Open: Business Model for Innovation

[Nicolò Borghi]

Henry Chesbrough, Adjunt Professor at Haas Business School of Berkeley, is Executive Director of Center for Open Innovation, University of California, Berkeley. He wrote two books to explain the great change ongoing in the world, passing from closed to open innovation. Here you can find the great presentation he did in Firenze, March 18, to present the italian edition of his second Book "Open".

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[Rude]

Nevermind Gius, it was no offence at all! Thanks to Paolo and Alberto Di Minin for their explanation: it was really useful!
I'm going to take a look at the paper as soon as possible. It's such a relevant topic! Companies need to carefully manage the shifting from one model to the other. Perhaps there is a way both for a better circulation of knowledge in society and for better innovation's exploitation by companies.

[Gius]

Sorry Rude, I was wrong. Thanks to Alberto Di Minin for the clear explanation and for the exhaustive article. From the reading of Mr. Chesbrough's paper I understand that startups companies and venture capital have been leading actors in the change from closed innovation to open innovation model. Another aspect stressed by Mr. Chesbrough is the ability of open innovation model to rescue "false negative" projects (ideas that initially seem to lack promise but turn out to be surprisingly valuable). I think this is a strong key point that differentiates open innovation from closed innovation.

[Amar Muharemovic]

Wow, a comment "from the inside", great !!!
The words that I would like to stress are :
more and more often companies realize that good ideas are
not coming out only from their own laboratories and research centers, and
that therefore they need to look out for opportunities and enlarge their
knowlede and technological basis, beyond corporate borders

I think the companies that understands this concept before the others will benefit the most !! This is positive for both, for us because it will increase the competitivity (there will be people from everywhere and with different backgrounds competing for the same thing !!!), and for companies because they will have a wide pool of "talents" !!!

[paolo marenco]

Here is a comment from the editor of the Italian edition, Alberto Di Minin
www.diminin.it
Alberto is currently Assistant Professor at Scuola Superiore Sant'Anna in
Pisa www.sssup.it and he studied in Berkeley with Henry Chesbrough for his
PhD

"This debate is quite fascinating, and I am glad that Henry's slides provoked
so much interest. First of all a semi-definition. Open Innovation has to do
with the fact that more and more often companies realize that good ideas are
not coming out only from their own laboratories and research centers, and
that therefore they need to look out for opportunities and enlarge their
knowlede and technological basis, beyond corporate borders, as Rude is
suggesting: "sharing knowledge is not a threat but an opportunity". Also,
companies might try to exploit the result of their innovation through
various possible applications, such as licensing, spin-off companies, M&A...
and so on. So the Open Innovation framework becomes a "double funnel", with
a wider side at the beginning (for technology/knowledge sourcing) and a
wider side at the end (for various exploitation opportunities: products,
spinoffs, licensing...)
Now.. companies need to be careful when they decide to open. Things can go
really really wrong. As open does not at all mean "no-charge for my
innovation!" A clear strategy and a goal-orientend mentality is necessary.
This is why Henry is giving a lot of emphasis to the business model.
Innovation in the business model becomes a key unit of analysis for this
phenomenon.
Also, Gius and Amar have it right! there are a lot of similarities between
Open Innovation and Open Source Software! And here (where free does not mean
free of charge but free to circulate...) there are a lot of opportunities to
exploit the business potential in the Open Source world. Henry dedicates to
this an entire chapter in his book Open Business Models. In the Italian
edition of the book we find a lot of examples of Italian companies that
applied Open Innovation in their business.
To get started with these topics, why don't you take a look at this piece?
Chesbrough, H. 2003. The era of open innovation. Sloan Management Review,
Summer: 35-41.

I hope this helps!
Alberto"

[Rude]

Hey! first, I just wanted to say: I said "it's not easy to understand IT all", not that "I didn't understand AT all" !!! sometimes the slideshow is not very easy to understand well, but I think that some concepts are quite clear. As Paolo said, OPEN INNOVATION and OPEN SOURCE share the same basic idea: the need to share knowledge. Yet I think that there is one main difference: the first aim at improving profits for a company, the second aim at fastening the technological progress in society so everyone can make the most of. Of course sometimes companies try to find ways to take advantage of the OPEN SOURCE phenomenon, just like what happened between IBM and LINUX.

[paolo marenco]

Guys you are right , open source have the same philosophy behind...is the approach to share ideas more than to bhold for yourself...in very simple words, and the example of Ryan Air is very clear also...they made a revolution in Air transport...

[Gius]

Hi! I didn't understand the slideshow at all, like Amar and Rude. I had to take a look at the wiki link posted by Amar. Now the concept is more clear in my mind. Although I didn't never study things like business models or the transaction costs theory, I think that it's easy to understand the potential of Open Innovation. I agree with Amar when he says that the first thing that comes in mind is Open Source (I'm a Linux fanatic!!) and in fact is not too far. I think that those new concepts like Open Innovation are the new ways of world economy that are brought up by new technologies, internet above all. To understand for first those stuff will make the difference in the very near future because I think that they will be the dominant ways to make business. We have to understand it for first, four our own advantage.
What do you think about it?

[Amar Muharemovic]

Hi Rude, maybe I explained badly myself, I never wanted to compare Open Business Model to Open Source, I just said that was the first thing that the name "Open Business Model" evocates in me, probably because of the word "open"...
Here is what I found on wiki about open innovation:
http://en.wikipedia.org/wiki/Open_Innovation
I rather think that by open innovation business model, the author referred to a change in the way of thinking of firms, that is needed to take advantage of new opportunities of higher revenues and lower costs generating by the innovation process. I mean, maybe OPEN stands for "being receptive to exterior boosts" to build up innovation on a larger technological basis. This could allow the company to leverage on cost and time savings, besides giving new opportunities of revenues through spin-offs (which I think should mean undesired results found out in the process), licensing and access to new markets.
You said it... I think that the most important thing of this new business model is "being receptive to exterior boosts" !!
I talked about internet because, in my opinion, the most (and sometimes the best) of these exterior boosts can came from the net ! This is the biggest source of information and ideas existent nowdays... Internet is also an important test-bed (I hope that the translation of "banco di prova" is correct) for every new business.

[Rude]

Hey! I agree with you Amar: the slideshow, it's not easy to unterstand it all! may anyone who was present in the conference kindly post a brief comment, summing up the main concepts that were talked about on the occasion?
Anyway, Amar, I don't think it was about open source and the ease of sharing informations throughout the internet nowadays.
I rather think that by open innovation business model, the author referred to a change in the way of thinking of firms, that is needed to take advantage of new opportunities of higher revenues and lower costs generating by the innovation process. I mean, maybe OPEN stands for "being receptive to exterior boosts" to build up innovation on a larger technological basis. This could allow the company to leverage on cost and time savings, besides giving new opportunities of revenues through spin-offs (which I think should mean undesired results found out in the process), licensing and access to new markets.
So, in summary:
sharing of knowledge is not a threat but an opportunity, even for the companies (not only for forumers like us...!);
best results are unexpected, which means that when you start an innovation process, you don't have to plan everything, you shouldn't even know exactly where you're aiming at.
One last consideration: it's not always better to license knowledge, resources and competences: sometimes scope economies are better exploitable by internalizing (which could involve diversifying businesses). It depends on the relative costs: that's what comes from the transaction costs theory!! therefore: sometimes companies should find the courage to enter new markets, as well!
What do you think about it?

[Amar Muharemovic]

Hi Guys/Girls... Should I be the first to left a post ? It seems so...
For first, I must confess that I haven't understood it all !

Open Innovation, what a strange expression... The first thing that
comes to my mind is Open Sourse... not too far !

I belive that open Innovation business model,in a world dominated by the IT, is
the natural evolution of events (classical colsed model).
As I substained in other posts, the key world in IT is SHARING ... Even if I think
so, asking to industries to share their knowledge and their experience may seem crazy and
impossible to be realized ! If you were them (industries), would you share the
knowledge and patents that you have achieved in many years of researches and the
result of big ammounts of money profused with the rest of the world ?
Nowdays the information can be transferred in such an easy way that seems
impossible to be blocked. In this context, is better for companies to understand
how they can benefit from the information exchange than to try to avoid them. It's
crucial for industries to understand which informations can be exchanged and
which must be kept secret.

After the diffusion of internet, world changed deeply. I think that no one can
stop the massive diffusions of any kind of information, the ability of a company
is in "managing" it. I think with a good "information policy", big companies can
only benefit from the "help" that can come from outside. As is said clearly in the
7th slide: "Not all the smart people in the world works for us" !
I strongly belive that the fundamental help can come from everywhere and at any time... I also think that not all companies are able to pick up this informations "coming from outside".