Open Innovation: The New Imperative For Creating And Profiting From Technology
Henry Chesbrough

Harvard Business School Press
Price: Rs 1880/-

Excerpt: “Today, ‘Not Invented Here’ means that companies need not reinvent the wheel, since they can rely on external sources to do the job effectively.”

‘i.t.’ score: 85%

Once upon a time, IT giants such as IBM, Xerox, AT&T - Bell Labs and GE believed that to retain their industry leadership they had to recruit the best brains, invest heavily in labs to research and develop fascinating new products, promptly market these through existing business models, and protect the intellectual property (IP) created therein like their life-breath. Without a doubt, such a system worked well (at that time), and these companies grew famous for their R&D prowess.

But over time, their stronghold began to erode—after all, you cannot confine knowledge within four walls. People changed jobs and took their knowledge with them. Venture capital became increasingly available, and senior engineers quit their jobs to start their own companies. Intellect began to disperse, and with it crumbled the fortress of ‘innovation’ built by these companies.

Then emerged a new clan of companies including Cisco, Microsoft and Intel, who proved that ‘open innovation’ was mightier than the ‘closed innovation’ practised by the erstwhile giants. These incumbents also rode on innovation, but they did relatively little internal research. They focused on minimalist supportive research within the organisation, and fuelled this with abundant intellectual property from disparate silos across the globe—by sponsoring research in university labs, acquiring or funding start-ups etc. Thus, they matched and often beat—in a quicker, easier, cheaper fashion—what their predecessors achieved through heavy R&D investments. Not surprisingly, the likes of IBM and Xerox also transitioned to open innovation over time.

What’s more, even as these companies sought to buy IP, others were prepared to sell, and, as they say, everything clicked! Notably, this marks another major aspect of open innovation—that of monetising rather than closeting IP. In the course of R&D, a company often generates a lot of knowledge that might not be useful to it. By licensing out such IP, companies can make money out of research that would otherwise expire on their shelves! A lot of such IP was licensed out like this by Xerox’s Palo Alto Research Centre, triggering the formation of successful start-ups like 3Com.

Intellectual property and product-innovation apart, these new-age companies also showed that it was not necessary to be the ‘first’ to market a product; it was more important to be the ‘smartest’ to market a product. Mere product innovation is of no use if not supported by equally innovative and relevant business models. This is another of open innovation’s key logics.

Henry Chesbrough’s ‘Open Innovation: The New Imperative For Creating And Profiting From Technology’ is an excellent starting point for companies desiring to go the open innovation way. The book explains the need for open innovation, and how to achieve it, with detailed and engagingly written case studies of high-tech companies including Xerox, IBM and Intel. There’s even a highly informative Notes section at the end; though these factoids and opinions would have had more impact if woven into the main text, as one often tends to ignore the footnotes. A must-read for tech firm leaders!