Defining (and practicing) ‘open’ innovation

“Okay, we know open innovation works in practice. So now the question is, does it work in theory?!” Henry Chesbrough opened his remarks with this joke at our recent 10th birthday event. He was joking because PARC has been practicing open innovation since being incorporated as an independent subsidiary in 2002, well before Henry published his seminal book coining and outlining ‘open innovation’.

Since then, open innovation has moved from business phrase and concept to business practice and reality. But what does it mean, really??

Simply put: open innovation means drawing on resources and/or working with people outside one’s organization to fill in gaps and accomplish your goals… whatever they are. Because one of the biggest mistakes (as Henry noted) you can make in today’s innovation landscape is assuming that all the best people in the world work for you. They don’t.

Open innovation is a way to leverage others’ expertise, assets, and resources for your needs, whether you’re buying or selling (or both). There are many ways to do this – think of a spectrum, ranging from unfettered to orchestrated, all of them loosely categorized as “open innovation”:

• open source to collaboratively design, develop, and implement products that are freely available to and adaptable by end users
• crowdsourcing and ranking ideas, feedback, or solutions from a distributed group of people using gamification mechanisms and collective intelligence
• contests for “grand challenges”, incentives for “challenge problems”, and other competitive mechanisms or social/professional networks applied to solve problems
• marketplaces for technology and IP that connect innovation “sellers” to “buyers”, or, simply licensing technology
• joint-development agreements where parties bring different but necessary pieces of the technology puzzle to address a specific technology need
• contract research or “research for hire”; etc.

Open innovation: the PARC way

For PARC it’s not as simple as “open” + “innovation”. It’s about more than the sum of these parts.

To PARC, open innovation goes beyond technology a la carte and research for hire: it’s gaining strategic insight into our clients’ roadmaps and visions and then working together (what we often call “co-developing”) to achieve them.

Sometimes this involves shaping those future directions and outcomes together by applying:

• human-centered insight – especially critical when you’re trying to figure out the right problem to solve instead of just solving the problem right
• new models for business – not just new business models, but mindsets and methods for experimentation and for metering investments in uncertainty as you learn more
• specialized technology expertise and know-how – this isn’t academic knowledge, it’s the ability to “reduce to practice” within industry constraints… it’s also an insider perspective on key technology trends and waves, and how to implement them, that only deep and connected experts have

Most companies divide these three circles, functionally and philosophically, which works well to run core operations at scale. And that’s fine, because just one of these is enough to help you with incremental innovation.

But to achieve the type of innovation that has and can transform your business, you need to be at the intersection of all three of these. That’s where the potential for transformation lies – and as we’ve evolved our business model and client engagements over the past 10 years, it’s where we’ve found our “sweet spot” in the evolving innovation landscape.