Category: ‘Models’

Open Innovation

Sunday, December 6th, 2009

A recent post in Slashdot, talks about Google becoming a “Black Hole of Brilliance”.  Google VP Bradley Horowitz is quoted as saying:

I recently had a discussion with an engineer at Google and I pointed out a handful of people that I thought were fruitful in the industry and I proposed that we should hire these people.  But [the engineer] stopped me and said: “These people are actually important to have outside of Google. They’re very Google people that have the right philosophies around these things, and it’s important that we not hire these guys. It’s better for the ecosystem to have an honest industry, as opposed to aggregating all this talent at Google”.

I do wonder however whether Horowitz’s comments reflect a growing sentiment amongst companies at the forefront of innovation, which is, you can’t keep buying the best engineers in the world with the hope of delivering the best products and services in the world.  It’s simply not a sustainable model, and one that is very costly, even for Google.  But perhaps there’s more to it then this, perhaps Google’s cottoned on to the fact that to retain their competitive edge they have to start fishing for ideas outside their internal pools of talent, even if it means opening the doors of innovation to the rest of the community and potentially their competitors.

Open Innovation is a term popularised by Dr. Henry Chesbourgh who is the author of several award winning books on the subject.  It represents a shift from the traditional “closed” business model where 100% of a company’s innovation originates from within, to a more open innovation model where both internal and external ideas are combined to create an innovation, whether it be a cool shirt that can earn you some bucks or a solution to another party’s problem. Although Chesbrough coined the term “open innovation” in 2003, it’s not something new as those of us familiar with Open Source will agree with.

What is different however, is that Open Innovation has become a core management discipline.

The breadth of external knowledge and the speed at which it can be transferred cannot be ignored.   And, if Chesbourgh’s recent award is anything to go by, its that greater importance is being placed on open collaborative business models.   But before we start sharing our ideas with the rest of the world  there are of course certain challenges that need to be addressed when considering Open Innovation as a business model.  Perhaps the biggest challenge involves a paradox, why would firms spend money on R&D efforts if the results of these efforts are available to rival firms? Another challenge has to do with starting an innovation from scratch; would it be possible to launch an Open Source software project without a base or foundation to build, develop, debug upon?

Take Apple and Google for example.  Apple have designed and delivered a fully comprehensive platform and integrated framework for developers called iTunes and iPhone, which in its right is every bit a closed innovation; nobody but the Apple resources, architects, developers and business suits were responsible for designing, building and delivering the solution.  And, here’s the best part; the rest of iPhone and iTunes, namely its “App Store” is Open Innovation, which means Apple has opened the doors for smart cookies from all walks of life to come up with cool and interesting applications.

Google is no different.  Just about every Google innovation, not all, but some, are open to others wishing to collaborate and innovate with the worlds most innovative company.   The catch is, Google provides the platform and foundation, everyone else builds on top of this.  Google, like Apple, enjoy greater market penetration, a richer feature list -- thanks to everyone contributing, and the contributors get the kudos.  Some, in the case of Apple, get paid for it.  So what’s the theme here?  How are these companies avoiding rivals from benefiting from their openness whilst still fostering a collaborative environment for innovation?

Well as we’ve seen from Open Source projects, Apple and Google, there are few things in common:

  • They have a base or a foundation that is typically closed.  In the case of Open Source, closed means -- updates and bug fixes only.
  • They provide an open framework for innovation that builds on top of this foundation.
  • You get rewarded either through kudos or cash for your contributions.

So the trick is to keep the core business closed and only open up those parts that benefit the community, the clients and the industry as a whole.   Perhaps I’m stating the obvious here, but as I explore this paradigm further its real practicality will become clearer.

Apart from business and technology, Open Innovation also has the potential for far reaching societal and environmental benefits.   Here’s a list of some great ideas for Open Innovation.

This is really just the tip of the iceberg, and no doubt I will be writing about Open Innovation again.  For now here’s Dr. Henry Chesbourgh on Open Innovation and how its being applied to academia.

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