Open Innovation Vs Closed Innovation
Under the concept of innovation that prevailed during most of the 20th century, companies attained competitive advantage by funding
large research laboratories that developed technologies that formed the basis of new products that commanded high profit margins that
then could be plowed back into research.
According to Dr. Henry Chesbrough (Executive Director, Center for Open Innovation, Haas School of Business), the closed innovation
paradigm has eroded due to the following factors:
- Increased mobility of skilled workers
- Expansion of venture capital
- External options for unused technologies
- Increased availability of highly-capable outsourcing partners
The table below further illustrates the differences between closed and Open Innovation principles:
| Closed Innovation Principles |
Open Innovation Principles |
| Most of the smart people in our field work for us |
Not all the smart people work for us, so owe must find and tap into the knowledge and expertise of bright individuals outside our company |
| To profit from R&D, we must discover, develop and ship ourselves |
External R&D can create significant value; internal R&D is needed to claim some portion of that value |
| If we discover it, we will get it to market first |
We don't have to originate the research in order to profit from it |
| If we are the 1st to commercialize we will win |
Building a better business model is better than getting to market first |
| If we create the most and the best ideas in the industry, we will win |
If we make the best use of internal and external ideas, we will win |
| We should control our intellectual property (IP) so that our competitors don't profit from our ideas |
We should profit from others' use of our IP, and we should buy others' IP whenever it advances our own business model |
