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”RISKS OF OPEN INNOVATION”

Niklas Kviselius, Stockholm School of Economics

October 2009
”RISKS OF OPEN INNOVATION”
Niklas Kviselius, Stockholm School of Economics

October 2009

When studying Open Innovation practices it is also


necessary to take a look at the perceived risks. This article
discusses two such risks and possible remedies.

Continued strong case for Open Innovation.

Theory can however be far away


The theoretical case for Open from practice. When studying
Innovation is strong - it is becoming rollouts of Open Innovation
increasingly necessary for practices it is also necessary to
organizations to exploit knowledge seriously take a look at the
and opportunities outside the firm perceived and/or real risks
through combinations managers bring up. As
of one’s own “What is left in any business
capabilities and behind is perhaps endeavor there are in
fact several potential
resources with those
from the external a little more than risks to employing
environment. A recent another Open Innovation.
massive study (Walsh suggestion box,
& Nagaoka, 2009)
comparing innovation
with disillusioned Two perceived risks
At least two well
processes in the staff and
articulated risks (or
world’s two largest customers as the
economies – the US fears among managers)
unintended are brought up when
and Japan – again
strongly indicates
result.” studying business
that collaboration tends to enhance cases of Open Innovation activities.
the value of innovation as well as These risks represent two extremes
the chance of commercialization, of a continuum. The first risk
and makes the case for increased
becomes relevant if Open
openness in innovation.
Innovation, as part of an
organizations innovation strategy,
is poorly executed. The second, and
this may seem as a paradox at first
sight, if Open Innovation is too well
executed.
”RISKS OF OPEN INNOVATION”
Niklas Kviselius, Stockholm School of Economics

October 2009

Risk 1: Creating one more something that in our experience


suggestion box. not should be taken for granted.
Here the Open Innovation project
often gets limited attention and This includes paying attention to
funding after the first energetic creating a lasting infrastructure of
marketing phase is over – or the innovation tools that really
initiating manager leaves. The activates the right brain of the staff
investment in Open Innovation and triggers collaboration. In the
practices, including educating and Open Innovation Framework project
energizing the staff to really start we have recently evaluated 51
co-creating, fades out. Initially software systems designed to
active and interested staff looking accomplish this (Hrastinski et al,
forward to some involvement and 2009). Taking a look on how such
attention from managers, file this low-cost and readily available
effort as yet another management support can help providing more
vogue. What is left behind is than the typical “suggestion box” is
perhaps a little more than another recommended. We find them a
suggestion box, with disillusioned positive step towards
staff and customers as the building communities of knowledge
unintended result. Innovation inside organizations and
becomes incremental at best. connecting them to outside
stakeholders.
One remedy would be to really treat
Open Innovation as a new way of Risk 2: Competitors capitalizing on
thinking about innovation that will our Open Innovation efforts.
involve some long-lasting effort, Here Open Innovation has
attention and resources dedicated successfully become the essential
to making a shift in innovation core of the organizations
processes. This is naturally easier innovation efforts. All discussions
when current innovation processes on potential new products and
are formally or informally agreed services take place with the help of
upon in the organization – “the crowd”.
”RISKS OF OPEN INNOVATION”
Niklas Kviselius, Stockholm School of Economics

October 2009

This crowd successfully includes Open Innovation paradigm as


both internal experts and binary, but add a crucial time axis
stakeholders and interested parties and learn when innovation
from outside. processes should be
Despite this, there “The only way to open, semi-open, or
is still a looming ensure long-term even closed.
feeling that Management of how
corporate
research findings to balance openness
competitiveness for
that are crucial to vs. closeness
competitiveness
ourselves is to becomes necessary.
and/or that brings cooperate with other
in money through companies in an open Take IBM as an
licensing are “given manner, and example – one of the
away”. promote open most prominent
innovation.” corporate
It is natural to worry evangelists for Open
about opening up John E Kelly, Senior Vice President Innovation (see link
windows into and Director at IBM Research to full interview
critical R&D below). IBM receives
processes resulting in potentially about US$1 billion in revenue
leaking knowledge that could be annually from patents. However
capitalized on by competitors. One they spend about US$6 billion a
solution would be to not treat the year on R&D and constantly must
take a number of decisions
regarding the balance of openness
vs. closeness. When should IBM
leverage their 40,000 patent
portfolio to hinder other companies
or maximize licensing revenue, and
when should they not?
”RISKS OF OPEN INNOVATION”
Niklas Kviselius, Stockholm School of Economics

October 2009

Making openness a well-informed


choice
Facing these decisions, in most
organizations in a much smaller
scale and scope, perhaps leads to a
somewhat less dramatic view on
Open Innovation as phenomena.
Organizations may feel less at
home with Open Innovation as a
dramatic paradigm shift, where an
old (always closed and undesirable)
innovation process must be
replaced by a new (always open and
desirable). And more as a view
where openness is a well-informed
choice based upon a number of
variables.

The world of business is seldom as


black or white, however these risks
are real and can serve as a point for
learning about succeeding in Open
Innovation. But remember - to have
these options, an organization must
have invested in Open Innovation
practices in the first place. ¶
“RISKS OF OPEN INNOVATION”
Niklas Kviselius, Stockholm School of Economics
Niklas Z Kviselius has a Master and PhD from Stockholm School of Economics with
specialization in International Business and Marketing. Niklas currently does research on open
innovation, aspects of trust in internationalization, and innovation and roll-out strategies in
the ICT-industry. Much of his research has been focused on business relationships with the
Japanese market.

Further reading

Walsh, J.P. & Nagaoka, S. (2009). How “Open” is Innovation in the US and Japan?:
Evidence from the RIETI-Georgia Tech inventor survey. 2009 RIETI Discussion Paper
Series 09-E-022

Hrastinski, S., Kviselius, N.Z., Ozan, H. & Edenius, M. (2009). A Review of Technologies
for Open Innovation: Characteristics and Future Trends. To be presented at Hawaii
International Conference on System Sciences 43, January 5-8, 2010.

Tanokura, Y. & Oishi, M. (2009). ‘Only Open, Evolving Companies will Survive’—John E
Kelly III, IBM. Last accessed September 17, 2009.

Open Innovation
From the Open Innovation Forum’s perspective open innovation involves all aspects
of creating new business opportunities by engaging end-users in co-creative
activities. Web 2.0 technologies has caused electronic collaboration to evolve, hence
paving the way for companies to invite customers and employees to be involved in
the refinement of their offerings. Ideally open innovation will create win-win
situations where users get services that are more oriented to their needs and
organizations will offer services that are more desired by the market.

The Open Innovation Forum


The Open Innovation Forum aims at being a knowledge hub and rallying point for
user-oriented open innovation, where innovation experts and researchers can
collaborate on improving theories and practices, while open innovation novices are
invited to follow, or take active part, in the development of the area.

www.openinnovationforum.com
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original authors.

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