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Open Innovation and the Ecosystem of Everything

July 13th, 2011 Steve Nimmons Tags: Open Innovation, Tracks
Posted in Uncategorized |

Towards Increased Openness

Innovation in the 21st century is increasingly open, collaborative, multi-disciplinary and global. There are erosion factors which are providing increasing challenges for traditional R&D functions to retain knowledge. Of these mobility of people, loss of technological hegemony, increasing sophistication of university research schemes, knowledge leak, pervasive communities of users practicing their own innovation and availability of venture capital are key factors.

Closed Innovation is being challenged; Joy’s law states:

No matter who you are, most of the smartest people work for someone else.

Tapping into the knowledge that sits outside of the enterprise and having a process to cross-fertilise internal innovation strategy is therefore important and increasingly prevalent.

Carburetting the Innovation Funnel

I frequently amuse people when doing my Open Innovation elevator pitch, ‘air drawing’ an Open Innovation funnel and demonstrating (think air steward giving safety demonstration) drilling holes into the funnel to allow ideas to flow in and out from any external or internal source (my ‘Ecosystem of Everything’). When waving hands with excitement I use exotic metaphors such as ‘fuel injecting’ and ‘carburetting’ the innovation funnel.

Initially formalized by Professor Henry Chesbrough at UC Berkeley in his book ”Open Innovation”, it states that in the new knowledge economy where Open Source Software like Linux, Apache and Firefox are seen as equivalent to proprietary systems in terms of quality and reach, where Wikipedia is used more and has similar or better accuracy than Encyclopaedia Britannica, the time has come to use external sources to drive innovation while contributing in return.

The motivation for Open Innovation is very similar to that of Closed Innovation, namely pursuit of greater corporate success, greater profit and reduced risk. Closed Innovation however requires ‘widening’ of the innovation funnel (to ensure the richest set of ideas is being selected initially). These are then filtered through the funnel using ‘selective reduction’. If we metaphorically drill holes in the Closed Innovation funnel and provide for controlled ingress and egress of ideas there is much greater potential in the innovation cycle.

Vertical Integration is Weakening

Open Innovation clearly recognises that vertical integration as a sole strategy is weakening (‘we know best’ thinking as an exclusive approach is ageing). It is equally important to note the presence of egress flows from an Open Innovation funnel. This recognises that not all internally sourced ideas will make it through the ‘selective reduction’ processes that filter the wide base of initial ideas into actual products or services. Open Innovation is as much about appropriate sharing of your unused ideas with others as it is tapping into external knowledge sources. The barrier of the enterprise is therefore no longer rigid. Ideas can filter into and out of the innovation funnel via controlled routes.

Open Innovation has advantages over Closed Innovation in terms of:

1. The ability to leverage significant diversity

2. The ability to share risk (joint venture, spin-out, spin-in, divestment, boomerang models etc.)

3. The ability to monetise knowledge flows into and out of the innovation funnel

4. The ability to leverage additional business models and ‘aim the funnel’ at new markets.

Open Innovation is typified by the presence of external collaboration, knowledge communities and innovation ecosystems often comprising, universities, research institutes, suppliers, partners, competitors, government, non-governmental organizations and third sector organisations. In the truest sense it is ‘the Ecosystem of Everything’, as von Hippel rightly highlights the importance is the idea and the business model, not the source of the idea.

An Ecosystem of Everything

Open Innovation also comes in a many forms, from massively distributed approaches which focus on creativity above commerce (Open Source software for example) to small and highly selective initiatives such as closed competitions. I primarily focus on Open Innovation as collaborative commercial innovation ventures (i.e. commerce not commune).

Open Innovation throws up some interesting challenges, particularly around intellectual property rights and associated legal issues. There is also what I describe as “Open Innovation Culture Shock” and a need for strong business change and communications to make Open Innovation appealing. Overcoming ‘not invented here’ syndrome is not trivial and there are challenging questions about who you should Open Innovate with, to what degree and whether this openness is graduated throughout the innovation process. The castle walls of Closed Innovation are comforting to traditionalists and we need to guide sensible innovation decisions, whilst respecting the need (for all parties) to protect their commercial interests.

The potential of an ‘Ecosystem of Everything’ is really interesting, and patterns such as knowledge broker, facilitator and community builder are a few areas of personal interest. Ecosystem modularity, extensibility and interoperability will no doubt surface new standards, products and processes.

Open Innovation combined with horizon scanning, Pattern Based Strategy, Social Network Analysis and collaboration is a compelling and powerful technique.

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