Open Innovation And Strategy

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Open Innovation and Strategy
MOOI Theme 1 presentation
discussion December 3, 2013
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MOOI Theme 1Open Innovation and Strategy
Prof. Henry Chesbrough, University of California,
Berkeley ESADE Prof. Wim Vanhaverbeke, Hasselt
University, ESADE National University of
Singapore Dr. Nadine Roijakkers, Hasselt
University December 3, 2013
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Statements about OI and strategy

• the need to align open innovation with the
  organizational strategy
• . firms need to audit the current status of
  their innovation strategy and identify areas
  where value could be added by open innovation
• Innocentive project
• Quantitative Model to Aid Strategy Decisions
  When Applying Open Innovation
• Crowdsourcing applied to the link strategy open
  innovation

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Overview

• OI and corporate strategy
• OI and business strategy
• OI and strategy types
• A process view on the link between strategy and OI

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OI and corporate strategies
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OI and corporate strategy

• Corporate strategy
• Long-term growth of the company
• in which industries/technologies a firm wants to
  be active new business development
• OI and cap ability building (dynamic view)
• Absorptive capacity/connective
  capacity/desorptive capacity (Lichtenthaler and
  Lichtenthaler, JMS 2009)
• OI as instrument to drive cognition of future
  strategy (Itami Numagami, SMJ 1992). OI frames
  and drives the way managers think try to
  integrate it in the corporate strategy
  formulation process

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The McKinsey Growth Model

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McKinsey Model innovation strategy

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McKinsey model and OI

• Innovation efforts aimed at all three time
  horizons
• H1 Current business
• BM determined/clear
• Incremental innovations with existing partners
• Market related partners more important?
• Short OI innovation cycles with low uncertainty

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McKinsey model and OI

• H2 Related businesses
• H3 New businesses or disrupting businesses
• Work on the three horizons simultaneously

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BCG matrix Adapted for OIFrank Mattes -
Applied Innovation management - nr 3 2011 (p.
13)
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Deloittes Growth Framework

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Growth matrix Adapted for OIFrank Mattes -
Applied Innovation management - nr 3 2011 (p.
14)
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Incubation and EBAs Growing beyond the
mainstream businesses

• Role of corporate incubators EBAs (DSM) in
  growth strategy of the firm
• OI in EBAs is quite different than in mainstream
  businesses
• New capability building through external
  relations
• Also capabilities become non-strategic, obsolete
  (open up to 3rd parties, e.g. Philips Research in
  specific technical areas)

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Accelerating and supporting innovation
DSM Innovation Center
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New Business Development
Enablers
EBA Biomedical
Excellence in Innovation
EBA Bio-basedProducts Services
CTO Office
EBA Advanced Surfaces
Licensing
Business Incubator
Venturing
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OI and the cognition of future corporate
strategies

• Different people working together with external
  partners
• Different views on the technical and market
  opportunities
• Scouters, incubators, EBAs focusing on LT
  technical developments vs. mainstream businesses
• Tools to bring bottom-up insights into corporate
  strategy? (corporate strategic dialogues?)

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Capability building(Lichtenhaler
Lichtenthaler, JMS, 2009)
Knowledge exploration Knowledge retention Knowledge exploitation
Internal (intrafirm) Inventive capacity Transformative capacity Innovative capacity
External (interfrm) Absorptive capacity Connective capacity Desorptive capacity
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Top-down bottom-up approachesIfm report (2009)
Top down Strategically driven

Distributed OI Activities
Centralised OI Activities
Bottom up Achieved by evolution
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Interactive poll 1
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OI and Business Strategy
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Chesbrough Appleyard (CMR 2007)
ABSTRACT The article discusses a process of
business innovation known as open innovation and
its relation to traditional business strategy.
The competitive strategy developed by Michael
Porter emphasized rivalry, buyer power, and
barriers to entry as forces that could enhance a
producer's surplus. The authors discuss the
impact of the Porterian value chain, the
processes of production through to the consumer,
on subsequent business practices. However, this
theory does not account for external sources of
value to a company, such as innovation
communities, volunteer contributors and
surrounding networks, including social networking
web sites, open source software and the Wiki
model of open contributions. The concept of
openness requires shifting from ownership to
value creation and value capture.

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Chesbrough Appleyard (CMR 2007)

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Chesbrough 2006

• A business model performs two important
  functions
• it creates value, and
• it captures a portion of that value
• Creation of value by defining a range of
  activities that will yield a new product or
  service valued by a (target) customer group
• Value capturing by establishing a unique
  resource, asset or position within that series of
  activities where the firm enjoys a competitive
  advantage

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Chesbrough 2006

• Open business models
• Division of labor
• one party develops a novel idea but does not
  carry this idea to the market itself
• sells it to another party,who carries it to the
  market
• Open business model uses the division of labor
  to
• create greater value by leveraging more ideas
  (external ideas)
• capture greater value by using key asset,
  resource, or position not only in the companys
  own business but also in other companies
  businesses

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The relation between OI and OBM
Open Innovation
I-Pod Apple http//open--innovation.blogspot.nl/20
10/02/ipod-thanks-to-open-innovation.html
SkyNRG http//skynrg.com
Tide (PG) http//www.acs.org/content/acs/en/educa
tion/whatischemistry/landmarks/tidedetergent.html
Senseo (Philips/Sara Lee) http//www.entrepreneurs
hip.ethz.ch/education/lectures/Alliance_Advantage/
Trust_Risk_de_Man_2009.pdf
(P/SL)
Closed Innovation
Closed Business Model
Open Business Model
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OI and Strategy Types
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Jaruzelski Holman/Booz Company(Ivey Business
Journal, 2011)

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OI and Innovation strategy typesFrank Mattes -
Applied Innovation management - nr 3 2011 (p.
20)
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A PROCESS VIEW ON THE LINK BETWEEN STRATEGY AND OI
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Slowinski Sagal(Research Technology Mgt 2010)

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Interactive poll 2
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References

• Abernathy and Clark, Harvard Business R.,
  September 1981
• Chesbrough Appleyard, California Mgt R., 2007
• Chesbrough and Crowther, RD Mgt, 2006
• How to implement OI, IfM report, 2009, University
  of Cambridge
• Itamy Namagami , Strat Mgt J., 1992
• Lichtenthaler Lichtenthaler, J Mgt Studies,
  2009
• Jaruzelski Holman/Booz Company, Ivey Business
  Journal, 2011
• Mattes Frank, How to make OI work for your RD,
  Applied Innovation management - nr 3 2011
• Slowinski Sagal, Research Technology Mgt, 2010
• Brandenburger en Nalebuff, Co-opetition, HBS
  press, 1996

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QA
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