The neutrality of this article is disputed. [March 2013] Before being open, innovation happened in closed environments often performed by individuals, scientists or employees. However, the expression closed innovation was coined later and not before the paradigm of open innovation became popular by works of Henry Chesbrough[1] and Don Tapscott et Anthony D. Williams[2] Closed innovation was described in March 2003 by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at UC Berkeley, in his book Open Innovation: The new imperative for creating and profiting from technology.[1] The concept is related to user innovation, know-how trading and mass innovation and subject of recent research projects [3] The paradigm of closed innovation says that successful innovation requires control and ownership of the Intellectual property [IP]. A company should control the creation and management of ideas. Roots of closed innovation go back to the beginning of the twentieth century when universities and governments were not involved in the commercial application of science. Some companies therefore decided to run their own research and development units. The entire new product development [NPD] cycle was then integrated within the company where innovation was performed in a "closed" and self-sufficient way.
The period between the end of World War II and the mid-1980s was the era of closed innovation and internal R&D. Many R&D departments of private companies were at the leading edge of scientific research. The setup of internal R&D was perceived as a strong barrier for potential new competitors, as large investments had to be made to be able to compete[4] Often, closed innovation paradigms are set equal to the “Not Invented Here” syndrome sometimes referred to by decision makers: everything coming from outside is suspicious and not reliable. However, there are ongoing research projects [3] and emerging companies [5] that investigate the pros and cons of closed innovation versus open innovation.
adapted from[6] In the 29th Information Systems Research Conference in Scandinavia[7] in 2006 the transition path from closed innovation to open innovation was formally described. As a result, it was found that when seeking to increase customer loyalty and attracting new customers, companies needed to increase customer involvement in research and design [R&D] operation. Brokering and social networking processes lie at the heart of the open innovation paradigm. The technology brokering process model by Hargadon and Sutton [1997][8] describes the shift towards open innovation.
Closed Innovation Principles
Open Innovation Principles
The smart people in the field work for us.
Not all the smart people in the field work for us. We need to work with smart people inside and outside the company.
To profit from R&D, we must discover it, develop it, and ship it ourselves.
External R&D can create significant value: internal R&D is needed to claim some portion of that value.
If we discover it ourselves, we will get it to the market first.
We don't have to originate the research to profit from it.
If we create the most and the best ideas in the industry, we will win.
If we make the best use of internal and external ideas, we will win.
We should control our IP, so that our competitors don't profit from our ideas.
We should profit from others' use of our IP, and we should buy others' IP whenever it advances our business model.
Retrieved from "//en.wikipedia.org/w/index.php?title=Closed_innovation&oldid=1031659845"
Innovation is about growth – about recognizing opportunities for doing something new and implementing those ideas to create some kind of value. It could be business growth or it could be social change. Nevertheless, at its heart is the creative human spirit, the urge to make change in our environment. Innovation is also a survival imperative. If an organization does not change what it offers the world and the ways in which it creates and delivers its offerings it could well be in trouble. Moreover, innovation contributes to competitive success in many different ways – it is a strategic resource to getting the organization where it is trying to go, whether it is delivering shareholder value for private sector firms, or providing better public services, or enabling the start-up and growth of new enterprises.
Innovation can take many forms but they that can be reduce to four directions of change, all dimensions are known also as innovation’s 4Ps.Tidd and Bessant [2005] has created the 4Ps of innovation space:
‘Product innovation’ – [first P of the 4Ps] is the easiest to understand. It means changes in the things [products/services] which an organization offers. ‘Process innovation’ – [second P of 4Ps] is also quite easy to understand. It means changes in organization’s processes the ways in which they are created and delivered. ‘Position innovation’ – [third P of 4Ps] to understand needs some thinking and it is not as clear as the first two innovation types. It means changes in the context in which the products/services are introduce. ‘Paradigm innovation’ – [fourth P and last of 4Ps] it is meaning for paradigm innovation. Meaning for that is changes in the underlying mental models that frame what the organization does. It is by far the hardest to understand.
First two dimensions, product and process, are the most common innovation dimensions that exist. On table is added innovation dimensions. It is the same table where innovations where divided into two types radical and incremental. There you can see for example that product innovation can be either incremental or radical.
How to use innovation space?
First step you need to think what innovation type is. Is it incremental or is it radical?
Second step is to think what the dimension of the innovation is. That sounds quite easy but there are some innovations that can be in several dimension groups, for example jet-powered sea ferry. That innovation belongs both to a product dimension and a process dimension.
Third and last step is to map innovation to the innovation space.
“If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.” ― Albert Einstein
In addition, innovation defined in different ways depending on different perspectives of different authors. The following is a list of most common definitions for innovation:
“When an enterprise produces a good or service or uses a method or input that is new to it, it makes a technical change. The first enterprise to make a given technical change is an innovator. Its action is innovation” [Schmookler]
“Innovation should be taken as the entire process of research, development and implementation of a technology. By definition, this process consists of more successive phases” [Uhlmann, 1978]
“Innovation as it is the means by which the entrepreneur either creates new wealth producing resources or endows existing resources with enhanced potential for creating wealth” [Druker, 1985]
According to Mulgan and Albury et al [2003] “Successful innovation is the creation and implementation of new processes, products, services and methods of delivery which result in significant improvement in outcomes efficiency, effectiveness or quality”
“Innovation is the Process of Marketing changes, Large and Small, Radical and incremental, to products, processes and service that results in the introduction of something new for the organization that adds value to customers and contributes to the knowledge store of the organization” [O'Sullivan, 2009]
“To understand what drives innovation in an organisation, it is necessary to identify the resources and efforts that lead to innovative outputs. A simple definition of innovation resource in this paper is understood as, anything which is tangible [database, technology, software, equipment, finance]”. [Forfas, 2006]
And as [SCHUMPETER]defined Innovation “One of the 20th century's great economic and political thinkers. Joseph Schumpeter is well known for his theory explaining the activities that lead to economic growth in capitalist economies. His theory centres on entrepreneurial innovations and their role as the key driver of economic growth. Schumpeter argues that competition among market participants leads to a desire to seek out new ways to improve technology, new ways to do business and other types of advantages that would increase profit margins and directly impact the entrepreneur's standard of living. ”
INNOVATION TYPES
Innovation as term is not only related to products or processes, but is more that. Schumpeter [1934] described different types of innovation like: new products, new methods of production, new sources of supply, the exploitation of new markets and new ways to organize business. [Druker, 1985] Defined innovation as the process of equipping in new, improved capabilities or increased utility. Actually there lot of types of Innovation, here we will cover some of them:
Organisational innovation
An organisational innovation is the implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations. Innovations in workplace organisation involve the implementation of new methods for distributing responsibilities and decision making among employees for the division of work within and between firm activities [and organisational units], as well as new concepts for the structuring of activities, such as the integration of different business activities. An example of an organisational innovation in workplace organisation is the first implementation of an organisational model that gives the firm’s employees greater autonomy in decision making and encourages them to contribute their ideas. [OECD, 2005]
Process innovation
A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software. Process innovations can be intended to decrease unit costs of production or delivery, to increase quality, or to produce or deliver new or significantly improved products. [OECD, 2005]
Red ocean innovation
Red Oceans refer to the known market space, i.e. all the industries in existence today. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Companies try to outperform their rivals to grab a greater share of existing demand usually through marginal changes in offering level and price. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody. [The gentle art of smart stealing]
Service innovation
Service Innovation can be defined as “a new or considerably changed service concept, client interaction channel, service delivery system or technological concept that individually, but most likely in combination, leads to one or more [re]new[ed] service functions that are new to the firm. [ La Toupie , 2006]
Business model innovation
Business Model Innovation [BMI] refers to the creation, or reinvention, of a business itself. Whereas innovation is more typically seen in the form of a new product or service offering, a business model innovation results in an entirely different type of company that competes not only on the value proposition of its offerings, but aligns its profit formula, resources and processes to enhance that value proposition, capture new market segments and alienate competitors. [Z.Lindgardt, 2009]
Sustainable innovation
Eco-innovation is the development of products and processes that contribute to sustainable development, applying the commercial application of knowledge to elicit direct or indirect ecological improvements. This includes a range of related ideas, from environmentally friendly technological advances to socially acceptable innovative paths towards sustainability. [Wikipedia, 2015]
Frugal innovation
The term Frugal Innovation - sometimes referred to as 'reverse innovation', 'inclusive innovation' and 'constraint-based innovation' - Dutta and Benavente [2011] describes a type of innovation in which technological products are customised at low prices and high volumes in and for emerging markets. These innovations are not confined to technological breakthroughs but also include incremental process and product innovations aimed mainly at the middle or the bottom of the income pyramid. [Tidd, 2011]
Blue ocean innovation
Blue Oceans represent the unknown market space, i.e. all the industries not in existence today. Blue oceans are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. In blue oceans, competition is irrelevant because the rules of the game are not set. Blue oceans can be created by expanding existing industry boundaries or by reconstructing industry boundaries.
Incremental innovation
Incremental innovation seeks to improve the systems that already exist, making them better, faster cheaper. It’s a series of small improvements to an existing product or product line that usually helps maintain or improve its competitive position over time. Incremental innovation is regularly used within the high technology business by companies that need to continue to improve their products to include new features increasingly desired by consumers. [Business Dictionary, 2014]
Radical innovation
Radical innovations [sometime referred to as breakthrough, discontinuous or disruptive innovations] provide something new to the world that we live in by uprooting industry conventions and by significantly changing customer expectations in a positive way. Ultimately, they often end up replacing existing methods / technologies. [Innovation Creativity, 2014]
Open source innovation / crowd sourcing.
Open innovation is a systematic approach to engaging and directing external resources to find solutions for specific business opportunities and challenges. It can reduce risk, engage external partners and create tremendous brand benefits. It is also no longer an option: Companies that do not harness its power risk being left behind. Our open innovation process provides a way to ignite breakthroughs that solve your greatest challenges. With deep experience in the various types of open innovation available, we help you cut through the hype to determine a strategy that’s appropriate for you. Whether that’s through crowd sourcing, collaboration, or competition, we help you define your existing innovation condition and then decide where you should place your open innovation bets. We’ll help you design and structure your open innovation program and define a structured way to execute and implement it. [DOBLIN , 2015]
Experience innovation
Innovation Experience brings together applied clean tech development with human centred design and a focus on social impact. [innovation experience, 2015]
Supply chain innovation
Supply chain innovation is about applying best practices and technological innovations to your own supply chain in order to reduce such cycle and wait times and other waste [to use a Lean term] in your in-house processes. For many companies supply chain innovation [SCI] is a key source of competitive advantage. Yet there is no clear, commonly accepted definition of the concept; one company's SCI is another company's process improvement. [MIT Center for Transportation & Logistics , 2013]
From those types of innovation we can understand that innovation is can be used or it already used in all domain production, health and even in your daily life.
BUSINESS CAPABILITIES
Strategic Capabilities
Strategic capabilities refer to the capabilities of the members of the organization that enable the formation and deployment of strategy in pursuit of a sustainable advantage. Working within the strategic management framework, capable people are woven into effective processes, inspired by the business design construct, and compelled by purpose to create the competencies of the business organization that produces advantage.
Operational Capabilities
Operational capabilities are firm-specific sets of skills, processes, and routines, developed within the operations management system, that are regularly used in solving the problem faced by a unit and which provide that unit and, ultimately, the firm with the means of configuring the resources of the operations management system to meet the firm’s distinctive needs and challenges. The performance of operations is normally associated have been reported by many authors in previous decades as [Wheelwright, 1984].
Based on our definition of operational capabilities , we searched through the literature for potentially critical operational capabilities . [Swink, 1998], Proposed seven capabilities relevant in an operations context:
- Operational improvement
- Operational innovation
- Operational integration
- Operational acuity
- Operational control
- Operational agility
- Operational responsiveness
Managerial Capabilities
Managerial capabilities refer to the capacity of managers to create, extend or modify the way in which an organization makes a living in for-profit firms, or fulfils its mission in non-profit organizations, including through changes in resource and capabilities. Measure of the ability of an entity [department, organization, person, system] to achieve its objectives, especially in relation to its overall mission. Dynamic managerial capabilities derive from managerial human capital, managerial social capital and managerial cognition.
Adaptive Capabilities
Adaptive capabilities can be defined as an organization’s “ability to identify and capitalize on emerging market opportunities”. Key elements of adaptive capabilities are the ability to respond to external product market opportunities, the investment in marketing activities, and the speed of response to changing market conditions.
Innovation Capabilities
Innovation capabilities are the ability to come up, consistently, with novel ideas that deliver short and long term profits to an organization. The next question that follows is “What gives the organization the ability to come up with ideas consistently?” It comes from the ability to link insights, concepts and facts in a new/different way. There are essentially three capabilities that form the pillars on which Innovation Capability is built. 1] Building Innovation Capability, 2] Building Knowledge Capability, 3] Attitudinal Capability.
Definition: Business Innovation is the creation and capture of new values in new ways.
SUSTAINABLE BUSINESS MODEL
Strategic Capabilities
- Operating Model
- Visual Strategy
- Finance
Adaptive Capabilities
- Resilience
- Change Management
- Horizon scanning
Operational Capabilities
- Process Management
- Performance Management
- Digital Manufacturing
Managerial Capabilities
- Decision making
- People development
- Management Style [leadership]
WHY INNOVATION IN SMALL FIRMS IS SUBSTANTIALLY DIFFERENT THAN IN LARGE COMPANIES?
OI -Open Innovation- in small companies is quite different than OI in large companies. I dare to argue that we have to unlearn the current OI-framework [which can be applied to large firms] and develop a new framework for small companies. Here are some reasons not to use the OI framework for large firms into small companies [eager to see your thoughts and comments - should I extend the list]:
1. Small firms don't have a portfolio of innovation projects - no need to frame their innovation activities into a closed or open innovation funnel [the most popular visualisation tool in OI publications]
2. Studying open innovation in small firms makes only sense within the broader framework of a business model [innovation]. OI is a wel developed business practice in larger firms with people that are held accountable for it. This is not the case in small firms, where OI is always an consequence of the strategic changes in the company.
3. OI in small firms is managed by the entrepreneur / founder - not by the VP OI or an OI manager / team. OI and entrepreneurship are two sides of the same coin in small firms. Developing OI in small firms is part of the entrepreneurship in these companies. This also requires the integration of an entrepreneurship and OI literature streams.
4. Open innovation between small companies takes the shape of innovation and value networks which are governed in quite different ways than large companies. Personal relationships, trust, speedy decision making, and informal communication are characteristics of these relations.
Proponents of open innovation identify many limitations of its opposite, which is “closed” innovation:
- Quality: The expertise found within a company or organisation is not always sufficient to guarantee state-of-the-art knowledge. One can always draw upon external expertise.
- Resources: Even larger businesses cannot always provide adequate resources for research and development.
- Analysis: Customer-focused products need a holistic view on their potential use, which a company cannot assess entirely just on its own.
- Networks: Time and again, organisations fail to provide even an internal culture of sharing and exchanging that allows ideas to flourish.
- Creativity: In traditional structures, mentality is heavily compartmentalized. Their expertise is defined by roles and positions, which hinders creativity; this is contrary to interdisciplinary approaches.
- Business model: Ideas often need their own business model. Many companies do not pursue ideas that don’t happen to fit in their business model. Some ideas also might require a non-profit model.
The rise of social innovation addresses the organisational boundaries, in a bid to find alternative solutions to problems elsewhere and in a more transparent way. Social innovation empowers people and their ideas to:
- Identify needs and problems and create a motivating environment, in which colleagues and stakeholders can openly share opinions to create solutions to the problems that affect them.
- Offer new channels to collaborate constructively and systematically on bottom-up solutions, with the participation of those who will actually benefit.
- Develop ideas in a rapid-prototyping form, apply solutions and jointly learn from the collaborative process and outcome right from the start.
- Be open and consider all potential models to implement solutions, including both commercial and for non-profit [social business] models
Innovation is the only way to win. - Steve Jobs
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Sources:
Is there any true innovation left…or just copying? By Sam Wanekeya