

has recently attracted a lot of

attention, both in practice and in

academia with the basic premise

“opening up the innovation process”

One of the main reasons is that the

concept inbound / outbound open

innovation fits very well with many

trends in the broader management

arena

The firm need to applied open

innovation paradigm because of the

advantages and their strategy to

make the effectiveness

The „do-it-yourself‟ mentality in

innovation management just became

outdated

Conclusion