Briefly discuss the concept of open innovation and understanding the concept of openness

1. INTRODUCTION TO OPEN
INNOVATION &
UNDERSTANDING THE CONCEPT
OF OPENNESS
SARAVANAN A
PhD Candidate,
Rajiv Gandhi School of Intellectual Property Law,
IIT KHARAGPUR

2. Agenda:
Invention-Innovation
Open & Closed Innovation
Open Source
Open Innovation
Outside-in & Inside-out
When OS & OI part ways?
Benefits of OI
Challenges for OI
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3. Disclaimer:
• Images, content, and published articles are
for reference and illustrative purposes only.
Under no circumstances should any image,
logo, content or article be viewed as an
endorsement for this presentation or any of
its contents. This presentation is intended
for educational purposes only.
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4. Introduction:
• Many ways internet has changes our lives
• IT- digitalized: Rampant duplication
– Napster, Torrent- Millions of users to download
billions of audio and videos
• Many legislations were brought to control
• Technological advance- Two Phases
– Invention & Innovation
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5. • What is the difference between
invention and innovation according to
you?
Question:
Source: www.inaray.com
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6. Difference between Invention
and Innovation:
Invention Innovation
Creation of something new Novelty and modernization
Only invention Invention + Exploitation
(individuals and organizations generate
new ideas and put them into practice
Concern is a singular product or process Involves an amalgamation of various
products and process
E.g: Invention of MP3 Player Development of iPod
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7. MP3 v Apple iPod:
7
Vs
Source: http://www.sevenforums.com Source: www.theipodrenaissance.files.wordpress.com

8. New Forms of Managing Innovation:
• Innovation
process divided
into different
phases.
• Each phases
requires distinct
management.
Source: http://furtyop.myblog.it/ 8

9. Closed Innovation:
• Closed Process
• Project can enter in one
way and can only exit in
one way, by going into
market
• Organizations generate,
develop, and
commercialize their own
ideas belongs to the closed
innovation model
• All the activities
performed internally
Source: H Chesbrough, Open Business Models
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10. Cont…
• It is based on control.
• During 1970s and 80s IT cos invested
– Eg IBM, Xerox
• With the transformation of society
– Information-based, Knowledge-intensive, and Service-
driven economy
• Business rules shifted radically
– Closed Innovation- obsolete
• Cos to take step to open up their innovation
philosophies 10

11. Open Innovation:
• “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”
• Henry Chesbrough
Source: H Chesbrough, Open Business Models
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12. What is the Difference - Practical Approach
Benefits of the sandpit:
•You don’t have to pay for all the toys
•You can use the toys others don’t want
•You can negotiate to play with other toys
•You can play alone or together
Rules of the sandpit:
•The toys must be shared
•You can’t have it all your way
•You must behave yourself
Closed Innovation Open Innovation
Source: http://www.pbase.com
Source: http://www.excellenceincare.com.au
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13. 13

14. Modes of open innovation
Inbound
Outbound
Pecuniary Non-pecuniary*
Direction
Financial flows
IP in-licensing
Contracted R&D services
Specialized open
Innovation intermediaries
Idea & start-up competitions
Supplier innovation awards
University research
grants
Joint-venture activities
Spin-offs
Corporate business incubation
Selling market-ready
products
IP out-licensing
Customer & consumer
Co-creation
Crowdsourcing
Publically funded
R&D consortia
Informal networking
Participation
in standardization
(public standards)
Donations to
commons
or nonprofits
* Without full compensation
Source: Managing Open Innovation in Large Firms, H. Chesbrough, S. Brunswicker, 2013
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15. Kinds of OI:
Outside-in OI
• Opening up a co’s own innovation processes to
many kinds of external Inputs and contributions.
• ‘Not-invented-here’ into an outside-in OI
– E.g: Bring 100s of researchers around the world to
supplement you R & D activities.
– Cos acquire inventions or IP from other cos
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16. Inside-out OI:
• How organizations can allow unused and under-
utilized ideas to go outside the organizations for
others to use in their businesses and markets
– E.g: Unused patents and other IP to external users.
– Patents are often underused- more than half of Dow's
patents were unutilized.
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17. Difference between Open Source and OI:
Open Source:
• Started during 1970s, even before OI
– Software vendors- impossible to change what they have
developed
• MIT researcher Richard Stallman came up with
the concept ‘support and sharing’ philosophy
• Creates project GNU and founded Free Software
Foundation
– First Success- LINUX OS (now used in all android)
• Open Source Initiative- born in California.
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18. Open Source Open Innovation
Objects involved: Software Any type of product or service
Economic Legal Framework: - Defined
•Provides framework for economic exchange
and an IP policy
Framework Change- case by case
Weight:
•No such intermediaries
•Code may be done via computer servers
Often dictated by a large company or defined
through a specialized intermediary
Diversity:
OS covers software development or
improvement
Diversity is huge.
Cos use OI for upstream projects (ideation, ideas
competition), as well as problem solving,
improving existing products, mounting research
projects
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19. Open Source projects as examples of OI:
Source: J. West and S. Gallagher
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20. Where Open Source and Open
Innovation Part Ways?
• Some firms involvement in OS fits the Chesbrough
definition of OI.
– It doesn’t mean “all OS Software is an eg for all OI”
• Scenario of using OI in Computer industry has
increased
– Because computer vendors are relied upon 3rd party
supplier
• Important Milestone- in 1980s
• IBM had decided to source their PC, CPU and OS
from Intel and Microsoft.
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21. In certain cases OS and OI are
overlap each other
1) OS but not OI:
• OS is OI only if it has a business model.
• OS is not OI if it has any non-pecuniary
motivations
– Eg: GNU Project.
2) OI but not OS:
• 'Wintel' PC using Windows and Intel components
represent OI.
• It lowered barriers to entry, of numerous 'PC
Clone' makers. 21

22. 3) Neither OS nor OI:
• Norm - Use of independent software vendors
(ISVs) for external innovations.
• In some cases, firms doing it in other direction,
becoming increased integrated- decreasing the
relative importance of third party application
providers.
– Eg: i) Microsoft has integrated downstream from OS
into applications such as Windows, Money and SQL
Server
– ii) Intuit- adding additional services such as loans- to
extend its quicken financial management software.
Cont…
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23. • OS is having profound impact on IT value creation and
capture,
– But it is too soon to say what effect OS, OI will have upon
proprietary alternatives
Source: J. West and S. Gallagher
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24. Benefits of OI:
• Up gradation: Adopting global technologies –
wider source of innovation.
• Acquire patent without in house expertise.
• Leverage R&D developed on someone budget .
• Instant solutions: Found & adopted immediately.
• Constant reinvention: Constant renewing of
technology which may be difficult to achieve with
in-house R&D.
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25. Cont…
• Improved payback on internal R&D through sale
or license of otherwise unused IP.
• Strategic experiments at lower risk & resources,
with the opportunity to extend core business &
create new sources of growth.
• Create innovative culture, from the ‘outside in’
through continued exposure & relationships with
external innovators.
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26. Challenges for OI:
• What is the appropriate balance of
internal/external technology?
• What competencies should we invest in & control
externally? How should others be acquired?
• How do we make quantum leaps in innovation?
• How do we integrate board room deal making
with other types of advance technology
collaboration?
• Licensee may become a competitor?
• Theft of IP?
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27. Adoption of OI across different
Industries:
Source: Managing Open Innovation in Large Firms, H. Chesbrough, S. Brunswicker, 2013
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31. Closed Innovation Open Innovation
• IP Generators of new technologies- mainly
companies
• IP- barrier to entry- not source of revenue
Variety of IP generators and collaborators –
other companies, public universities and
R&D institutions, users, customers,
suppliers.
Huge IP non-performing portfolios
Companies usually selling but not buying
Active IP asset management of the
companies’ IP portfolio – matching
technologies with innovative (inside or
external) business models to add value to
IP
IPRs (advantage – no confusion about IP
ownership)
• More proactive assertion of IP policy
• Development of Intermediate IP Markets –
semiconductors, biotechnology, chemicals
and consumer products and Innovation
Intermediaries (facilitators)
IP valuation method – Discounted Cash
Flow– ‘Net Present Value’ of the technology
Use of More complex IP Valuation methods-
‘Real Option’
Models of Innovation and IP:
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32. Unanswered Questions?
• How innovation researchers were hired?
• What incentives they were offered for their
inventions?
• What is the strategy of the firm was towards
the technologies being patented?
All of these important influences are
determined by managerial decisions.
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33. Thank
You…
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