Open Innovation: ideas from Chesbrough and Von Hippel

Alonso lvarez Garca Servicios

Este artculo en espaol

Open Innovation is an oft-mentioned concept, often rather lightly, which has lost some of its sheen due to overuse. The original idea of companies turning to external resources to support their innovation processes, while at the same time exposing their own results and gaining from this, has gradually been adorned or adapted to each one's discourse and needs. The same can be said of the democratisation of innovation, leveraging the creative force of users. Henry Chesbrough , of Berkeley University, is responsible for coining the term Open Innovation , which he has popularised through his books and talks, and for the Center for Open Innovation , which he directs. The term Open Innovation may even be familiar to many of you reading this, though Professor Chesbrough adds certain nuances and new concepts that are not to be found in the texts and presentations (some of which, by the way, can be found on the Internet). The Open Innovation concept is based on the idea that companies are no longer able to tackle the

entire innovation process on their own. They need external resources (intellectual property, ideas, products, people, institutions) that must be integrated into their own innovation chains. At the same time, the results of their work may be useful for other companies and in other markets, and this is a way to gain from innovations that do not serve the company's primary objectives. According to professor Chesbrough, innovation is longer flows from top down and from the core of the company outward, but rather from the bottom up and from the outside towards that core. The innovation that could be found in a company 50 or 100 years ago can be defined as closed innovation. At that time, there were few sources of innovation: inventors (geniuses) and imitators, and large corporations. Until well into the 20th century, the applied research of technological development was seen as something minor. This is reflected in a "funnel" model that gradually filters ideas until they reach the market:

In this model, an internal flow of ideas (as we have the most capable people in our field of interest) passes through successive filters with possible ideas falling by the wayside, until proposals focussing on our market are reached, with the aim of being the first to offer products and services that only we can make profitable. It has been that way since the beginning of modern enterprise, and has been the universally accepted model, materialised in large corporate R&D organisations. However, the scenario has changed. First of all, the number of sources of innovation is now greater, and its origins are increasingly heterogeneous: The internet, universities throughout the world, global patents, users themselves, small and medium-sized companies (which have taken over from large corporations), some classical corporations, and non-profit-making foundations and organisations. The universalisation of internet access has revolutionised this field: not only has there been a process of movement to off-shore, of the migration of innovation from developed countries towards emerging ones due to the increasing cost of in-house innovation. But also in the opposite direction, companies from countries such as India are expanding into countries like the United States. The ubiquity of internet access and the sheer quantity of contents long ago ended the limitations on access to current technical and scientific information. Open Innovation is represented by this "funnel", now with holes and multiple paths that can be seen with increasing frequency in our presentations. A funnel which, moreover, aims at different targets, representing our current market, the future market and that of third parties. On this point, Chesbrough speaks of "boomerang ideas", which follow a process of spin-off when a company sees no place for them in its strategy, and which, after a process of maturation and growth, again return to the company that generated them, having proven themselves in the outside world.

In this model, access to ideas, to external innovation, is a fundamental element and there are many places in which to look for it: Academic establishments. Users, who play an increasingly important role in innovation, as we will see later. "Collaborative Research Initiatives": SRI, Frauhoffer, Tech Scouting, one example of which is the work of P&G with a structure that may be familiar: Scouts, IP, and the innovation intermediaries, which promote internal initiatives. "Idea hunts" and initiatives to encourage employees to photograph and note down anything they see that may be of interest for the company in their leisure time and on trips. Prizes for innovation, such as the X Prizes. Internal Technology Fairs. Innovation Communities, with the open source world as an example. In fact, the reality of the communities formed around open code has determined the way in which this concept of open innovation has developed. Thus, under the paradigm of Open Innovation, companies assume that the ideas they need may be outside their organisations, so external R&D may help to create value and complement internal R&D. It is no longer necessary for innovation to come from inside a company in order to make a profit from it, it is possible to access the market with other people's breakthroughs. In Chesbrough's analysis, innovation has followed a similar evolution to that of the well-known "long tail": while historically innovation was concentrated at the top of the curve (large organisations), it has now moved down, to the myriad potential sources of creativity that today's world offers. One of the points stressed by Professor Chesbrough is alos a complete change of focus: the new innovation will not only be in invention, but also in marketing, affecting the business. It can come from outside, anyone can do it, not just engineers. It is the Open Business Model. For Chesbrough, the business model is superior to technology, as it makes it possible to sustain technological development and really take advantage of it. In fact, many recent innovations have been launched from already-existing technologies. This new model has implications for relations with collaborators, customers and employees, particularly with regard to knowledge and preparation. As for the future of internal R&D, it still plays a role, it is not obsolete. However, it takes on other (additional) tasks: it must pay attention to what is going on outside, identify gaps and holes - and remedy them - and facilitate integration; and it can become an additional source of income. In relation to the way these changes are taken on board in traditional R&D organisations, Chesbrough admits that adaptation may be difficult, especially for people ('engineers don't change'), and he gave

examples of other adaptations (such as the process developed by IBM) in which it proved crucial for its people to be in contact with customers in order to learn from them, understand their problems, and return with this knowledge in order to develop the solutions they really need. For his part, professor Von Hippel of the Sloan School of Management at MIT defends the "Democratisation of innovation", in which the role of users is primordial when it comes to creating new products and concepts. It is a complementary concept to open innovation, which recognises end users as one of its sources of ideas. In fact, Von Hippel is behind the "lead users" theory, i.e. people who identify a need in the market before anyone else, and who will be the first to adopt a product or technology and who directly receive their benefits. One thing that characterises some of these users is that they cannot wait until what they are looking for is available on the market, and are capable of developing innovations that meet the needs they have. This has always happened, and moreover it is particularly relevant in fields such as medicine, sport, agriculture, etc. Unfortunately, this creativity takes time to reach the market: between five and seven years on average, and often much longer. Today, the growing variety of personal manufacturing tools and new forms of self-marketing and self-promotion may help to change this situation in the future.

Von Hippel distinguishes two functional sources of innovation: The user who wants to use the new product or added features. The company that wants to sell new products, or improve them. The fact is that some companies, such as 3M, have developed a systematic procedure to identify and capture users innovations. Von Hippel's presentations are usually full of anecdotes and examples. Thus, he talks of the origins of some devices created by restless users, such as the mountain bike, kite surfing, surgical machines, spray irrigation over large surface areas, and many other examples. And he places the internet at the centre of the process that is changing innovation by users, creating their own information exchange networks, pushing companies to the side, rather than being at the centre of such networks as in the past. Another example: Lego and the AFOL (Adult Fans of Lego) and the way they have been perfectly integrated into the company's strategy and production chain. Perhaps part of the success of Lego (which is selling its own users designs) is due to modularity, a characteristic that is fundamental in fomenting innovation by users, so that it can surpass conventional R&D. And not only when they use a manufacturer's components, but also when they have the possibility of combining the best from various sources. By the way, Professor Von Hippel's book "Democratizing Innovation" is available free to download from the Internet . And as he said: "free is really cheap'.

BIBLIOGRAPHY http://www.haas.berkeley.edu/faculty/chesbrough.html http://en.wikipedia.org/wiki/Open_Innovation http://openinnovation.haas.berkeley.edu/ http://www.slideshare.net/Allagi/open-innovation-seminar-2008-brazil-henry-chesbrough http://web.mit.edu/evhippel/www/ http://web.mit.edu/evhippel/www/democ1.htm Author: Alonso lvarez Garca, Telefnica I+D Paper included in the bulletin eKISS n91, a weekly internal publication of Telefonica