Open Innovation: The New Imperative for Creating and Profiting from Technology
Henry William Chesbrough, John Seely BrownBooks.org participates in affiliate programs including Bookshop.org and the Amazon Services LLC Associates Program. We may earn a commission from qualifying purchases made through links on this page, at no additional cost to you.
Overview
The Innovation Game Has Changed . . .
Companies that don't innovate die. This is one certainty your company faces in a complex world. But how should your company innovate? While the key to successful innovation once lay in the controlled environment of the corporate laboratory, today the widespread distribution of useful knowledge makes such control unfeasible. Competitive advantage now often comes from leveraging the discoveries of others.Rather than relying entirely on internal ideas to advance the business, an "open" approach to innovation leverages internal and external sources of ideas. Rather than restricting innovations to a single path to market, open innovation inspires companies to find the most appropriate business model to commercialize a new offering -- whether that model exists within the firm or must be sought through external licensing, partnering, or venturing.
This pathbreaking approach -- based on the author's extensive field research, academic study, and longtime professional experience in Silicon Valley -- calls for very different organizing principles for managing research and innovation. Through rich descriptions of the innovation processes of Xerox, IBM, Intel, Procter & Gamble, Lucent, Merck, and other firms, Chesbrough illustrates the principles of open innovation in practice:
- Not all the smart people work for you
- External ideas can help create value, but it takes internal R&D to claim a portion of that value for you
- It is better to build a better business model than to get to market first
- If you make the best use of internal and external ideas, you will win
- Not only should you profit from others' use of your intellectual property, you should also buy others' IP whenever it advances your own business model
- You should expand R&D's role to include not only knowledge generation, but knowledge brokering as well
Synopsis
Chesbrough (business, Harvard U.) argues that the way businesses develop new ideas and bring them to market is shifting from a closed approach in which a company develops innovation internally and keeps control of it, to an open approach in which companies draw ideas from outside. Annotation ©2003 Book News, Inc., Portland, OR
Publishers Weekly
The great corporate research departments at companies like Bell Labs, IBM and Xerox were once the motor of American industry. But that may be changing, according to this probing academic study of corporate technological innovation. Chesbrough, an assistant professor at the Harvard Business School, argues that the old "closed innovation" model-vertically integrated research-and-development departments that develop technology in-house for the sole use of their corporate parent-is becoming obsolete in an age of mobile scientific workers, ubiquitous high-tech startups and a growing extra-corporate research establishment at university labs. Modern technology powerhouses like Cisco and Microsoft do little of their own basic research, he reports; instead they have dropped the "do-it-all-yourself" approach and pioneered a new model of "open innovation," in which companies import ideas from without and let their own innovations enter the wider marketplace. Drawing on case studies of companies like Lucent and Intel, Chesbrough suggests that companies make themselves more permeable to the flow of knowledge through such strategies as hiring professors and grad students as summer consultants, sponsoring university research, investing in and partnering with high-tech startups and venture capitalists, and disseminating their own innovations through spin-off companies or even by publishing it in the public domain. Chesbrough's sophisticated but highly readable discussion of these complex issues will give managers much food for thought. (Apr.) Copyright 2003 Reed Business Information.