Open Vs Closed Innovation

I had participated in a recent K Community Event at TCS , Chennai. There was an interesting change in the event calendar. A debate on “Closed vs.. Open Group Innovation” was included imho for the first in a K Community Meet. I was to defend Closed Innovation. Although I was filling in for another gentleman, my initial thoughts were to surrender to the winning side of the debate and prepare to be hammered on every point I could possible conjure to defend ‘Closed Innovation’.

Research into the topic brought out a lot of interesting points that I wish to share in this post. This post is divided into two parts, a description of my defense and the second a brief light on the innovation model , that I believe makes sense in the Web2.0 world.

Closed vs.. Open

Closed Innovation Model serves as a catalyst for innovation, considering that many of the greatest inventions either in the product or services space had its beginnings in the vertically integrated model of Closed Innovation.

The greatest example of a Closed Innovation Model is the company at 1 Infinite Loop, Cupertino. Working behind veils of secrecy and the occasional ‘strategic leak’ , Apple has delivered some of the greatest products in the the technology industry. The proponents of open innovation model do agree that Apple ‘s success lies in an innovation model that is ‘Closed’ yet conducive for openness. The single maniacal direction enforced by Steve Jobs and the radical internalization of all branches of product development had brought out coherent products.They have managed to avoid ‘featuritis’ plaguing many ‘Open’ products.

The focus of my argument is the problems within open innovation.The very concepts of Open Innovation can in certain situation be its Achilles heel.

Open Innovation is primarily one sided with large corporations feeding of smaller companies. The greatest proponents  of Open Innovation P&G,IBM are some of the examples of this nature of relationship.

Since Open Innovation is open coming in , it can also be open going out. This effect is offset by companies finally acquiring their partner companies. Spate of Googles acquisitions or the recent purchase of Siri by Apple goes to show how the status quo can be affected if the parent companies perceives a possible threat or augmentation.Somehow this actions make it seem Open Innovation primarily works with ‘suppliers’ .

Open Innovation can lead to many conflicts over IP , conflicts of monetization , direction of Innovation and also revenue share unless iron clad agreements are in place.Risk Sharing also become contentious. In a world of increased violations and decreased cost of litigations the very partner relationship can be the ‘reserve salient’ for Open Innovation models. In a partner ecosystem model that depends on increased cost of collaboration between the stakeholders , there is a greater element of management overhead and also perceivable loss of flexibility.

Another key characteristic of open innovation is that for the innovation process to be defined ‘open’, the research/researcher must have the ability to evaluate and integrate knowledge { both tacit and documented}. This leads to significant investment in the R&D stage while performing the integration activities.

In summary, the best possible Innovation Model, that is interestingly being defined as the ‘Hybrid Model’ , is for initial stages of Innovation to follow the Closed Model, wherein a core object can be delivered and before the development reaches a stage of glut, the model to be opened up. Taking a lesson from Eric S Raymonds ‘Cathedral and the Bazaar’ this Hybrid model brings in the best of both models.

As a side note it is interesting to note that the innovation model came to be classified as Open vis a vis Closed only after a seminal book by Henry Chesbrough . Prior to that it was plain ol R&D.

Open Innovation Model

The second part of this post is to bring out a model of Open Innovation which I believe sums up the nature of innovation successful companies in the Web2.0 world are able to leverage to deliver outstanding products/services. In my research on Closed vs.. Open Innovation models I had come across the definition of Open Innovation model summed up in the following diagram.

Image courtesy; http://www.business-strategy-innovation.com

While it sums up the concept of open innovation it does not account for the increasing amounts of Agile Development and Customer feedback that is being incorporated by companies such as Apple, Google. The ‘ Perpetual Beta’ model has not been captured  in the above definition of Open Innovation.

Companies like Apple are famous for not looking at the ‘Hype cycles’ or ‘ Market Analysis’ yet they have their ears on the ground listening to customers. Customer feedback loops are becoming a part of the Innovation Cycle.

OpenInnovation

This new model incorporates the feedback from  users/customers in the beta development mode.The feedback described in this is what is gathered from the customers/users after they experience the  prototype/concept. This feedback loop ensures that the development process is kept in check with relevant controls in place.

Thus hybrid model ensures that companies can be agile in the increasing open globalized world.

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3 Responses to Open Vs Closed Innovation

  1. Mike Hiotis says:

    Thank you for this. made a few things clear and diagrams quite helpful.

  2. Kristina says:

    hey you, i just read your post. quite interesting, because i´m working on the same topic “closed vs. open innovation” for a university project right now. with my study group we need to defend closed innovation. would it be possible that you can give us some more information you gathered in your research? that would help us a lot 🙂
    you can contact me via e-mail. thank you

  3. lameck oyugi says:

    Samsung may be mentioned among companies that apply open innovation model. the currently invented flexible display screen has not bee applied on any device. they are inviting ideas from anybody who may be having the best idea on how to use the technology.

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