Profiting fromExternal Innovation

Joel WestSan Jose State U.

Keck Graduate Institute

Marcel BogersU. of Southern Denmark,

Sønderborg

Industry Studies ConferenceJune 2, 2011

Overview

• Our study of inbound open innovation Based on review of 280 OI publications Three-phrase process model Recommendations re gaps/opportunities

• Link back to crowdsourcing

Inbound Open Innovation

What is “Open Innovation”?

“Open innovation is the use of purposiveinflows and outflows of knowledge toaccelerate internal innovation, andexpand the markets for external use ofinnovation, respectively.”

Source: Chesbrough (2006)See also OpenInnovation.net/definition

Other definitional issues

• Conflating innovation with invention (OK for now) with knowledge or antecedents (not OK) with content (not OK)

• Success metrics Tend to be IP or product output Rarely: financial performance

Profiting from external innovations1. Obtaining2. Integrating3. Commercializing

Innova&onSource

Innova&onSource

Innova&onSource

Innova&onSource

Focal  Firm

2 31 CustomersR&DSales  /

Marke.ng

Suppliers Rivals Customers

Nonrecursive paths

Model for inbound OI

1. Obtaining

• Searching: sourcing, brokerage, limits• Enabling: contests, toolkits, platforms• Filtering: gatekeepers, scouts• Acquiring: incentives, contracts

2. Integrating

• External vs. internal innovations Substitutes vs. complements? Absorptive capacity Culture: NIH

• Incentives to integration• Implications for competencies

For producing internal innovations For incorporating external innovations

3. Commercializing

• Commercialization process Similar or different vs. internal innovations?

• Value creation Most common topic Standard NPD metrics

• Value capture Reduced cost or increased margin?

Nonrecursive paths

• Feedback loops R&D feedback Customer/market feedback E.g. “voice of the customer”

• Reciprocal engagement Co-creation Communities Value networks E.g. joint ventures, R&D alliances

Gaps/future research

• Alignment to business models• More rigorous use of “innovation”• Across the entire process• Non-linear models

Open Innovation andCrowdsourcing

What is “Crowdsourcing”?

Source: Howe (2006)

“The act of a company orinstitution taking a functiononce performed by employeesand outsourcing it to anundefined (and generallylarge) network of people in theform of an open call”

Crowdsourcing archetypes

• Online content networks (iStockPhoto)• Open innovation intermediaries (InnoCentive)• Small human intelligence tasks (Amazon

Mechnical Turk)• Peer production and open content (Wikipedia)• Corporate without intermediaries (Dell

IdeaStorm)• Open contest (TopCoder)

Source: Ren & Levina (AOM 2010) via oiblog.net

Openinnovation

Userinnovation

Crowdsourcing

Linux

InnoCentiveX Prize

Tech support

Threadless

LicensedIP

Extremesports

Businessusers

Thank you!