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Approaches to Open Innovation

Question:

Discuss about the Role of Information Technology in Enabling Open Innovation.

In the present dynamic and continuously changing business environment, it is necessary for the organisations to continuously evolve and innovate in order to sustain, survive and thrive in the long run. Open innovation is a relatively new field of study which encourages the organisations to innovatively collaborate with their external stakeholders which includes their customers, suppliers etc. to contribute to the development of the organisation by supplying ideas and methods to innovate. In order to implement open innovation in the organisations, a number of mechanisms have been developed and proposed in the past, and are also being developed continuously. The most common and widely practiced approach to open innovation as suggested by Gassmann and Enkel is the one involving the outside in and inside out flow of knowledge (Gassmann & Enkel, 2004). The outside in flow of knowledge and innovation takes place when the ideas come from the external partners towards the decision makers of the organisation, encouraging them to innovate and experiment with different approaches. An example of this approach is increasing customer focus of the organisation. On the other hand, the inside out flow of knowledge for open innovation of an organisation is said to be practiced when the external partners of the organisation accelerate the commercialization of innovative ideas related to the firm, and help in their realization. An example of Inside Out flow of knowledge can be the organizations selling their intellectual property (Desouza, 2007). This research report is written with an intent to explore and analyze the role of information technology and study how it acts as an enabler of open innovation. It has been seen in the past few years that there is a tremendous increase in growth towards innovation or general knowledge to maximize the advantage of not just innovation, but also the strategies that can help the organizations in examining the practice of open innovation (Huizingh, 2011). Therefore, there is a need of implementation of open innovation in the organizations today. Innovation is considered as an important approach to analyze the competitive power in the long term in this unstable economy and the business environment. Nowadays, organizations are suggested to take an open approach to work with their evolution process and assist them to collaborate with their partners, consumers, retailers or other individuals that can provide innovative ideas. This approach is called the open innovation, which is gaining a lot of support by organizations all around the world. Open innovation is a new form of innovation that is making the firms carry out and assessment of their leadership positions (Lam, 2004). This approach helps in the reflection of the productivity and profitability of the organisation, as well as their performance with the strategies. Adopting an open approach to innovation has helped the organisations in reviewing their business strategies and models, in order to embrace the non traditional and innovative ideas and approaches to business operations. Major corporations like IBM, GE, Boeing, and Proctor & Gamble have integrated online crowdsourcing platforms as part of their open innovation programs. Likewise, the open source software movement is also often viewed as a role model for open innovation (Whelan, et al., 2009).

Information Technology and Open Innovation

While some of these experiments and approaches may struggle by challenging the current views of the workplaces on strategy, the same could also contribute towards the success of these approaches (Carmen & Jose, 2008).

Information technology in general has been observed to contribute significantly towards the adoption of open innovative practices by the organisations. There are a number of finer levels of information technology practices, which when studied specifically, can help in gaining a better understanding of the complexities of this contribution and the capabilities of these technologies in enhancing the organisational performance and productivity. This section of the report comprises of a brief description of some of the relevant researches that have been conducted in the area of information technology and its role in the promotion of open innovation in the organisations. This section also highlights the work or studies completed by the experts in their respective fields, related to the topic of the research report. Open innovation is a term coined by Henry Chesbrough which implies to a concept that advocates in favour of the organisations, to work towards the exploitation of the inflow and outflow of knowledge, in order to accelerate the internal innovation within the organisation and also expand and promote the use of innovation in the external areas. This is a by product of the world becoming increasingly boundary free due to advancement in technology and information systems (Chesbrough, 2003). Schumpeter has differentiated between innovation, which involves the introduction of new products, methods or forms of industrial organization, and invention, which is the discovery of technical knowledge which is new to the industry and finding its practical applications (Schumpeter, 2009). Information technology is divided into various smaller modules that help in studying the role of IT in enabling open innovation. These smaller modules will help in improving the understanding of IT in open innovation by providing extracted level of analysis. Also, these different modules of IT may cancel out functionalities or features of each other and thus, do not impact much on the processes of open innovation. According to the study, the role of IT in open innovation made by these smaller modules are considered as of much importance. The previous studies stated that these final modules help us in analyzing the association between the IT and the innovation (Steiber, 2012). These modules also provide the explanation of the role played by the smaller module of IT in enabling open innovation by forming a strategy towards innovation. The implementation of new and remarkably important study which describes the product and services or a new method in bringing the best practices in business or workplace organization developing external relations are there factors of innovation. The organizations try to improve their marketplace and have developed ways that are beneficial for their operations in terms of monetary and financial actions. However, it has been observed that there is no specific strategy that can help any organization to make it successful in each and every case. The suggestions provided to the organizations with the help of partners, people, consumers, retailers, suppliers etc is known as open up innovation process. Many organizations prefer to use open innovation strategy to build business Alliance with other organizations (Razavi & Attarnezhad, 2013). The innovation is also considered to have happened if it is implemented by the organization. A creation is a very immediate or direct concept of open innovation to increase the chances of innovation. Many companies or organizations moving or changing their strategies toward open innovation approach so as to enhance their chances of innovation. This can be better explained by an example which says that many organizations have created the web pages or websites which help the target visitors or customers to submit their views or ideas who visit their website for some information. In addition to this, the customer online communities like blogs, forums, and clubs are the sources for retrieving the creative ideas from the potential clients that can bring into perfection the organization innovation process. On using an open innovative approach, organizations can evaluate their output or results to find out whether their output and the efficiency of the organization increases, decreases or remains constant or static with respect to their present situations. Open Innovative literature consist of search conflicting results related to the effectiveness of the approach. These conflicting results have also been explained by many organizations. Financial benefits, number of revolutions, and change of innovations measures and forms a creative idea to evaluate the impact of various open innovation practices implemented to improve the performance. To accelerate the internal open innovation for inflow of knowledge, which is the first process or inbound open innovation and the expansion of the market for the external use of open innovation is called outbound process. Inbound open innovation and outbound open innovation are compatible with the scanning of latest technologies while integrating the customer’s retailers. External knowledge and practice of bringing the new and latest ideas to the market for selling different packages are made with the help of outside in and inside out respectively (Azar & Ciabuschi, 2017).

Processes of IT-Enabled Open Innovation

There are different processes with the help of which the applications of IT help in the open innovation processes. First part of these processes is known as knowledge management which helps in improving the capability to search and improve the data management the data mining techniques. This also helps in analyzing the knowledge from existing databases by connecting knowledge connection or network. The second one is known as the innovation production which helps in identifying the opportunity to develop the concept and designing innovation (Carlsson & Session, 2017). The third one is called external innovation partnership which has been creating the bonds for exchanging the information with different organizations or partners and developing the relationship between organization and other service providers. Based on the absorption capacity theory there are three processes or mechanism which helps in introducing the IT enabled knowledge capabilities that helps in achieving innovation. These are described as:

  • IT enabled potential absorptive capacity
  • IT enabled realized absorptive capacity, and
  • IT enabled social integration capacity.

Based upon this segregation and on the motivational condition described in the research paper, this study helps us in identifying the role of IT enabled capabilities that helps in the promotion of open innovation. Therefore, there is a continued sequence that is not perceptibly different from each other with respect to inbound and open innovation approaches. The organizations which are using the inbound open innovation might buy the technological resolutions. For the innovation and to support and integrate the user defined ideas which are collected from the end users using the resources like websites, blogs, forms, etc. These are the general strategy used by the organizations as an inbound open innovation which is called innovation figures. So, there are also innovation providers which help the organization to send the products to the sellers.

The study of approaches towards innovation like, open innovation, can help us understand the role of IT in an open innovation. While the open approach to innovation is growing in its popularity, there is a lack of detailed literature and empirical studies on this topic that will help in quantifying the impact that this may have on the organizational performance and profitability. That being studied, this research describes the gap to get the detailed understanding of the role of IT in enabling an open innovation from different perspectives. In the information technology literature, there is a concept of open source software which is a best example for the open innovation, which requires special attention. It has observed in the study by William R. King on Knowledge Management and Organizational Learning that there are three approaches which can be used by the organization for the innovation process (Knig, 2009). The first one is the knowledge management which helps in improving the capability of the user to search and implement various data mining techniques so as to generate valuable information from the existing database. The second one is the innovation production which helps in identifying the opportunities, development of concepts, and designing innovations. The third one is the external intervention collaboration which helps in building the business line organized with the external market. A number of organisations belonging to different industries are strategizing and continuously and innovating their approaches to embrace the volatility and the continuous change within the business environment. A few examples of these are observed in the form of platforms like Lego ideas which is a Japanese subsidiary of The Lego group that allows people to suggest ideas for the development of Lego (Starbucks, 2017). A poll is then conducted, in which the ideas receiving maximum support are developed and the person contributing to the same is rewarded. Another such initiative is started by Starbucks by creating a website through which anyone is allowed to submit their unique and innovative business ideas related to the coffee products, customer service, customer experience and the organizational involvement in the society to Starbucks. Dell Idea Storm was another innovative practice launched by Dell in February 2007. With the help of their website, they allow people to add articles and promote or demote them to help the organisation in estimating and understanding the ideas that the people consider relevant or important (LEGO Group, 2017).

Expert Perspectives on Open Innovation

Open Innovation and its adoption has gained momentum in practice as well as theory over the last decade. This section of the research report comprises of the preliminary information related to the research, by defining the theoretical constructs related to open innovation, as well as an explanation of the basic concepts related to it. This also covers the boundary conditions required for the implementation of open innovation in the organisations, and the motivation that the organisations get behind it (Stowe & Grider, 2014). This research report deals with the identification and exploration of the role that information technology plays in enabling open innovation in the work places and the organisations. Some of the basic concepts and definitions that need to be understood to study the implications of the same are compiled in this section (Koen, 2008).

The organization for Economic Co-operation and Development has defined innovation as the practice of implementation of a product, process, marketing method or the organisational method which is new and significantly improved, in the business organisation and practice. If an organisation commercializes an idea related to a business product, service or the business process, they are said to have innovated in their business practice (Schmidt & Rammer, 2006). The gathering or creation of knowledge that is abstract or the mere invention of a new product or business process cannot be considered innovation until the same is transformed in the organisation into operating procedures or tools that contribute to the growth of the business in any way (OECD, 2005).

Most approaches to describe innovation processes incorporate three generic steps: a phase where ideas are collected or generated (“idea generation”), another one to develop and specify those ideas (“idea development”) and finally the culminating step where creation of value takes place by the transformation of ideas into products (“idea commercialization”) (Polder & Mohnen, 2010).

Innovation is an organisation specific, and continuously evolving strategy and there is no single form of innovation that works every time for any given organisation or idea. Open innovation is an approach of business innovation, in which, the organisation opens up to the inside out form of knowledge gaining by inviting ideas from the external sources and stakeholders of the organisation. Traditionally, innovation was implemented in the organisation in a closed form by having an in-house research and development team which used to carry out studies and analysis to produce innovative ideas and contribute to the growth of the business. Quite opposite to it, open approach of innovation allows the firms to operate together in collaboration with the individuals as well as organisations outside (Chesbrough & Appleyard, 2007). Popularized by Chesbrough as a business idea, open innovation accelerates the internal innovation process of the organisation and also expands their market for a better inflow of information, knowledge and innovative ideas. Co-creation and crowd sourcing are some of the most common forms of open innovation that are practiced by the business organisations today. Open innovation is gaining a lot of popularity in the present business world with a number of organizations shifting their innovation strategies towards this approach. Open innovation expands the chances and possibilities for the organisation and increases their inflow of knowledge. It should be noted that open innovation is not an objective decision as there are a number of approaches that are closely related but still different from each other, that need to be considered when adopting the open innovation approach for an organisation. While there are success stories like those of Starbucks, Dell and Lego being the organisations who have leveraged open innovation approach and have benefited from it, this approach can only be effective when combined with a detailed in house study of the innovative ideas gathered by the sources as well (Gassman, et al., 2010).

The research design adopted to carry out this study is descriptive research design. Most of the studies carried out that are related to market trends and social issues follow the descriptive and exploratory research process. In this research we have explored the topic of open innovation and the role of information technology in its promotion among the business organisations (Chesbrough & Crowther, 2006). This research has looked for you new insights related to these topics and developed propositions for further research on the same. This research will help the reader in gaining a better understanding of the topic of open innovation as well as communicate how information technology helps in the enhancement of the same among the organisations (IBM Corporation, 2005). A descriptive research answers the basic Who? What? Where? When? and How? questions. It helps in building a picture of the problem being explored, and is used to examine the key issues or trends related to it (Hall, 2012). The data collected for this research has been majorly sourced from secondary data sources. These are the various published and unpublished articles, magazines, websites, researches and peer reviewed journals which contain data related to the topic being researched (Chesbrough, 2015). This is a qualitative research that gives out an ideographic description of the topic and the concepts related to it. These type of researches are rich in context and possess a high validity quotient. Qualitative research helps in raising more open ended questions that increase the scope of further research on the selected topic. It helps in the development of ideas for products, services and business processes like open innovation and helps the organisations in strategizing and developing policies that guide their processes and overall performance (Yun, et al., 2016). This research will help in the generation and development of ideas related to open innovation for the organisations and supply a greater depth and wider context to this topic. An ad hoc research addresses a given issue or topic at a certain point of time. For this research, and ad hoc study has been conducted by the finding out and analyzing the contribution of information technology in popularizing and enhancing the use of open innovation by the organisations (Deloitte, 2013).

Open innovation is found to be beneficial for the organisations as it helps in broadening the range of theoretical perspectives for the organisation for the development of their business processes and getting more ideas to change the way they strategize their working. This also makes the results of the research process more dynamic and fosters innovation by increasing the impact and the proliferation level of the resultant ideas. Although there are a number of organisations and the examples of their cases available, that have helped them in flourishing and making the management research process better equipped and more effective, there are still ongoing debates about the theoretical foundations of open innovation as the statistical evidences on this topic are lacking due to this being a new concept in business development. The three core open innovation processes that have been identified are 1) The outside-in process: Enriching an organization’s own knowledge base through the integration of suppliers, customers, and external knowledge sourcing can increase a company's innovativeness. 2) The inside-out process: The external exploitation of ideas in different markets, selling intellectual property and multiplying technology by channelling ideas to the external environment. 3) The coupled process: Linking outside-in and inside-out by working in alliances with complementary companies during which give and take are crucial for success. The introduction of open innovation strategy in the business environment has posed a challenge in front of the traditional strategies followed by the organisation. In order to promote open innovation and make use of the ideas that are generated from this, it is necessary that the organisations validate the ideas for their ownership and the possibility of creation of value for the organisation. Another factor that is important and should be kept in mind by the organisations adopting the open innovation business strategy is to ensure that the contribution and idea generation process for open innovation is transparent and fair. To promote an unbiased inflow of ideas, the businesses must also work towards claiming the ownership of the ideas being raised for excluding any other organisation from copying the idea, or working on it at the same time. Technology has not only fostered the process of adoption of open innovation by the business organisations, it has revolutionized the way organisations make use of this approach to analyse the strategies and develop their products and services. The information technology tools like websites, web portals and open source programs have further widened the reach of these strategies, and has allowed  maximum participation of the external sources in contributing towards innovating the business practices of the organisation adopting this approach. The given figure lists the organisations operating in the field of information technology that rely on various degrees of open and closed innovation.

Figure: Adoption of open and closed innovation strategy by the organizations (Chesbrough, 2015)

In the above matrix the organisations are classified on the basis of the strategies for the creation of value for the organisation and the method they adopt for capturing the created values. Value creation is done by either in house team that conducts the research and development activities for the organisation, or by adopting the open innovation approach driving the community to contribute towards the generation of ideas for innovation by the business. The other dimension comprises of capturing the value that is created by both open and closed initiatives for the business development and its realization by the organisation or by the larger community to which the organisation belongs to. This variance can be seen in the working of these organisations. For example, Microsoft is an organisation having an in house value creation team which works towards building ideas for the development of the organisation and the value that is created from those ideas is also captured within the business organisation only by keeping source codes of their operating system and other applications within the organisation (Chesbrough, 2013). Similarly, Google Inc. is one organisation that creates value with the help of advertisers and capture this value within the organisation only by keeping their proprietary search algorithms as the intellectual property of the organisation and also keeping the auction bidding system of Google for the advertisers only. While both Microsoft and Google have benefited by practicing these approaches, the organisations and individuals working within and close to their environment have also benefited from the same. To give an example for the same, a number of organisations place their ads on the Google search engine which helps in bolstering their performance and in turn benefits Google financially. Quite opposite to this principle, the community driven initiatives produce ideas for goods and services that help in value creation across a larger group of people and contribute to the public good. In the world of information technology, Linux is the biggest examples of open source operating system that allows coordination and invention in a collective manner by allowing the people to contribute to their growth and allowing them to use the services of the organisation as well. Information Technology enables the organisations to collaborate their capability and further strengthens the open innovative strategies of the organisations by linking their external partners, who are the contributors of the innovative ideas, to the medium that is used for information exchange (Vanhaverbeke & Chesbrough, 2014). If an organisation wishes to optimally utilize the open innovative strategy, and attract the external partners for the contribution of information and innovative ideas, they require an implementation of information technology tools.  These tools coordinate the business process, and make it faster and more effective. The organisations that are willing to innovate more openly are more likely to make use of information technology tools by synergizing the ideas with the methods for application for the same into the business processes. This helps in external collaboration of the information for open innovation of the organisation. Just like the information technology tools empower external collaboration, they also allow the internal members of the organisations to communicate and collaborate in a better way. Particularly, the integration and networking tools of information technology provide a mechanism to these members to integrate and collaborate with each other (Cassiman, 2013)


These tools promote interaction among the members and keep them connected by allowing easier and faster way of communication within and outside the workplace. They also help in coordinating the business activities. The information technology tools create a seamless network for the people in the organisation to devise the tools and share the knowledge on real time basis (Hague, 2009). With the help of the IT enabled mechanism of the organisation, the people within and outside the organisation are able to collaborate and co-ordinate with each other to share and store the data collected by them and can easily gain access to this data whenever and wherever required. The internal communication systems, organisation specific social networks, blogs and organisational websites are the most commonly used information technology tools that enable internal collaboration and information exchange in the organisations. Once the information from these internal and external sources has been acquired it is important to make use of this knowledge and transform it to improve the organisational performance by forming innovative strategies and policies (Cosh, et al., 2014). In this stage as well, information technology plays an important role by providing the organisations with tools like integrated process management, systems for knowledge management, data storage and retrieval software etc. that support the entire knowledge processing system of the organisation (Gassmann & Enkel, 2010). Additional programs like those for improving business intelligence, analyzing the organisational performance and the data, data mining software, software that help in creation of a simulation environment that lets the organisation test the ideas, support system for organisational decision making, the analytical processing of the organisational data, data compilation tools like digital dashboard,  technologies that help in virtualization and visualization of the created ideas and programs and the expert systems that help in reasoning of the cases being analysed and ideas being processed are all a product of information technology. Organisations that lean towards innovative information technology tools, can exploit the ideas generated from both external and internal sources better and accomplish their goals for open innovation. The information technology tools provide a structure for knowledge processing and testing by the organisations, in order to allow them to get maximum benefits from the ideas generated in the previous steps (Gassmann & Enkel, 2010)

Conclusion

This research report comprises of a study of the role that information technology plays in enabling open innovation in the organisations. For this, a brief overview of the concepts of open innovation and the various practices related to it is included in this report, along with a study on the general role of information technology in the business operations. This research offers valuable contribution in the field of open innovation as well as information systems in business. For the study, the business innovation process has been analysed to identify the various steps involved in it, and how changing the approach of business Innovation process and its alignment towards open innovation can bring about changes in the business process and strategies. This report can provide the business practitioners, decision makers and managers with useful insights regarding open innovation and the collaboration of the ideas generated for the same, which is done with the help of application of information technology tools in business. Being an academic research, there are certain limitations to this research that should also be addressed here. Any research carried out primarily for academic purposes is generally limited in the availability of time and resources available for the conduction of it.  The same holds true for this research. Another limitation that this study suffers from, is that it uses secondary data sources for the gathering the data for the research. The credibility of the data collected relies heavily on the credibility of the sources from which it has been collected. Following a qualitative research design for the conduction of this study, an accurate figurative measurement could not be made for measuring the impact of information technology on the adoption of open innovative practices by the organisations. Therefore, there is a further scope of research in this topic by adopting a quantitative research model to study the monetary benefits that the organizations can or are enjoying by adopting this practice. Being an extremely dynamic area of research, information technology and its trends and developments keep on changing and progressing rapidly. Therefore, further studies should be continued on this topic so that the knowledge on these areas is enhanced to adopt more innovative practices in the workplaces and to help the managers with their decision making process. There is no empirical study that has been published that quantifies the impact that information technology has on open innovation in the organisations. Further study which is exploratory and descriptive in nature, can help in offering insights in these areas as well.

References

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