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The Role of Outside Innovators in the Business World

Question:

Discuss about the Innovation, Creativity and Entrepreneurship.

Innovation and innovators play a critical role in the business world. When speaking of innovators, the role of outside innovators is considered to be fundamental, and the success of companies like Apple Inc. confirms this fact (Boudreau & Lakhani 2009, p. 69). The aspect of having a reliance on outside innovators is what has given companies like Apple Inc. a name, especially when looking at the iPhone (Boudreau & Lakhani 2009, p. 69). Open innovation, according to Lichtenthaler (2011, p. 76), is the tendency of businesses to make use of knowledge inflows and outflows as the sources for ideas and acceleration of innovation strategies. Co-innovation, on the other hand, is considered to be a type of open innovation. Co-innovation is defined by Griffith (n.d, p. 1) to involve the collaboration of two or more partners that work purposively in the management of the flow of mutual knowledge across the boundaries of the organizations through joint innovation and commercialization of the said innovation. Overall, open innovation allows companies to commercialize its ideas as well as those from other firms and as a result, identify ways of taking its in-house ideas to the market through the adoption of pathways outside its current business set up (Chesbrough 2011, p. 1). It is apparent that the concepts of open innovation and co-innovation have set root in the present world, and they have profound implications for business as the section below will confirm.

The implications of open innovation and co-innovation are felt in areas such as the firm's strategy, generation of ideas, performance, business models and intellectual property, among others. Detailed information on this is outlined below.

Business strategy is considered by Chesbrough and Appleyard (2009, p. 58) is considered to be a vast field. As a matter of fact, business strategy has been linked to a firm's plan to use its opportunities against the threats that may manifest in its environment (Chesborough & Appleyard 2009, p. 58). Open innovation has transformed the design of business strategies. As businesses shift from the closed innovation, where research and development departments took the centre stage, to open innovation, changes to the business strategies have been noted to take place. As stated by Chesbrough and Appleyard (2009, p. 60). Some of the changes that are deemed as being imperative in the open business strategies take note of value creation and value capture (Chesborough & Appleyard 2009, p. 60). Creation of value through the open innovation would tend to take the approach of a public good (Chesbrough & Appleyard 2009, p. 60). In such a case, value creation is not a rival, where it can be consumed, and its experience will not be degraded. Additionally, value creation would allow access to all comers (Chesbrough & Appleyard 2009, p. 60).

When looking at the concepts of value creation and value capture as the implications of open business strategies, it essential to understand the concepts of knowledge creation in open invention, and ecosystem creation in open coordination (Chesbrough & Appleyard 2009, p. 62). Value creation is dependent on knowledge, which can, in turn, be profitable as established by Chesbrough and Appleyard (2009, p. 62). The very essence of pooled knowledge in value creation is superior to the knowledge that is drawn from an individual contributor (Chesbrough & Appleyard 2009, p. 62). Similar to the concept of the open invention that is achievable under pooled knowledge creation, it is essential to note that open coordination is also imperative. This is in the sense that it has fostered the instigation of building consensus on topics that include technology standards, which have played a fundamental role to the flourishing of business ecosystems (Chesbrough & Appleyard 2009, p. 62).

Open Innovation and Co-Innovation Defined

From the above, it is clear that open innovation and co-innovation have fostered changes to the strategies that firms adopt.

Open innovation has implications on the performance of businesses. As identified by Chen, Tsou and Ching (2011, p. 1335), businesses with a greater innovation capacity tend to be more prepared to respond to their environments in a successful manner. As a matter of fact, these businesses tend to have the capabilities they need to gain a competitive edge, while they improve their overall performance (Chen, Tsou & Ching 2011, p. 1335). Collaborations, under the concepts of co-innovation/ co-production, allow businesses to inaugurate innovations much faster and in an effective manner (Chen, Tsou, & Ching 2011, p. 1335). Innovation orientation practices in businesses are considered to be a critical addition to collaborations (Chen, Tsou, & Ching 2011, p. 1335). Innovation orientation will in turn foster creativity and the overall development of innovation practices in business as identified by (Chen, Tsou, & Ching 2011, p. 1335), thus activate the cycle of performance improvement.

The implication of open innovation and co-innovation is felt on business models that are adopted by firms. The new model of open innovation, according to Chesbrough (2003, p. 1), is based on a wide pool of knowledge, which must be put to use immediately, if firms are to reap the benefits of the value that they possess. The new open innovation model holds that organizations must not have restrictions in the knowledge that it unveils in its research; particularly to the market pathways that are internally based (Chesbrough 2003, p. 1). In addition, the internal pathways must also not be restricted to only taking a given business’ internal knowledge capabilities to the market (Chesbrough 2003, p. 1).

The open innovation model promotes rules that are defiant of those that are propelled by the old closed innovation model (Chesbrough 2003, p. 1). In reality, a difference rests with the principles that are upheld by the open and the closed business innovation models. The principles in the closed business innovation model, as established by Chesbrough (2003, p. 1) take note of the fact that smart people in the field of a given business, work for the said firm. Another principle considers the fact that for businesses to benefit from R & D, they ought to come up with ideas, develop it and then market it by themselves. Another principle in the model consider that if businesses discover an idea by themselves, then they ought to take the idea to the market by themselves, Other principles consider the fact that if businesses commercialize an idea, then the win and if they create the best ideas in the field they also stand a winning chance. Finally, the model lives by the principle of controlling a business’ intellectual property so that competitors do not benefit from the firm’s ideas.

In contrast, to the closed business innovation model, the principles upheld by the open business innovation model consider the following;

Not every smart person works for the company, and so great ideas ought to be sourced from outside. External R&D is essential in the creation of significant value, which internal R&D can claim a section of it (Chesbrough & Crowther 2006, p. 229). Another principle under the model is that businesses do not have to come up with ideas to benefit from them. Another principle identifies the fact that the development of a sound business model was essential than taking an idea to the market. Making good use of both internal and external R&D allows companies to garner success. Finally, the open innovation model, businesses should allow other firms to use their IP, and the said companies should buy other's IP, especially if it propels a given company's business model.

Implications of Open Innovation on Business Strategy

According to West and Lakhani (2008, p. 1), present studies confirm the fact that innovation had been linked to the role that communities play. The role that is played by outside communities is especially important when looking at the creation, shaping, and transferring of technology and social-based innovations (West & Lakhani 2008, p. 1). Evidently, communities play a critical role in idea creation, in open innovation, which ends up being adapted, adopted or disseminated. It is essential to note that a significant implication of open innovation rests with the essence of new idea generation, which can be developed and commercialized by firms.

Asides from the positive implications that open innovation displays for businesses, as presented above, it is essential to note that the concept of open innovation has challenges as identified by West and Gallagher (2006, p. 3) rests with three concepts namely maximization, incorporation and motivation. Under maximization, firms have to be in a position where they can find vast approaches of maximizing the returns that emanate from internal innovation. Under incorporation, firms have to understand that they cannot locate the benefit of external innovation, where there is a lack of the relevant knowledge that can allow incorporating its knowledge to the innovation activities. Finally, firms have to ensure that a source of replenishing the individual external contributors through motivation.

As determined by Seltzer and Mahmoudi (2013, p. 1), open innovation under the concepts of crowdsourcing allows flow of ideas from diverse groups of people that are different from those in the organization, as a means of finding new solutions to challenges, and sites like OpenIDEO confirm this aspect. Open innovation is unpredictable for firms and engagement in it, calls for the presence of time and resources (Seltzer & Mahmoudi 2013, p. 12). Crowdsourcing and citizen participation via the web heighten the workload level for companies, which ought to be managed, that requires the time of planners. Participation time is also of the essence for the participants to a challenge, given that it is considered to be leisure-time. In summary, challenges with the quality of participation, time and resources are apparent for web crowdsourcing platforms like OpenIDEO. 

Conclusion

The concepts of open innovation and co-innovation are essential to businesses. The implication of the idea of open innovation is impeccable, both positively and negatively. It is essential for firms to understand the basics of the concepts and the weaknesses that manifest therein; in this case, attention is paid to sites like OpenIDEO. 

List of References

Boudreau, K. and Lakhani, K., 2009. How to manage outside innovation. MIT Sloan management review, 50(4), p.69.

Chen, J.S., Tsou, H.T. and Ching, R.K., 2011. Co-production and its effects on service innovation. Industrial Marketing Management, 40(8), pp.1331-1346.

Chesbrough, H., and Appleyard, M. (2007) Open Innovation and Strategy. California Management Review. Vol. 50, NO. 1 Fall.

Chesbrough, H. (2003) The Era of Open Innovation. MIT Sloan Management Review, vol. 44, pp. 35-42, 2003.

Chesbrough, H. (2011). Bringing open innovation to services. MIT Sloan Management Review, 52(2), 85-90.

Chesbrough, H. and Crowther, A.K. (2006). Beyond high tech: early adopters of open innovation in other industries. R&D Management 36(3): 229-236.

Griffith, T. n.d. Co-Innovation as a Form of Open Innovation. Available at: https://cims.ncsu.edu/co-innovation-as-a-form-of-open-innovation/

Lichtenthaler, U., 2011. Open Innovation: Past research, current debates, and future directions. The Academy of Management Perspectives, 25(1), pp.75-93.

Seltzer, E. and Mahmoudi, D., 2013. Citizen participation, open innovation, and crowdsourcing: Challenges and opportunities for planning. CPL Bibliography, 28(1), pp.3-18.

West, J. and Gallagher, S., 2006. Challenges of open innovation: the paradox of firm investment in open?source software. R&d Management, 36(3), pp.319-331.

West, J., & Lakhani, K. R. (2008). Getting clear about communities in open innovation. Industry and Innovation, 15(2), 223-231. 

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