Academic journal article Research-Technology Management

Open Model Innovation: Culture, Contract and Competition Embrace the Practical Issues That R&D Leaders Need to Consider

Academic journal article Research-Technology Management

Open Model Innovation: Culture, Contract and Competition Embrace the Practical Issues That R&D Leaders Need to Consider

Article excerpt

In recent years there have been numerous publications and references to the growth of an approach by which companies can create new value. This approach has been labeled by various authors (most notably Henry Chesbrough) under phrases such as Open Innovation, Open Networks, Open Platform, Open Business Models and the like (1). A common theme has been the "opening up" of companies from a closed value model in which an organization controlled the key elements of new value creation (e.g., research, development, marketing, etc.). An open approach advocates establishing a broad ecosystem whereby external parties are much more engaged and involved in conceptualization and implementation of innovative new ideas in a variety of formal and informal matters.

This more "open model" approach can provide three clear benefits to an organization:

1. New ideas can be contributed from a much larger range of parties and from different perspectives than what might be contributed internally.

2. Business and financial risk can be mitigated by the participation of one or more third parties and greater market scale can be achieved by joining forces.

3. Speed to market may be accelerated by particular contributions made by other partners or contributors in the ecosystem.

Perhaps one of the best illustrations of these factors at work in today's world has been in the pharmaceutical industry. In recent years there has been a much greater willingness by large pharmaceutical firms to engage much smaller biotechnology firms in marketing alliances, co-development programs, equity investments, etc., as new product successes from traditional chemical-based methods have diminished.

Such approaches can be complex, though. Over the years, I have been involved in many types of open model forms--co-development agreements, inventor/designer contracts, marketing alliances, patent licensing and cross-licensing engagements, etc. Each was entered into to derive one or more of the benefits listed above. However, as are most things in life, there is "no free lunch" and "nothing is ever easy." In particular, issues that arise regarding practically implementing an open model approach tend to cluster into three categories: Culture, Contract and Competition.

Culture

Contained under Culture are a number of elements including differing perspectives on speed, resource commitment, organizational changes, and even such mundane issues as common terminology (i.e., the same word meaning the same thing to both parties). In a closed model, although differences regarding each of these elements can occur, there tends to be much more of a normative internal organizational reference as well as an ultimate arbiter, namely the CEO.

Speed

When moving to an open model with much more active engagement and partnering, the complexity increases substantially with the addition of a partner, and exponentially with a broad-based ecosystem. The term "speed" likely had a much different definition for Microsoft as it developed and brought to market Vista than it did for various small applications developers with new products who awaited its release and had worked to ensure system compatibility.

Priorities

It is not uncommon for two parties working together to have differing priorities and therefore resource commitments in advancing a new joint concept. As a consequence, the project may proceed in fits and starts as the parties continually seek to realign differing expectations.

A similar issue also occurs due to the time it takes for a concept to evolve to a completed product or business. Organizations change over time as do priorities and champions. What was once important to one organization no longer is, yet the other partner still values it and wants to proceed. Separation and disentanglement can be a long, protracted and painful process; just ask the various parties who were involved in the high-definition DVD format war. …

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