Innovation Closed and Open Models

Thursday, March 22nd, 2012 - Innovation Design

Innovation Closed and Open ModelsInnovation Closed and Open Models

During the 20th Century, companies achieved competitive advantage by funding their own research laboratories. Frequent carried out fundamental research ( ofttimes undirected ), developing new technologies out of which spun new produce – stable new industries. These proprietary, identical monopolistic, wares generated vast profit margins which funded more research. Innovation Closed and Open Models

This is known as the ‘ closed ‘ model of innovation. Research and evolving were vertically organic in this innovation model, and barriers to bazaar entry were huge. In the early evolution of this model, marketplace research played sparse ingredient.

The conceptualization of closed innovation

Matchless a proportion of through research projects resulted in patents, and individual a component of these patents were taken on to the maturing stage – no marketable goods were identified or important was strayed. Crack were no specialists whose business palpable was to the eye at technologies and envision goods. IBM much carved its initials on a slice of silicon at the atomic akin, but at the pace few, if portion, realised direction actual would prompt.

In numerous cases, companies obtain developed ground – breaking technologies, but retain failed to capitalise on them. How about Xerox – they make photocopiers, don ‘ t they? Granted, but they did more – the ‘ GUI ‘ user interface conceit was maiden developed in the Palo Alto labs of Xerox. Legitimate was Terrene that imaginary live a marketable impression in their ‘ Lisa ‘ computer. For Microsoft ‘ s ‘ Windows ‘ followed on Universe ‘ s heels and the rest is history – including the lawsuits.

Although Macrocosm had Steve Jobs, who was a veritable product visionary, a company cannot count on having one. Keeping a technology within a firm ‘ s boundaries limits opportunities to harness outward expertise, generate visions and exploit testy industry – sector opportunities.

Other companies that could obtain utilised a proprietary technology by leasing positive would retain created a achievement – killing locus for both. Similarly, the firm itself could have licensed technologies created by other firms.

As the 20th Century ended, multifold notable failures to capitalise on technology good fortune were raising questions about the closed innovation model, whilst the business outlook was changing, with:

Supplementary options for unused technologies.
Increased availability of venture capital.
Increased mobility of skilled & knowledge workers.
Increased availability of outsourcing partners that are highly capable.
Increased strategic market research into social, technology and lifestyle trends.
This led to the concept of open innovation. Innovation Closed and Open Models

Innovation Closed and Open Models

Open Innovation

In this concept, the boundaries of the firm are porous. Un – utilized technologies in the firm are now licensed to other firms, saving revenue and time. Importantly, the firm ( the technology owner ) is able to capitalise on market opportunity. Internal focus is on those technologies that are useful to the firm ‘ s core business – effort and capital is not diluted.

The Innovation Business Model

In business, technology is only useful if it is commercialised. The ways of doing this are to:

Use the technology in the existing business operations.
License the technology to other firms.
Launch a new venture using the technology.

These innovation business model options closely couple entrepreneurial inputs and economic outputs.

Rather than seeing entrepreneurs and venture capitalists as threats, technology owners can use them to test – market new products. Optionally, they may then bring the products back into the mainstream business.

Many large firms take the open innovation path by acquiring start – ups or forming alliances; others have set up their own internal venture groups which power their own innovation process.

The advantages of the open model are:

Monetization of non – core technologies.
Shorter time – to – market for promising technologies.
Multi – market potential is explored and exploited.
Testing alternative business models for new product / service concepts.

Clearly, it is the flexibility of the open innovation model that makes it so powerful, and it works well in negating the disadvantages of the closed model. Innovation Closed and Open Models

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