2008 international conference on industrial technology innovation taipei – august 21-22, 2008 open...
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2008 International Conference on Industrial Technology InnovationTaipei – August 21-22, 2008
Open Innovation and Types of Innovation: A Policy Perspective
Shin-Horng CHENAlice LIN, Pei-Ju YU & Pam WEN
Chung-Hua Institution for Economic Research
Outline
Introduction A Closer Look at Open Innovation Open Innovation and Types of Innovation:
Case Elaboration Examples of Policy Programs Based on Open
Innovation Policy Implications, Especially for the DoIT
2
1. Introduction
Open Innovation (OI) first coined by Henry Chesbrough, as an antithesis of closed innovation Traditional innovation paradigm: One company, the
owner of the innovation, in charge of the innovation process
The basic questions: What can the government do, except making the framework condition right and compatible to the OI model?
Key issue: How to interpret OI from a strategic perspective, drawing further policy implications? Is OI just a better practice for the routine innovation
process? Are there some innovation activities than the other
more prone to entail OI? OI may involve both costs and benefits
3
5
Back to the Basics (1/3)
Definition The use of purposive inflows and outflows of knowledge to accelerate
internal innovation, and expand the markets for external use of innovation, respectively (Chesbrough et al., 2003)
Concept Spanning firm boundary Collaboration inside & outside the organization Managing the external process of innovation
Inside•Employees across divisions, locations, functions
Outside•Suppliers•Customers•Consumers•Partners•Universities & research institutes•Retirees•Anybody
Source: Henry Chesbrough ( 2003)
Back to the Basics (2/3)
From Innovation 1.0 to Innovation 2.0: Leveraging the value of peer to peer innovation from those you don’t control
6Source: Robson & Smith (2008)
Back to the Basics (3/3)
Antecedents to OI, to name just a few Spillover effect (neo-classical) Absorptive capacity aspect of R&D (Cohen & Levinthal) Complementary assets for innovation (Teece) Democratizing & user-driven innovation (von Hippel) Outsourcing
In one way or another, internal innovation can benefit from external knowledge. OI: in a systematic way
What else is new about OI? Fredberg et al. (2008): OI increases both potential creativity
and complexity of the innovation process. A tradeoff between costs and benefits; more than just
cognitive barriers (Robson & Smith, 2008) How to identify: focusing on a few key words or statements
as food for additional thoughts7
Why - Open innovation
The forces for moving to open innovation model
8
1. 1. GlobalizationGlobalization
• higher mobility of capital, labor and knowledge• lowered entry barriers and increased opportunities for firms that can innovate fast
• higher mobility of capital, labor and knowledge• lowered entry barriers and increased opportunities for firms that can innovate fast
2. 2. Technology Technology intensity & fusion intensity & fusion
• The shorter product life cycle coupled with increasing complexity of the R&D process.• Technologies are increasing morphing into new fusion fields, more interdisciplinary cross-border required, no one firm can innovate fast enough by themselves
• The shorter product life cycle coupled with increasing complexity of the R&D process.• Technologies are increasing morphing into new fusion fields, more interdisciplinary cross-border required, no one firm can innovate fast enough by themselves
3. New business 3. New business modelsmodels
• With the rapid shift of many industry and technology borders, new business opportunities arise.• New alliances have been formed for sharing of risks, the pooling of complementary competencies, and the realization of synergies.
• With the rapid shift of many industry and technology borders, new business opportunities arise.• New alliances have been formed for sharing of risks, the pooling of complementary competencies, and the realization of synergies.
Open innovation models require systematic innovation processes that engage third parties for both idea generation and commercialization.
4. Knowledge 4. Knowledge leveragingleveraging
•Open source software development encourages many specialized knowledge workers to offer their service to different organizations at the same time. • Instead of hiring the best engineers internally, companies are forced to act as knowledge brokers.
•Open source software development encourages many specialized knowledge workers to offer their service to different organizations at the same time. • Instead of hiring the best engineers internally, companies are forced to act as knowledge brokers.
9
Open Innovation & R&D Globalization (1/2)
New Patterns R&D offshoring, technology sourcing, offshore
collaboration (esp. global innovation networks; GINs) Particularly regarding developing host countries Beyond technology transfer and adaptive R&D
R&D offshoring, technology sourcing Software, basic research, new market insights Possibility of “enclave”; absence of local linkages
offshore collaboration Inter-organizational, cross-border collaboration for
innovation, facilitated by modularization of product Capitalizing on the local countries “external economies”, in
terms of industrial networking
10
Open Innovation & R&D Globalization (2/2)
Rules changed? (in relative terms) Disassociation of R&D and manufacturing in terms
of location Unlike the case of technology transfer & adaptive
R&D Some of developing countries as a source of R&D
and innovation Not just a technology recipient and late-adopter
Players in the developing world as a partner of collective innovation Involvement at the early stage of the product life
cycle Richard Florida: “Spiky” global landscape of
knowledge and technology
Key Words/Statements for Further thoughts
Chesbrough (2008) OI processes combine internal and external ideas into
architectures and systems. OI processes utilize business models to define the requirements for these architectures and systems.
OI explicitly incorporates the business model as the source of both value creation and value capture. This latter role of the business model enables the organization to sustain its position in the industry value chain over time.
OI treats spillovers as a consequence of the company’s business model. These spillovers need not be a cost of doing business, they are an opportunity to expand a company’s business model, or to spin off a technology outside the firm to locate a different business model.
11
Implications of the Key Words/Statements
Those innovations with a stronger flavor of architecture and system integration may be more prone to entail OI. Types of innovation
With an appropriate business model, OI can facilitate a firm to sustain its position in the industry value chain over time, the unit of analysis is not necessarily limited to the firm, and may involve the industry and the value chain for a specific innovation, and even cross sectors. Chesbrough, Vanhavebeke & West (2006); Herstand
(2008): OI at different levels How may OI facilitate the formation of the
architectures and systems needed? Policy design
12
A Definition of Systems and Architectures
Technical systems defined by Windrum (1999) Inherently large, comprising a set of jointly consumed
interdependent products Innovation networks: Intensive interfaces between multiple
actors with different knowledge & skills bases Because of network effects and product compatibility
Product architecture The scheme by which a product’s arrangement of
functional elements, the mapping from functional elements to physical components, and the specification of the interfaces among interacting physical components is defined Also applicable to service innovation
Not only does such innovation often result from the collective efforts of interrelated firms, but the value chain does not need to be completely internalized within individual firms. 14
15
Systemic Service Innovation Defined by the EU KISA
Source : Kivisaari & Väyrynen (2004).
•Co-creation can be the norm.
16
A Four dimensional Model of Service Innovation by den Hertog
Source: den Hertog (2001).
NewInsights
Business
TechnologySocial Development
【 SSME 】Outside-in
NEW SERVICECONCEPT
(DIMENSION 1)
NEW CLIENTINTERFACE
(DIMENSION 2)
NEW SERVICEDELIVERY SYSTEM
(DIMENSION 3)
TECH-NOLOGICAL
OPTIONS(DIMENSION 4)
organisational
capabilities
HR
Mca
pabi
litie
s
marketing & distributioncapabilities
capabilities, skills & attitude of existingand competing service workers
char
acte
rist
ics
of e
xist
ing
and
com
peti
ng s
ervi
ces
char
acte
rist
ics
of a
ctua
l a
nd p
oten
tial
cli
ents
© Dialogic
17
Elements Needed for Systemic Service Innovation
Systematic innovation of services, entailing large-scale transformation of the services as well as goods involved Four dimensions proposed by den Hertog
A platform upon which new services can proliferate, domestic services can be exported, the existing services can be improved IT network: India’s surge in service exports; DoCoMo: imode
Reconfiguration of the process and interface New technology, organization & way of interaction needed
For 3G operators, customized handsets needed
Redefinition of the role of the key actors involved and new value proposition 7-11: From corner shop to convenience chain store with multiple
services via co-creation
The Rationale of Industrial Services (Service Strategy in Manufacturing)
18
TransactionalEconomy
Functional orService
Economy
Servicizing
Material ServicesMaterial Services(Product- based)(Product- based)
Non-material ServiceNon-material Service
Product FunctionProduct FunctionServicesServicesex. leasing
Product ExtensionProduct ExtensionServicesServices
ex. warranties,
maintenance agreement
Dematerialized Services
Dematerialized Services
Source: Adapted from White (1999).
Main Thrusts of Industrial Services
19
Baines et al.
(2007)
V & R(1988)
Baines et al.
(2007)
Davies(2003)
Go Downstream
Functionality/Use Provided
From Product-focused to Service-focused
ManufactureCustomerIntimacy
Kolter(2003)
TotalOffering
H &G(1999)
Mathieu(2001)
W & B (1999)
C & G(1989) Q, D & P
(1990)O & K(2003)
Cohen et al.
(2000)
Reiskin et al.
(2000)
Toffel(2008)
White et al.
(1999)•GE: Power by the Hour
•DuPont: Chemical Management Services
•Utilities: Demand Side Management
•Xerox: Document Services
Key Issues for Industrial Services
New value proposition Inter-entity co-creation to enhance customer intimacy, often
involving lead customers New capabilities or platform technology
Based on which to redefine client interface and provide product extension services or total offering, with customization
New internal and external processes In line with the new value proposition
New pricing and revenue model Some involving revenue sharing with customers
New ownership of the goods in transaction “Sale of use or function”, not “sale of product”
20
Features of EU Living Labs Network
21
User-centric & involvement
Open innovation
Systemic innovation
Local & int’lnetworking
•Mainly at the city scale, to form critical mass and promote innovation in the real world
•An OI community, involving a variety of stakeholders
•Involving users, application environment, infrastructure, experts to form innovation ecosystem
• Thematic inter-lab collaboration; a local hub to be engaged with the global network
22
Typical Living Lab Project in EU
Who : stakeholders [enterprises, academia, public and civic bodies, customers]What : co-create [collaborative product development from ideation to market deployment]What : new products, services, businesses and technology [enterprises, academia, public and civic bodies, customers]Where : in real life environments [regions of with specific attributes – urban, suburban, rural, remote, …] and virtual networks [networks as regions in a virtual geography]When : in multi-contextual spheres [in all roles and phases of the customers’ use]
Who : stakeholders [enterprises, academia, public and civic bodies, customers]What : co-create [collaborative product development from ideation to market deployment]What : new products, services, businesses and technology [enterprises, academia, public and civic bodies, customers]Where : in real life environments [regions of with specific attributes – urban, suburban, rural, remote, …] and virtual networks [networks as regions in a virtual geography]When : in multi-contextual spheres [in all roles and phases of the customers’ use]
Common Grounds of the Three Types of Innovation
Not just technology needed Outside-in + inside-out
System integration + new business model + industrial reconfiguration Much more than the adoption of new technology and
reverse product life cycle Multidisciplinary collaboration + co-creation
Cross-fertilization, involving service science Business model developed in an inter-entity context,
calling for collaboration and early involvement of multi-stakeholders
23
Objectives of BestServ Programme (Finland)
Business Objectives Promote knowledge and case study sharing between forum
members and others Create mental mindset towards industrial service business Define generic frameworks to help business transformation Solution and life cycle business models Business transformation process Organizational change models (for service related mindset)
R&D Objectives Establish research area for industrial service business Activate and evaluate research and development activities Assist to define industrial service oriented education and training
activities to different levels Define generic terminology for industrial services business
25
The BestServ Forum (Finland)
26 Source: Tekes (2005).
•A network for knowledge sharing and learning between companies, researchers & consultants that are interested in industrial service business
• The Forum aims to: •Support profitable service business with its activities
•Support service business research
Finnish Strategic Centres for Science, Technology and Innovation (SHOK)
Internationalpartner
Cluster Ltd.
CompaniesUniversities
Researchinstitutes
Cluster Ltd.
CompaniesUniversities
Researchinstitutes
Virtualresearch organisation
Virtualresearch organisation
Technologytransfer
Technologytransfer
R&D andinnovation
program 1, 2of centre
Centre A, B
Cooperatingcompanies
UniversitiesResearch
organisations
Cooperatingcompanies
UniversitiesResearch
organisations
StrategicpartnersStrategicpartners
CompanyCompany CompanyCompany
Researchinstitute
Researchinstitute
Five SHOKS:•Energy and environment•Metal products and mechanical engineering•Forest cluster•Health and well-being•Information and communication industry and services
SHOKs provide a new way of coordinating dispersed research resources to meet targets that are important for Finnish business and society.
In the strategic centres Companies, universities and research institutes will
agree on a joint research plan. The plan will aim tomeet the application needs for practical applicationby companies within a 5-10-year period.
In addition to shareholders, public fundingorganisations will commit themselves to providingfunding for the centres in the long term. 27
Finnish Metal Products and Mechanical Engineering SHOK
Research leads to innovations
FIMECC Vision To create new international research networks, new top science, and new application
driven research contents. The competence and knowledge in selected focus areas will be raised to globally
leading position. R&D with an ambitious target-orientation, openness, dynamics, and true
internationality.
FIMECC Vision To create new international research networks, new top science, and new application
driven research contents. The competence and knowledge in selected focus areas will be raised to globally
leading position. R&D with an ambitious target-orientation, openness, dynamics, and true
internationality.
28
NESTA –Interdisciplinary Collaboration Programme
Universities United
Science
Technology Art & Design
•An interdisciplinary approach to innovation in the universities sector. •Six facilitated collaborative workshops. •The ideas will be generated and fine- tuned into commercial concepts.
Ideas
Crucible
Crucible 2008
•An interdisciplinary collaborations between early- to mid-career researchers working in diverse fields within science, technology, and the social sciences.•Three collaborative workshops. - e.g. Carbon Crucible
Ideas
29
Evolution of the R&D Programs by DoIT
32
R & D Programs
2015 Vision
NIS Integration
Multi-Stakeholders
& Tracks
Exploratory Research
Mfg & Service Innovation
Int’l Networking
Research Institute-centricLocal Industry-centric
Catch-Up-Oriented Manufacturing-centric
DoIT’s Multi-Stakeholder & Track Approach
33
Research Institutes
Exploratory Research
DoIT’s R&D Programs
Service Innovation & Tech–based Biz Model
Academia
Industrial Players &
SMEs•Strategic Planning•Cultivation of Human Capital•Int’l Cooperation
•Tended to be single actor-centric, technology-driven, and linear model.
Directions of Policy Reform (1/2)
Chesbrough et al., (2006): Policy issues for sectoral modes of OI Designing specific policy measures for different types
of industries Horizontal policy coordination Promotion cross-sector interaction & collaboration Building up and using of external knowledge Interdisciplinary collaboration
New Initiatives to be launched by the DoIT tend to be more OI-oriented Industrial services, service innovation, living lab Not possible to have business of policy design as usual
34
Directions of Policy Reform (2/2)
What’s needed A framework for systematic and interdisciplinary
collaboration Not just collaboration per se Guided by a well-articulated and –agreed roadmap Dedicated forum to form a network for knowledge
sharing and learning POs to be equipped with such functions as strategic
planning and horizontal policy coordination Via both internal capacity and external networking
Studies of SSME not a stand-alone initiative Addressing the issue in a specific context, in
collaboration with the new initiatives
35
38
Main Generic Policy Implications of OI Government support to R&D and Innovation – Issues for Discussion Should governments open up their national or regional R&D and innovation schemes more widely? How can they ensure benefits flow back to the country? Given the important role large firms play in national and global innovation networks, is the distinction in policy between support for SME’s on the one hand and large firms on the other still relevant?
Government support to R&D and Innovation – Issues for Discussion Should governments open up their national or regional R&D and innovation schemes more widely? How can they ensure benefits flow back to the country? Given the important role large firms play in national and global innovation networks, is the distinction in policy between support for SME’s on the one hand and large firms on the other still relevant?
Integrating the global dimension in innovation support schemes. - foster greater participation from abroad firms Streamlining and simplifying access to government R&D and innovation schemes. Promoting open source and open innovation practices in the public sector. - promoting open source platforms - government procurement strategies Fostering technology foresight and road-mapping. - Working together with firms to set priorities for research (e.g. European Technology Platform, SHOK of Finland ) Regional or local initiatives may play a greater role .
Integrating the global dimension in innovation support schemes. - foster greater participation from abroad firms Streamlining and simplifying access to government R&D and innovation schemes. Promoting open source and open innovation practices in the public sector. - promoting open source platforms - government procurement strategies Fostering technology foresight and road-mapping. - Working together with firms to set priorities for research (e.g. European Technology Platform, SHOK of Finland ) Regional or local initiatives may play a greater role .
policy implications
39
Main Generic Policy Implications of OI
Public Research Organisations – Issues for Discussion How can policy makers encourage universities and public research organizations to play a more pro-active role in global innovation networks? Are universities going too far in their approach towards commercialisation of research (via IPRs) and is this hindering open innovation?
Public Research Organisations – Issues for Discussion How can policy makers encourage universities and public research organizations to play a more pro-active role in global innovation networks? Are universities going too far in their approach towards commercialisation of research (via IPRs) and is this hindering open innovation?
Growing and opening up access to public research. - Open science initiatives ( e.g. the development of competence centres ) and build the ICT-enabled platforms Networking and network integration. - Networking with public research allows firms to internalise knowledge spill-overs. - Integrating different networks across fields, sectors and technologies.
Joint knowledge development. - The public research sector must be better equipped and open to jointly develop knowledge with firms.
Knowledge exploitation. (IPR) Mobility.
Growing and opening up access to public research. - Open science initiatives ( e.g. the development of competence centres ) and build the ICT-enabled platforms Networking and network integration. - Networking with public research allows firms to internalise knowledge spill-overs. - Integrating different networks across fields, sectors and technologies.
Joint knowledge development. - The public research sector must be better equipped and open to jointly develop knowledge with firms.
Knowledge exploitation. (IPR) Mobility.
policy implications
40
Main Generic Policy Implications of OI
Implications for the broader environment for innovation: Getting the Framework conditions right To what extent are globalization and open innovation making some framework conditions more important than others and which ones? How can governments facilitate open innovation practices: by direct support measures?
Implications for the broader environment for innovation: Getting the Framework conditions right To what extent are globalization and open innovation making some framework conditions more important than others and which ones? How can governments facilitate open innovation practices: by direct support measures?
Fostering Competition and Co-operation Corporate Venturing. Entrepreneurship for innovation. - reducing barriers to firm entry and regulations on business start-ups. - academic entrepreneurship Consumer policy - providing a framework through which consumers/users/suppliers can participate in the innovation process IPR to support open innovation - to ease the use of IPR in open innovation through the simplification of procedures and helping SMEs and universities better manage IP
Fostering Competition and Co-operation Corporate Venturing. Entrepreneurship for innovation. - reducing barriers to firm entry and regulations on business start-ups. - academic entrepreneurship Consumer policy - providing a framework through which consumers/users/suppliers can participate in the innovation process IPR to support open innovation - to ease the use of IPR in open innovation through the simplification of procedures and helping SMEs and universities better manage IP
policy implications
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