Open Innovation and Strategy MOOI Theme # 1 – presentation & discussion December 3, 2013
MOOI Theme 1:
Open 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
Statements about OI and strategy –
… the need to align open innovation with the organizational strategy
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…. firms need to audit the current status of their innovation strategy and identify areas where value could be added by open innovation
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Innocentive project: •
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“Quantitative Model to Aid Strategy Decisions When Applying Open Innovation” Crowdsourcing applied to the link strategy & open innovation 3
Overview •
OI and corporate strategy
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OI and business strategy
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OI and strategy types
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A process view on the link between strategy and OI
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OI and corporate strategies 5
OI and corporate strategy
Corporate strategy: –
Long-term growth of the company
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in which industries/technologies a firm wants to be active – new business development
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OI and cap ability building (dynamic view): •
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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 6
The McKinsey Growth Model
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McKinsey Model & innovation strategy
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McKinsey model and OI •
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Innovation efforts aimed at all three time horizons H1: Current business: –
BM determined/clear
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Incremental innovations with existing partners
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Market related partners more important?
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Short OI innovation cycles with low uncertainty 9
McKinsey model and OI •
H2: Related businesses
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H3: New businesses or disrupting businesses
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Work on the three horizons simultaneously
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BCG matrix – Adapted for OI Frank Mattes - Applied Innovation management - nr 3 – 2011 (p. 13)
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Deloitte’s Growth Framework
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Growth matrix – Adapted for OI Frank Mattes - Applied Innovation management - nr 3 – 2011 (p. 14)
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Incubation and EBAs: Growing beyond the mainstream businesses •
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Role of corporate incubators & EBAs (DSM) in growth strategy of the firm OI in EBAs is quite different than in mainstream businesses
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New capability building through external relations
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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 ~80%
DSM Innovation Center
New Business Development
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~20%
Enablers
EBA Biomedical
Excellence in Innovation
EBA Bio-based Products & Services
CTO Office
EBA Advanced Surfaces
Licensing
Business Incubator
Venturing
OI and the cognition of future corporate strategies •
Different people working together with external partners: –
Different views on the technical and market opportunities
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Scouters, incubators, EBAs: focusing on LT technical developments vs. mainstream businesses
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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 approaches
Centralised OI Activities
Ifm report (2009)
Distributed OI Activities
Top down Strategically driven
Bottom up Achieved by evolution
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Interactive poll 1
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OI and Business Strategy Page 20
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. 21
Chesbrough & Appleyard (CMR 2007)
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Chesbrough 2006 •
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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 company’s own business but also in other companies’ businesses 24
The relation between OI and OBM Open Innovation
I-Pod Apple
http://open-innovation.blogspo t.nl/2010/02/ipodthanks-to-openinnovation.html
Tide (P&G) http://www.acs.or g/content/acs/en/ education/whatisc hemistry/landmark s/tidedetergent.ht ml
Closed Innovation Closed Business Model
SkyNRG
http://skynrg.com
Senseo (Philips/Sar a Lee)
(P/SL)
http://www.entrepre neurship.ethz.ch/edu cation/lectures/Allian ce_Advantage/Trust_ Risk_de_Man_2009.p df
Open Business Model 25
OI and Strategy Types 26
Jaruzelski & Holman/Booz & Company (Ivey Business Journal, 2011)
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OI and Innovation strategy types Frank Mattes - Applied Innovation management - nr 3 – 2011 (p. 20)
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A PROCESS VIEW ON THE LINK BETWEEN STRATEGY AND OI 29
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
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Chesbrough & Appleyard, California Mgt R., 2007
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Chesbrough and Crowther, R&D Mgt, 2006
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How to implement OI, IfM report, 2009, University of Cambridge
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Itamy & Namagami , Strat Mgt J., 1992
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Lichtenthaler & Lichtenthaler, J Mgt Studies, 2009
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Jaruzelski & Holman/Booz & Company, Ivey Business Journal, 2011
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Mattes Frank, How to make OI work for your R&D, Applied Innovation management - nr 3 – 2011
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Slowinski & Sagal, Research Technology Mgt, 2010
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Brandenburger en Nalebuff, Co-opetition, HBS press, 1996 32
Q&A
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