Defining Open Innovation

By MaryAnne M. Gobble, Managing Editor, Research-Technology Management (RTM)

In the last installment of this column, I initiated a new series of topics aimed at defining the vocabulary of innovation management. The object is to look critically at the profession’s terms of art, exploring their origins and mapping their limitations, to provide new clarity, and in the process restore some of their power. By looking at the terminology at the heart of innovation management and exploring how it has emerged and evolved, perhaps we can also get a glimpse of where innovation is heading.

In the first entry in the series, we looked at the concept of disruptive innovation. This time, we’re examining another concept whose usage has become confused and, at times, diluted: open innovation (Read this column at RTM; follow RTM on Twitter @RTMJournal).

Henry Chesbrough introduced the concept of open innovation in his 2003 book, Open Innovation: The New Imperative for Creating and Profiting from Technology. Despite popular conceptions, Chesbrough didn’t actually invent open innovation—his book is rich with examples of companies already doing it. Rather, he gave a name to the pattern and defined the paradigm:

Open Innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology. Open Innovation combines internal and external ideas into architectures and systems whose requirements are defined by a business model.

He refined that definition in a 2006 book he co-edited, Open Innovation: Researching a New Paradigm: “Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.” The key in both definitions is the focus on an approach driven by the business model. As Gene Slowinski and Matt Sagal point out, in their 2003 book and in a 2010 RTM article, that approach must be supported by a set of tools and processes designed to facilitate the relationships—with universities, with researchers, with individual inventors, even with competitors—that are at the core of open innovation. Slowinski and Sagal’s Want-Find-Get-Manage model, described in detail by Slowinski in Reinventing Corporate Growth, offers one framework for sustaining collaborative innovation.

Chesbrough’s assertion—in the books and in a series of journal articles between the two books (including two in the pages of this journal)—that open innovation would become absolutely essential was not wildly speculative; the precursors were clearly in place in the early 2000s. But he could not have predicted the changes to come in the few years after that first work, or the ways in which they would make openness both easier and more vital.

computer workstation
And the number of available tools keeps growing.

Indeed, Open Innovation arrived on the cusp of revolutionary change. As markets became ever more dynamic and unpredictable, new technology platforms allowed knowledge to circulate ever more freely and far more widely. Facebook, Twitter, LinkedIn, and Kickstarter all were born after open innovation. Wikipedia, Linux, Google’s Raspberry Pi, and other open-source projects revealed the power of mass collaboration to create knowledge through unfettered sharing. And Red Hat and others showed that there was money to be made from open-source platforms.

The crowd and the cloud became viable, even essential, tools. Wired magazine introduced the term crowdsourcing to the world in a 2006 article by Jeff Howe, and suddenly innovation had an entire new toolset. All companies had to do was figure out what to do with it. As Kevin Boudreaux and Karim Lakhani warned in a 2013 HBR article on the subject, “Crowds are moving into the mainstream; even if you don’t take advantage of them, your competitors surely will.” All of these developments offered new tools for pursuing open innovation.

But what many practitioners and researchers alike have done is conflate these new tools with open innovation itself, either treating crowdsourcing and open innovation as synonyms or suggesting some other kind of equivalence between the two concepts. On the other end of the spectrum are those who suggest that crowdsourcing and open innovation are not related at all, or are only peripherally linked. Michel Neumann in a 2014 blog post defines open innovation as “creating and innovating with external stakeholders: customers, suppliers, partners and your wider community” and dismisses crowdsourcing as simply another form of outsourcing—in this case, outsourcing to the public at large: “Crowdsourcing requires a lower level of engagement and involvement than open innovation … the organisation solicits solutions from the crowd—not genuine contribution and collaboration.” Open innovation “suggests active collaboration between different organisations and the sharing of intellectual property,” as opposed to individual engagement.

There are variations along this continuum, as different authors construct more complex taxonomies and frameworks. Enrique Estellés maps the different kinds of relationships authors propose between crowdsourcing and open innovation, and gives some good references in the process. (The entry is somewhat awkwardly translated, but the discussion is useful nonetheless.) Ultimately, Estellés argues, “both Open Innovation and Crowdsourcing are based on the same paradigm: knowledge is distributed and its use … can be a competitive advantage.”

children happy
Who doesn’t like having a competitive advantage?

That comparison is true as far as it goes, but it doesn’t do much to illuminate the functional relationship between the two concepts. Carl Lens, founder of CreativeCrowds, provides a better illustration in a simple infographic he offered in response to a 2014 question on Quora, a Venn diagram captioned with a simple explanation: “Crowdsourcing can be a means of open innovation. Open Innovation can be a reason for crowdsourcing.” In other words, crowdsourcing is not open innovation, but rather one tool that can be used in the context of an open innovation approach—and that also has other applications that have nothing to do with innovation. Crowdfunding platforms like Kickstarter or outlets like Mechanical Turk that aim to farm out tedious work, for example, may have applications that are related to innovation, but their primary goal is not innovation.

Indeed, researchers, commentators, and practitioners also conflate open innovation with other tools. NASA, for instance, refers frequently to its system of innovation challenges as its “open innovation program.” Topcoder and Innocentive, both platforms for crowdsourcing solutions (and so tools for open innovation), both refer to themselves as “open innovation platforms.” The result has been, as Eric von Hippel acknowledged in a 2009 interview, confusion:

There is also a lot of confusion on terminology right now. For instance, “open innovation” is a term that I use to mean innovation that is freely accessible by all via an information commons. That is how I use the term in this interview with you, and that is what people in open source software mean by the term. Others use that same term to refer to the buying and selling of closed, proprietary intellectual property among firms.

Chesbrough’s conception of open innovation, which he clarified in a 2011 post for Forbes, is both more inclusive and more closely defined than any of these variations:

There are other ways some people define open innovation, just as Eskimos have dozens of words for “snow.” Some claim it works just like open source software. It doesn’t. The business model for innovation is a key part of open innovation. Others think that it is just supply chain management. It isn’t. Open innovation involves many other actors that fall far outside traditional supply chains (such as universities or individuals), and these participants in open innovation can be influenced, but often are not actually directed or managed. Some claim it is user innovation. It’s not. The user is certainly very important to open innovation, but so are universities, startups, corporate R&D and venture capital.

The key point in this discussion is not whether sharing is between firms or with individuals or universities or whether information moves freely or via channels designed to protect intellectual property.

Rather, the defining principle of open innovation is the business model. The “purposive inflows and outflows of knowledge” in open innovation must be driven by the business model. Decisions about which internally developed ideas to keep and which ones to let go, about whether to bring in a partner to support development of an idea, about whether to buy in a promising concept are all rooted in the company’s overarching business model. Indeed, Chesbrough felt so strongly about the link between open innovation and business models that his second book—Open Business Models—focuses on it.

In other words, open innovation is not a tool to be deployed. It’s not a belief about the relative merits of information freedom. It is an attitude, a mindset, an approach, deeply embedded in the very foundation of the organization. An open-source project may be part of an open innovation approach, if it is supported by the business model—that is, if it supports the kinds of knowledge flows the business needs to maximize the value of its innovation pipeline. Crowdsourcing may also be a part of that approach, again as long as it is an integrated part of a wider set of knowledge flows that deliver value to the company and its stakeholders. But none of these are themselves open innovation.

In other words, open innovation is not something a company does; rather, it’s something a company is.

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MaryAnne M. Gobble is the Managing Editor of Research-Technology Management (RTM), @RTMJournal.

For an inside look at the latest issue of RTM, visit www.iriweb.org/rtm.

In the current issue (Sept-Oct, 2016):

2 thoughts on “Defining Open Innovation

  1. Laura A. Schoppe September 29, 2016 / 11:27 AM

    This article does a great job of explaining the differences between open innovation, crowdsourcing, and platform tools. I also agree with your points about the limitations and purposes of these different terms. Bravo, MaryAnne!

  2. William MIller September 29, 2016 / 9:54 AM

    Open innovation can best be understood in the context of the generations of R&D and innovation management that were first described in an 1995 RTM article and then the 1998 book, Fourth Generation R&D. In 2G innovation which began in the WWII with collaborative projects like the Manhattan Project driven by Vannevar Bush, open innovation was much more than a business model. Open innovation was a national strategy of collaborative innovation management between the federal government, universities, industrial companies and national laboratories to implement radical innovation in warfare based on new capabilities. 4G innovation defines the driver of new radical innovation as a dominant design (DD) with 3 parts: (1) new capabilities collaboratively developed with an architecture to form them into a dominant design, (2) new business models among partners developing the the new DD, and the new structure of the industry supplying new products and services that adopt the new DD and new channels that support the new DD. Another example of the open innovation governed by a 4G DD is how the computer industry changed with the PC when multiple companies supplied new capabilities including Microsoft, Intel, HP and others that provided parts governed by the new architecture.

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