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Open Innovation

Open innovation systematically opens the innovation process beyond the boundaries of the firm: external knowledge flows into internal development (outside-in), while internal technologies are commercialised through external channels (inside-out). Ideas and technologies thus migrate to where they create the most value — not to where they were invented.

Origin

The term was coined by Henry Chesbrough in Open Innovation (Harvard Business School Press, 2003). Chesbrough describes the transition from the closed model — the central research laboratory that invents and commercialises everything itself — to a model of permeable boundaries. His empirical starting point was Xerox PARC: a laboratory full of groundbreaking inventions whose value was largely realised by spin-offs and other companies, because they did not fit the firm’s own business model.

Typical use

In practice, open innovation covers a bundle of instruments: licensing technologies in and out, development partnerships with startups and research institutions, corporate accelerators and venture units, idea competitions and scouting organisations. The approach is used when relevant knowledge grows faster outside the organisation than inside — the normal case in most technology fields today — or when internal inventions find no route to market within the firm.

Procedure

  1. Define search fields and commercialisation gaps

    First clarify where openness creates value: which competence gaps should external knowledge fill (outside-in), and which internal technologies lie fallow because the core business does not use them (inside-out)? Without this focus, openness becomes an end in itself.

  2. Build the channels

    For each search field, suitable channels are established: licensing agreements, joint development projects, equity stakes, accelerator programmes, or spin-offs. The choice follows the uncertainty — the less clear market and technology are, the more participation rather than acquisition.

  3. Clarify the interfaces to the core business

    External impulses need internal recipients: defined hand-over points into development and business units, budgets for absorbing external technology, and settled rules for intellectual property. This is where contacts either turn into results or do not.

  4. Manage the portfolio and learn

    The activities are run as a portfolio: regular evaluation, consistent termination of ineffective partnerships, and measurement by contribution to products and options — not by the number of events and cooperation agreements.

Limits and typical mistakes

Open innovation rarely fails for lack of access to ideas, and almost always at their absorption. The not-invented-here syndrome makes organisations systematically devalue external solutions; missing absorptive capacity — the internal prior knowledge needed to assess and integrate external technology — renders even good partnerships inconsequential. Also widespread is shop-window openness: accelerators and hackathons as communication instruments, without a hand-over path into the business. Conversely, many companies underestimate the transaction costs — contracts, IP clarification, partner management — and the strategic question of which knowledge must not be shared. Finally, openness is no substitute for competence of one’s own: whoever has nothing to contribute is unattractive as a partner, too.

Relation to the Innovator’s Dilemma

The Innovator’s Dilemma arises because internal resource allocation is tied to the demands of the core business. Open innovation works on both sides of this mechanism: outside-in channels make signals from niches and fringe markets visible that internal market intelligence — calibrated to existing customers — does not capture; startups and spin-offs are often the first carriers of the disruptive patterns that disruption analysis looks for. Inside-out channels, conversely, give internally blocked ideas a route to value outside the firm’s own resource logic: what fails at the gate can still create value as a licence, an equity stake, or a spin-off — and secure the organisation an option on the emerging market. Openness does not resolve the dilemma, but it prevents the internal filter logic from having the last word.