Process and structure for open Innovation

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MOOI Theme 3Processes and structures for open
innovation
Prof. Henry Chesbrough, University of
California, Berkeley ESADE Prof. Wim
Vanhaverbeke, Hasselt University, ESADE
National University of Singapore Dr. Nadine
Roijakkers, Hasselt University February 4, 2013
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Processes and structures for OIOverview
Innovation Overview

• Findings
• Both vertical and horizontal integration work,
  depends on the business
• Distinction between formal and informal
  organization. How OI is related to these forms?
• Implications
• Key actions to implement in an organizational
  structure
• Some organizational structures

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FINDINGS
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Processes and structures for OIOverview
Innovation Overview

• Findings
• Both vertical and horizontal integration works,
  depends on the business
• Generally distinguishes between formal and
  informal organization. How OI is related to these
  forms

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Processes and structures Finding 1 Vertical
and horizontal integration Overview

• Both vertically and horizontally integrated
  companies have moved forward with adopting open
  innovation concepts, but the resulting
  innovationprocesses are distinct
• Horizontally integrated companies
• .. because they leverage their market position
  and network of suppliers/clients to become the
  nexus of the evolving open innovation
  network...
• In this way, these central companies are greatly
  increasing the number of ideas coming in
  ..while greatly decreasing their RD costs.

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Processes and structures Finding 1 Vertical
and horizontal integration Overview

• Vertically integrated companies
• normally have a very strong core competency in
  their product development, and their competitive
  advantage is based on this. ..
• These firms are not blessed with the same network
  of suppliers and clients as their horizontally
  oriented compatriots...
• Challenge these large RD operations can
  produce too many ideas all trying to go down the
  product development funnel

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Structuring horizontal and vertical OI

• Horizontal OI
• Standards? Precompetitive RD?
• Vertical OI (Lego)
• We have made a cultural shift internally,
  where we have gone from considering our customers
  as necessary intermediaries for reaching our end
  users to see them as very important partners
  Mads Nipper
• Partnerships with large customers like Wal-Mart,
  Target and Toys-r-us has proved invaluable to
  Lego.
• more shelf space
• involve both customers and some of the key
  suppliers in the development of new products.
• Lego invites up to 20 of their largest and most
  important customers very early in their
  development process in order to discuss what the
  new products should be and whether the pricing
  ideas are right.

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Processes and structures for OIOverview
Innovation Overview

• Findings
• Both vertical and horizontal integration works,
  depends on the business
• Generally distinguishes between formal and
  informal organization. How OI is related to these
  forms
• Implications
• Elements to implement in an organizational
  structure
• Some organizational structures

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Processes and structures Finding 2 Formal and
informal structure

• Formally structured organizations tend to be
  more bureaucratic and are characterized by
  institutionalized rules, .., difficult
  integration across functions,...
• an informal organizational structure is
  characterized by openness in the system which is
  a necessary precondition for idea initiation in
  the innovation process
• An informal organizational structure is
  positively related to the creation of open
  innovation by an organization.
• A formal organizational structure is negatively
  related to the creation of open innovation by an
  organization.

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Interactive poll 1

• What are the three most important general
  structural elements for stimulating Open
  Innovation?
• Centralized OI decision-making
• Flat hierarchy
• Informal way of working/communicating
• Horizontal integration
• Project-based organization
• Cross-functional teams/boundary spanning roles
• Empowerment in OI implementation

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implications
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Processes and structures for OIOverview
Innovation Overview

• Findings
• Implications
• Key actions to implement in an organizational
  structure
• Some organizational structures

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Processes and structures Implication 1
Elements to implement in an organizational
structure Overview
Seven key actions in order to structure open
innovation management and organize for OI 1.
Delegation of Decisions to OI Teams. 2.
Integration of RD into the Business Units. 3.
Co-Location of OI-Teams and Departments. 4.
Central OI Teams. 5. Central OI Funds. 6.
External Interface for Open Innovation. 7.
Merger Acquisition Department.
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Processes and structures for OIOverview
Innovation Overview

• Findings
• Implications
• Key actions to implement in an organizational
  structure
• Some organizational structures

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Processes and structures Implication 2 Some
organizational structuresOverview
Decentralized
Hybrid form
Centralized

• View of company-wide needs levrage across
  businesses
• Brings strategic growth options
• Experts in OI skills IP
• Central contact point internally externally
• Need to work to be viewed as a business unit team
  member
• Acceptance requires support from the top

• OI generalist in each business
• Lack of OI expertise in each skill
• View of business specific needs and markets
• Some leverage across businesses
• Community of Practice for OI skill development
• Central contact point by business
• Viewed as a business unit team member

• OI generalist in each business
• Lack of OI expertise in each skill
• View of business specific needs and markets
• Lack leverage across businesses
• Different OI practices by business diffcult to
  develop a community of practice
• Central contact point by business
• Viewed as a business unit team member

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Current OI management structure at PG

• Bert Grobben until recently Director Open
  Innovation Asia-Pacific (Singapore) in PGs new
  Innovation Center
• Global responsibility for particular technologies
  (Skincare)
• Managing Asia Pacific portfolio of Open
  Innovation partners and defining landscape and
  capabilities for building Best in Class Open
  Innovation and Connect Develop approaches. cost
  innovation, strategic alliances Academic, SME
  and MNC interactions.
• Businesses in PG have their local OI-team which
  can tap into the major OI-centers around the
  world.

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Interactive poll 2

• What are the three most important specific
  structural elements for stimulating Open
  Innovation?
• Delegation of Decisions to Innovation Teams
• Integration of RD into the Business Units
• Co-Location of Teams and Departments
• Central Innovation Teams
• Central Innovation Funds
• External Interface for Open Innovation
• Merger Acquisition Department

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References

• Blog, http//www.communitech.ca, April 2011
• Dr. Sharan Kaur, International Journal of
  Business and Social Science, Vol. 2 No. 6 April
  2011
• Wentz RC Die Innovationsmaschine, Springer
  Berlin-Heidelberg 2007
• Snyder NT, Duarte DL Strategic Innovation
  Embedding Innovation as a Core Competency in Your
  Organization. Jossey-Bass, Hoboken, 2003
• Lafley AG, Charan R The Game-Changer, Crown
  Business, New York 2008
• Blog, Linda Beltz, organizational structures for
  open innovation, http//www.15inno.com/2011/09/02/
  organizationalstructures/
• Stephen Lindegaard http//www.15inno.com/2010/03/
  12/legovertical/

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QA
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