Open Innovation's Promise and Perils

By Gwynne, Peter | Research-Technology Management, November-December 2007 | Go to article overview
Save to active project

Open Innovation's Promise and Perils

Gwynne, Peter, Research-Technology Management

Just like manufacturing operations and call centers, corporate R&D has gone global. It has done so via the Internet, facilitated by an emerging group of "knowledge brokers"--institutions that aim to bring together firms with difficult technical problems and individual scientists or scientific teams worldwide who possess the tools and the ideas to solve the problems.

"We have the capability to find virtually anyone in real time who has the knowledge and ability to tackle a problem," says Paul Stiros, CEO and president of NineSigma, a Cleveland, Ohio firm founded in 2000. "We're in an emerging field now," adds Phil Stern, co-founder and CEO of, a Needham, Massachusetts, company founded a year earlier "to bring buyers and sellers of technologies together so that all parties maximize the return on their investments."

Quantitative data on the networks' expansion are hard to find. "I have not come across any such data apart from what companies project, which are not necessarily validated," says Satish Nambisan, an associate professor in Rensselaer Polytechnic Institute's Lally School of Management. But anecdotal information suggests that the number of problems solved by the "open innovation" web communities has grown steadily during the past five years.

"The idea is one part of companies' portfolio strategy," says Karim Lakhani, an assistant professor in Harvard Business School who studies web communities. "It's still nascent but ready to take off." Large companies such as Procter & Gamble, General Motors and IBM were the early adopters. But medium-sized firms have begun to buy into the concept. Often encouraged by glowing press reports, several have become clients of the brokers and the scientists in their databases.

Teething Troubles

Like any new industry, however, this type of communal research has experienced some teething troubles. Some clients have encountered difficulties when they try to incorporate solutions from the web communities into their product lines. "We have heard a lot of talk about the potential of open innovation communities," Nambisan says. "But when it comes to actual execution there is a significant gap."

Several unconnected developments stimulated the web communities. "There were two very public test cases: Linux and the open software movement," Lakhani explains. "They represented the idea of doing software development around the world with people you had never met. Another popularizer is Wikipedia--a very sophisticated knowledge-gathering mechanism. People say that if this can happen with software and an encyclopedia, why not in my domain?"

Some entrepreneurs translated the message into action. "The idea of open innovation existed in 1999 but wasn't on everybody's tongue," Stern says. "What led us to found was a large set of technologies developed by large companies and not used in the marketplace. We saw the opportunity to monetize those assets."

And in 2001 the pharmaceutical firm Eli Lilly and Company funded InnoCentive, an e-business aimed at open-sourced, open network innovation and global collaboration.

The Basic Approach

The members of what Nambisan calls "the innovation bazaar" have varying philosophies and nomenclatures. However, they agree on the basic approach to problem solving. "There's a lot of knowledge outside the local organization," Lakhani explains. "Finding the knowledge is often a difficult search problem. Searching for the right person is a tough task. So rather than searching on the outside, you allow anybody to participate. It completely turns on its head the search process and the innovation process. What it says is: 'Let's be transparent about our problems and attract people who may have already solved them elsewhere'."

The knowledge brokers offer two forms of added value to their clients. First come their lists of problem solvers, which can amount to hundreds of thousands and even millions.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Open Innovation's Promise and Perils


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?