Adapting Open Innovation In ICT Ecosystem Dynamics
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By: Mohamed EldishnawySupervisor: Docent Kalevi KilkkiComnet Research Team – Prof. Heikki Hämmäinen
Adapting Open Innovation In ICT Ecosystem Dynamics
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Outline
• Background: What is Open Innovation?
• Research Focus: What exists Vs. What is missing
• Methods: From the dynamic and static point of view
• Results
• Interviews outcome – perception of open innovation
• System Dynamics model
• Business aspect of open innovation
• Conclusion
• Possible future work
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What is Open Innovation?
Background
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Innovation” An innovation is something original, new, and important - in whatever field - that breaks into (or obtains a foothold in) a market or society”*
*Based on Frankelius, P. (2009), Questioning two myths in innovation literature, Journal of High Technology Management Research, Vol. 20, No. 1, pp. 40–51.
Innovation Vs. Invention
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Innovation Process - Innovation Funnel
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G A Stevens, "3,000 raw ideas= 1 commercial success," vol. 40, no. 3, 1997.
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Innovations acts as a competitive advantage
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Closed Vs. Open Innovation
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Adapted from Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology (HBS Press, 2003)
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Closed Vs. Open Innovation
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Closed Vs. Open Innovation
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Adapted from Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology (HBS Press, 2003)
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What exists Vs. What is missing
Research Focus
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Current Research Focused only over
behavioral, managerial and legal aspects of open innovation
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• Revealing internal resources to external environment.
• Out-licensing or selling products acquire inventions.
• Input inventions to the innovation process.
• Firms informal and formal.
Studying static aspects of open innovation
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ResearchQuestions Static and dynamic view
of open innovation.
• Modeling open innovation constitutional functions and variables
• Explore Open innovation Business Phenomena
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From the dynamic and static point of view
Methods
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Interviews
• Review of scientific bibliography to analyze the main dimensions of open innovation.
• Build semi-structured interviews questions.
• Adapting multi-case nested experimental design.
“An empirical inquiry that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used”*
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*R. K. Yin, "Case Study Research: Design and Methods," Sage, Newbury Park, CA., 1989.
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System Dynamics“Understanding the behavior of complex systems over time”*
How open innovation starts and diffuses in innovative environments?
• Ideas and successful products as stocks and flows• Analyzing Feedback and Causal loops
Stocks Term for any entity that accumulates or depletes over time.
Flows Rate of change in a stock
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MIT System Dynamics in Education Project (SDEP)
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Open innovation business aspectsAreas of interest of open innovation
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M., Fredberg,T. and Ollila,S. Elmquist, "Exploring the field of open innovation," European Journal of Innovation Management, vol. 12, no. 3, 2009.
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Open innovation business aspectsThe long-tail business model
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C Anderson, Long tail, the, revised and updated edition: Why the future of business is selling less of more.: Hyperion Books, 2008.
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Interviews outcome – perception of open innovationSystem Dynamics modelBusiness aspect of open innovation
Results
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Interview Outcomes
Perception of Open Innovation
Open innovation is an ecosystem that includes multiple structures connected to each other in an evolutionary development.
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Interview Outcomes
What delays innovation?•Absence of leadership•Lack of interest•Extreme Inbound open innovation•Mistrust
What foster innovation?•Entrepreneurship spirit•Mixing the clusters•Monitoring the dwarfs•Active government and universities activities
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Open Innovation System Dynamics
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ResearchedIdeas
Developedideas
Commercializedideas
SuccessfulproductR1 R2 R4R3
R1: Rate of introducing new ideas into the firm
R2: Rate of developing ideas
R3: Rate of commercializing and marketing the idea
R4: Adoption rate
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Introducing new ideas into the firm
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ResearchedIdeas
R1
KnowledgeAbsorption
Learningwillingness
Learning capacity
Companyabsorption
capacity
Resources
New internalknowledge creation
OrganizationaldifferenceKnowledge
compatibility factor
Level of trust
Establish externalknowledge network
External Knowledgenetwork partners
Openess
Knowledgeoutdate rate
Investments
Knowledge Assets
- +
+
+-
+
+ +
+
+
+ +
+
+
+
+
Successfulproduct
+
+
+
R1: Rate of introducing new ideas
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Adoption Rate & Discard Rate
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Commercializedideas
Successfulproduct
R4
Adoption fraction
Contact Rate
Adoption fromadvertising
Adoption fromWord of Mouth
+
Advertisingeffectiveness
+
++
+
+
+
Total population-
+
B Marketsaturation
R Wordof mouth
B Marketsaturation
R5
RepeatedPurchase rate
++
Purchase rate
+
Productoutdate rate
Adopter AverageConsumption
+
R4: Adoption RateR5: Discard Rate
Bass Diffusion Model Revisited
•Discard rate to resemble the outdate of product.
•Repeated Purchases.
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The Causal Loops
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KnowledgeAbsorption
Knowledge Assets
+
+
+
Importance of absorption capacity to firms
Wesley M. Cohen and Daniel A. Levinthal, "Absorptive Capacity: A New Perspective on Learning and Innovation,"
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The Causal Loops
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The need of heavy investment in innovation process at the beginning to improve the internal knowledge creation
ResearchedIdeas
R1
Level of trust
Establish externalknowledge network
External Knowledgenetwork partners
+
++
Successfulproduct
+
+Knowledge
Network
Developedideas
R2
Externaldevelopment
network
Established externaltechnology
development network
Level of trust
Successfulproduct
+
++Development
Network
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The Causal Loops
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Commercializedideas
Successfulproduct
R4
R5
Productoutdate rate
Initializationloop
Successfulproduct
R4
RepeatedPurchase rate
+
+
+Loyalty
loop
The strength of the relationship between an individual's relative attitude and repeat patronage*
*Alan S. Dick and Kunal Basu, "Customer Loyalty: Toward an Integrated Conceptual Framework,"
The return of adopting customers to potential customers stock
• An indirect effect on the market saturation
• A threat that can be an opportunity
• Firms need to focus on building the loyalty of customers
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The long-tail Phenomenon of innovation
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Breakthrough innovations are found in the “long-tail”*
*Lee Fleming, "Breakthroughs and the "Long Tail" of Innovation," MITSloan Management Review, vol. 49, no. 1, pp. 69-74, Fall 2007Novozymes. [Online]. http://www.novozymes.com/en/about-us/Pages/default.aspx.
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The Android Case – Open Source
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Source: Gartner and IDC
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The Mobile Application Store
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Source: Flurry analytics
Top 25% App account 28% of total revenue of ~7€ Billion
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Where Current Players Exists?
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Internal cross-functional collaboration
Mass collaboration
R&D AllianceInternal R&D
Outside
Nu
mb
er
of
colla
bo
ratin
g a
cto
rs
Inside
Locus of innovation process
2
N
M., Fredberg,T. and Ollila,S. Elmquist, "Exploring the field of open innovation," European Journal of Innovation Management, vol. 12, no. 3, 2009.
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Conclusion
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General Findings
• Open Innovation is a must for firms to survive in existing ICT ecosystem.
• Trust and behavioral aspects are important in collaborative environment.
• There is an intersection between the different factors affecting the innovation process.
• The strategy of a firm needs to change rapidly with open innovation.
• Mass Collaboration is challenging and differentiating.
• The value results from open innovations usually lies in the “long-tail”.
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Possible Future Work
• Developing the System Dynamics model further.
• Data mining.
• Stochastic simulation of the model.
• Studying firms in a micro-level (Human Centric Approach).
• More investigation in the long-tail phenomenon.
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Supporting Slides
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Interviews
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Interviewee About Short Description
Annakaisa Häyrynen (AH)Mobile Operator/ ICT
AK is head of discovery project at Elisa Oyj. She has more than 15 years of experience in innovation. She studied open innovation from the master Henry Chesbrough himself in Berkeley.
Elisa Oyj is the leading ICT company in Finland. As head of discovery project AK responsibility is to find new business opportunities, analyze them, validate them and foster them in the organization.
Kalevi Ekman (KE)University/Research
KE is professor at Aalto university. He is managing Aalto design factory. His research focus is in Integrated product development.
As manager of Aalto design factory, KE have long relation in collaboration between universities, research centers and companies. As described by KE “Design Factory is the symbiosis of the state-of-the-art conceptual thinking and cross-disciplinary hands-on doing. It leads a way towards a paradigm shift in education and business by providing a constantly developing collaboration environment for students, researchers and business practitioners” [26]. The design factory now opened in Chili, China, Australia. Expansion is ongoing and collaboration with universities around the globe is highly active.
Janne Parantainen (JP)Mobile/ ICT Vendor
JP is head of solutions, technology to business acceleration at Nokia Siemens Networks (NSN)
JP is responsible in NSN to produce proof of concepts and validation to ideas. To reach this result, his team collaborates with different parties till they reach validation and proof of concept for the idea, then the idea can move to further stages within NSN internal network.
Kimmo Pentikäinen (KP)GovernmentStartup
KP is member of the board of Tivit Ltd, a non-profit company in Finland that focuses on collaboration and funding research projects that are with industry. KP as well has long experience in entrepreneurship for last 10 years.
Tivit is a “strategic center for science, technology and innovation in the field of ICT in Finland launches research programs in the ICT industry and services sectors. It channels both private and public funding towards these programs”.As member of the board, KP analyzes the applications by universities and companies for funding. He provides his point of view and decision to the board based on the applications and his broad experience in the area of innovation and experience. The projects’ only gets accepted if it creates a cutting edge and breakthrough in technology in a market-driven approach [27].
Raul Soderstrom (RS)ICT Vendor
RS is innovation manager at Ericsson R&D head-quarters in Finland
Fostering innovation, RS work with his team to check possible business opportunities in different areas. Product design and fitting the innovation in Ericsson ecosystem is part of his team responsibilities. Collaboration with external resources is needed to achieve that.
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System Dynamics Models
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ResearchedIdeas
Developedideas
R2
Technologyoutdate rate
IdeasImplementation
capacity
Knowledgemanagement skills
Internal Incentives
R&D investments
Resources
Externaldevelopment
network
Established externaltechnology
development network
Technologicalcapability difference
Level of trust
Successfulproduct
+
+-
+ +
+
+
+
<External knowledgenetwork partners>
+
++
+
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System Dynamics Models
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Developedideas
Commercializedideas
R3
+
Resourcesacquired
Business modelsgenerated
Identifiedopportunities
Technology marketrelevance
New technologymarket relevance
Technologyexistence period
Market demand
+
++
+
++
+