Open Innovation

OPEN INNOVATION AND DYNAMIC CAPABILITIES FOR

INDUSTRY & GROWTH

Alar Kolk

kolk@cc.hut.fi

alar.kolk@yahoo.com

www.alarkolk.com

Building New Innovation Capability to Identify Future Opportunities

- Identify New Growth Opportunities

- Define & Implement New Innovation Strategies

- Generate & Deliver Better Ideas

- Renew Organizatonal Capabilities

four levels of innovation

business model innovation

product & service innovation

process innovation

technology innovation

Revenue Growth, Life Cycle & Innovation Dynamics

Business model innovation has captured the attention of executives tasked with achieving growth in the face of increasing competitive pressure. Business model innovation suggests

that if you took an existing product and repackaged how you sold it, you can hold off competitive pressures and even capture entirely new market segments.

idea!

but there is no common language

Our current market

Our new market

Other firm´s market

Open innovation

External technology insourcing

Internal technology base

External technology base Henry Chesbrough, 2004

Internal/external venture handling

Licence, spin out, divest

interdisciplinary approach

Open Innovation means that valuable ideas can come from inside or outside the company (industry) and can go to market from inside or outside the company (industry) as well1.

This approach places external ideas and external path to market on the same level of importance as that reserved for internal ideas and paths to market during the Closed Innovation era2.

CLOSED & OPEN BUSINESS MODEL

OPEN INNOVATION!

1,2 H.Chesbrough, 2003

Dynamic capabilities as the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments1.

Some dynamic capabilities integrate resources (product development; strategic decision making), others focus on reconfiguration of recourses (knowledge brokering) within firm and other dynamic capabilities are related to the gain and release of recourses (knowledge creation routines; alliance, acquisition and exit routines)2.

EXPLORATION & TRANSFORMATION

DYNAMIC CAPABILITIES

Roald Amundsen, Robert Scott, Umberto Nobile

1Teece et al 1997 2Eisenhardt and Martin 2000

Developing Portfolio of Capabilities

Operational Capabilities

Technological Capabilities

TransformingSeizingSensing

Open Capabilities

Dynamic Capabilities

Learning

Innovation

think outside-of-the box

At any given point in time, firms must follow a certain trajectory or path of competence development. This path

not only defines what choices are open to the firm today, but it also puts bounds around what its internal

repertoire is likely to be in the future1.

Collaborative know-how is a particular type of knowledge that determines

whether companies can develop specialized knowledge via expertise

and then use it to obtain further benefits2.

STEP OUT OF THE BOX!!!

PATH DEPENDENCY

We had become stuck in our past and weren’t stretching far enough to innovate new ideas, to “step out of the box.”

David O. Swain, ex. CTO, Boeing

1Teece et al, 1997 2Simonin 1997

we re-invent the wheel

... improve it

Learning & Diversity

Boeing VP Dick Paul & CTO David O. Swain went to P&G and asked how they were getting ideas and how they were thinking about R&D. After the visit they remarked, “P&G

had some great thoughts, which affected what we did; we went home and did a couple of things differently and that was an example of us beginning to open our eyes to the world

and trying to integrate that into our planning process

user-centered

Platform leaders (companies that drive industry wide innovation for an evolving system of separately developed pieces of technology) are

navigating challenges from wannabes (companies that want to be platform leaders) and complementors (companies that make ancillary

products that expand the platform’s market. Platform leadership is the ability of a company to drive innovation around a particular platform

technology at the broad industry level.

Cusumano and Gawer (2002)

GROWTH & OPEN

BUSINESS MODELThe business model provides a coherent framework that takes

technological characteristics and potentials as inputs, and

converts them through customers and markets into

economic outputs1.

A business model has two functions: 1.Value creation

2.Value capture

1Chesbrough, Roosenbloom 2002

20 senti

2 krooni

20 krooni

30 – 70 krooni

... execute-> project portfolio

the big picture (business model)

how do you earn your money with this business model?

Traditional (product) value chain versus

Modern (business model) value chain

The business model mediates between technical and economic domains

Over the years, entrepreneurs have been mostly known for technical innovations. And there are many great companies that have been built on top of technical innovations like

Intel, Cisco, Oracle, Apple, and arguably Microsoft. If you think of Federal Express, Google, Netflix, these companies were built on business model innovations.

Business Model:

• market segment

• value proposition

• value chain

• c/profit mechanism

• value network

• competitive strategy

Business Model:

• market segment

• value proposition

• value chain

• c/profit mechanism

• value network

• competitive strategy

Economic Outputs:

e.g., value, price, profit

Technical Inputs:

e.g., feasibility,

performance

Measured in technical domain Measured in economic domain

Portfolio of Capabilities & Business Model

Open Capabilities

Dynamic Capabilities

Operational Capabilities

Technology Capabilities

Portfolio

how do you change a business model and innovate?

how do you measure the success of a business model?

strategic fit

… evaluate, learn and redesign-> manage improvement

... select the right teams and people-> make responsible

... outline key indicators to follow-> choose measures

OPEN INNOVATION AND DYNAMIC CAPABILITIES FOR

INDUSTRY & GROWTH

Alar Kolk

www.alarkolk.com

kolk@cc.hut.fialar.kolk@yahoo.com