Book Club: Open Innovation

Henry Chesbrough

The first pick for the new Innovation Book Club is Henry Chesbrough's book which is part of the movement of "innovating innovation." It's also the source of one of my favorite quotes. John Seely Brown's lead sentence in the Foreward to this book, states: As a student of innovation for more than twenty years, I still find it amazing just how difficult innovation continues to be. My whole body relaxed when I read that ... If John Seely Brown still finds this difficult, it makes sense that the rest of us keep wrestling with the complexities of innovation.

Henry starts us off with an equally jolting comment: "Most innovations fail." Following that, the equally dire: "And companies that don't innovate die." But he doesn't leave us in this hopeless state for long. Using some excellent case studies, he spells out the new world of innovation, a world that rewards some of the same practices that were strictly forbidden not too many years ago.

For instance, IBM's old concern about IP was to preserve design freedom for its developers so that it would not be a target of an infringement suit. Today, the company focuses on strategic licensing of its IP and received $1.9 billion in royalty payments in 2001.

It may be this very shifting of the fundamentals of innovation that makes this field so very frustrating to many people. In very clear terms, Henry spells out the differences between the principles of Closed Innovation (old) and Open Innovation (new), as follows:

Closed: The smart people in our field work for us.
Open: Not all the smart people work for us. We need to work with smart people inside and outside our company.

Closed: To profit from R&D, we must discover it, develop it, and ship it ourselves.
Open: External $&D can create significant value; internal R&D is needed to claim some portion of that value.

Closed: If we discover it ourselves, we will get it to market first.
Open We don't have to originate the research to profit from it.

Closed: The company that gets an innovation to market first will win.
Open: Building a better business model is better than getting to market first.

Closed: If we create the most and the best ideas in the industry, we will win.
Open: If we make the best use of internal and external ideas, we will win.

Closed: We should control our IP, so that our competitors don't profit from our ideas.
Open: We should profit from others' use of our IP, and we should buy others' IP whenever it advances our own business model.

We encourage you to read this book and share your thoughts in the comments section below.