Skip to 0 minutes and 1 second There is a huge tendency in organisations to try to protect the knowledge that they have. Now, there are various aspects of this what doesn’t really work. So if you, for example, take the Understanding Modern Business and Organisation MOOC there I talk about communities of practice and I talk about how knowledge does not stay within the organisation, it leaks through the organisational boundaries in the communities of practise because the knowledge sticks to the practice but doesn’t have any respect to organisational boundaries. And there I argue that it would be very important for organisations, for managers to recognise that they cannot really keep knowledge within the organisations. Now, the concept of open innovation is some sort of other side of this story.
Skip to 0 minutes and 55 seconds So it is all about how innovation is produced. Now, what is traditionally done is that if we are a larger organisation, if we hire the greatest minds in that area, and we keep that knowledge all inside the company, they come up with ideas. And based on that, we innovate. Now, it is important in this approach to distinguish between two concepts that we normally merge together. And we label it with the acronym R&D. R&D stands for research and development. In order to understand this concept properly, we need to divorce research from development. Research is something very unstructured. It is something that requires these creative, a little bit crazy people. And they come up with all sorts of ideas.
Skip to 1 minute and 47 seconds Now, once you have these people in your organisation, they come up with ideas and so on, you can channel these ideas together. It results in some sort of working prototype maybe. Very often the research phase ends before it is a really working prototype. It is an operationalised idea, which may or may not be a prototype. And then this thing enters a narrower kind of final phase, which means that they are stepping into the development, which does not only mean that there is a product that needs to be polished that we can properly conceptualise and so on, it also means that we need to think about mass producing, if it is something that we need to sell a lot of.
Skip to 2 minutes and 34 seconds There are, of course, occasionally some things of which you only need to sell three or four, but that’s not really what most of the world is about. Now, the idea of the closed innovation is that all of this is inside the organisation. And it means that once we have started from these ideas, some of them were pursued, some of them not. Some were discarded. Some were during the process. And then we end up with some things being developed. And those that are successfully developed, we can produce them in a reasonable ways. Those end up in the market. So this is the model of closed innovation. Now, Henry Chesbrough was the person who coined the concept of open innovation.
Skip to 3 minutes and 22 seconds And it is very important that he did not invent the open innovation and then companies started doing it. It always works the other way around in management that organisations start to do something and then we recognise it in the academia and then we write about it, how it is already working in reality. Now, so what Harry Chesbrough said that it is never only ideas within the organisation. So we should consider so if you think about this kind of funnel model, then this funnel is not completely solid. There are holes in it everywhere, which means that there are things coming inside from the outside as well. So the organisation is a little bit more open.
Skip to 4 minutes and 7 seconds So we are adopting ideas from other places as well. Of course, this is never a one-way thing. OK. So ideas are also going out. And that is basically the focus of the communities of practice idea. And that’s why I would say that the communities of practice and open innovation are best friends. They really go together. So ideas are coming in. Ideas are also going out. They are combined with ideas that were produced within the organisation and some of them will end up the same way as previously that we are releasing new products for the current market. So it is what happened with the closed innovation idea as well. However, some will leave the funnel.
Skip to 4 minutes and 54 seconds It might even stay within the organisation, but it is not part of that usual R&D process because in the development stage, for example, we developed something for which there is no market or something that is for a market in which we are not present at the moment. So it means that occasionally we deliver new products for new markets. And that will be a very different thing which cannot happen if we are in the closed innovation mindset. Of course, organisations were doing this anyway. We just had to recognise and describe it. Now, what is very important is that open innovation is not open source innovation.
Skip to 5 minutes and 31 seconds So it is not about that now you will release all your IP, make all the newly created knowledge available to everyone and you give it away for free. No, it is not about that at all. It is only that the organisational boundaries are not considered solid anymore. But there are things coming in and going out as well. Very often, for example, the Xerox example is used as some sort of negative story. Because what happened with Xerox is that they invented the personal computer, the PC. However, they never managed to get this thing to the market. They had these communities of practice. So the engineers from Xerox were having a regular meeting with engineers from IBM.
Skip to 6 minutes and 17 seconds And actually, it was IBM who did it first. So they created the PC, which was actually invented in Xerox. And when they say that this is a negative example, see, you should keep all the knowledge inside the organisation. Xerox lost the PC and IBM was becoming successful based on that. Now, that’s one side of the story. Look at the bigger picture. Xerox is a fantastically successful company. OK. And I think that it is mainly because they have these semi-permeable boundaries so they can let knowledged ideas in and out the organisation. And this is exactly what makes them so successful. So the whole closed innovation idea is only a small part of the story. In a pure form, it cannot exist.
Skip to 7 minutes and 12 seconds So I don’t think that there is really innovation without open innovation, particularly as you usually need many, many things to come together for a successful innovation. So I think that more or less, all innovation is, at least to some degree, open innovation.
In this video I introduce the idea of open innovation. Open innovation, as originally conceptualised by Henry Chesbrough, is contrasted with what he calls ‘closed innovation’, in which we try to keep everything in-house. Those who participated in the ‘Understanding Modern Business & Organisations’ MOOC might recognise parallels with the idea of communities of practice (CoPs).
What is particularly interesting is the way in which the ‘history’ of how this topic was prepared relates to the previous concepts. Henry drew a nice picture to illustrate the idea of ‘open innovation’. This picture can be found all over the internet. Amongst others, you can find an animated version that I have created. However legally, this is not fully cleared – we have copyright issues. So finally, I wrote to Henry and obtained his written permission to use the picture, more precisely, my animated version. Thanks Henry!
Credit: Animation in video adapted (with permission) from Chesbrough 2003