Do you know what open innovation means?

The following image says a lot about ho the open innovation works.

More than 15 years have passed since Henry W. Chesbrough (2003) noticed a new trend within the innovation ecosystem. The author realized a change in how companies structured their research and development (R&D) strategies for new products and services. In his analysis, the author noted that some companies were transitioning from considerable investments in internal R&D resources to the research for technologies beyond the firm's boundaries. He called this new strategy, Open Innovation. According to the author, it is a new imperative for creating value from technology (Henry William Chesbrough, 2003)

The underlying conditions that culminated in the erosion of closed innovation fundamentals happened mainly in developed countries, like the United States, at the end of the 20th century. Several factors explain the detrition

Chesbrough (2003) highlights the leading causes; first, the growth and the high mobility of knowledge workers, and companies cannot control or manage where new technology would happen. Additionally, countries started to have a tremendous investment in venture capital firms (VC), angel investors, and other innovators investors. The latter caused the emergence of newcomers, culminating in remarkably intense competition for already established enterprises.

Given the scenario designed and studying the markets of these new entrants, Chesbrough (2003) established some basic principles that would guide open innovation and would be the basis of the strategic management of some companies' innovative technology. For the author, in an era based on an intense exchange of knowledge and an explosion in the number of information sources, firms should understand that not all smart people worked for them. Indeed, workers were scattered and could even be potential competitors. Moreover, not only internal R&D but, in most cases, the joint effort of internal and external R&D could be a potential source of value creation. Besides, basic research or research origin did not need to occur within the company to make a profit.

What is the difference between closed and open innovation?

Chesbrough (2003) argues that the significant difference between closed and open innovation is how companies screen and lead their ideas until they reach the market. The author says that in a standard R&D process, companies tend to rely on analyzing and evaluating ideas within their boundaries, which results in the loss of many opportunities. Naturally, firms tend to consider many ideas not related to their business. Another problem is the need for complements from external technologies to leverage a given idea's full potential.

In that case, what should companies do?

Given that, companies should continue working with their internal R&D but enhance it with external ideas. Chesbrough talks about ensuring that the boundaries that separate the company and the surrounding environment are porous, through which projects can flow without a right and clear direction.

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