Henry Lopez VegaPh.D. Candidate

ESADE Business School

What is Open Innovation? Who is using it? Do I lose resources if I do not use it?

What is an Open Business Model? Why do organizations require Open Business

Models? Business model maturity stages How to use Business models?

European Living Labs How does Open Innovation works in Europe What is real real-life user-driven innovation?

Customers and consumer markets

have returned to center stage

Changes in economic conditions and

political events

The global economic plain field is

been flattened ( Thomas Friedman)

Closed Innovation Success 1945 – 1980

1980 – 1992 Problems transferring research results

into production 1992 Near Death Experience

the single largest quarterly and annual lost in U.S. corporate history, a loss $4.96 billon after taxes

New External CEO, Lou Gerstner

Solutions 1992 - 2007

Helping customers integrating computing

technologies to achieve their business goals

Management of customer’s equipment

Unbundling the value chain

Licensing Intellectual Property (IP)

Learning from customers and not only from

…

Actual IBM’s Business Model

Our current market

Our new

market

Other firm´s market

Open innovation

External technology insourcing

Internal technology base

External technology base

Internal/external venture handling

Licence, spin out, divest

Source: Chesbrough, H.

CurrentMarket

InternalTechnology

Base

R D

Technology Insourcing

New Market

ExternalTechnology

Base

Other Firm’s Market

Java,Linux

Sun, and others’ eqmt

$1.9 B licensing,OEM for semi co’sODM for others

Global Svcs

CurrentMarket

R D

New Market

“Use it or Lose it”

ExternalTechnology

Base

Other Firm’s Market

Technology Scouts

InternalTechnology

Base

VentureAcquisitions“Spinbrush”

LargeAcquisitions“L’Oreal”

Open Innovation is the use of purposive

inflows and outflows of knowledge to

accelerate internal innovation, and

expand the markets for external use of

innovation, respectively (Chesbrough ,2006)

INTERNAL

R&D Departments

Joint Ventures Licenses Spinoffs

EXTERNAL

Customers Competitors Venture Capital Start-ups Universities Research

Institutions Living Labs

Closed innovation principles Open Innovation Principles The smart people in our field work for us Not all the smart people work for us To profit from R&D, we must discover, develop

and ship it ourselves

External R&D can create significant value; Internal R&D is needed to claim some portion of that value

If we discover it ourselves, we will get it to market first

We don’t to originate the research in order to profit from it

If we are the first, to commercialize an innovation we will win

Building a better business model is better to market first

We should control our intellectual property so

that our competitors don’t profit from our ideas

We should profit from others’ use of our IP, and we should buy other IP whenever it advances our Business model

ipod IBM Ryan AirMTV

What about your Business Model?

Sometimes opportunities are not visible

MTV networks is part of the VIACOM group, world’s largest entertainment and media company

How does MTVsurvive in the new media

world?

Undifferentiated business model - none

Differentiated business model – Ad hoc

Segmented business model – Planned

Externally aware business model – externally

supportive

Integrated business model – Connected to

business model

Platform leadership business model – identifies

new business model

  Xerox 3Com Adobe

Identified market segment

Corporate and government market Corportate PC market 

PC, Mac, and laserprinter market

Clear Value Proposition

high-quality copies at a low monthly lease rate

establishes file and printer sharing between IBM PCs

enables output of richer document types

Elemets of value chain

developed entire copier system, including supplies, sold through a direct sales force

Focused on Ethernet protocol, and add-on boards

focused on supplying fonts to laserprinter and software firms

Defined cost and profit

modest profit on equipment, high profit on supplies or per "click" high volume, low unit costs very high fixed costs

Positioned in value network

First mover in "dry" copy process; did not require pursue partners

Set the IEEE 802 standard; utilized PC distribution channel

defined the PostScript standard for scalable fonts

Formulated competitive Strategy

Competed on technology, product quality, product capability

Compete on standard, new channels

strong network extenalities, high switching costs

MarketRevenue

Internal Developmnet

Costs

Own Market

Revenue

InternalDevelop

mentcosts

License

Own Market

Revenue

Sale/Divestiture

Spinoff

InternalAnd ExtenalDevelopment

costs

Costs

Revenues

Rising Costs Of innovation

NewNewRevenuesRevenues

Costs and time savingsFrom leaveraging Extenal development

0

Source: Chesbrough (2006,2007)

A business model is a useful framework to link ideas and technologies to economic output

Two clear functions1.Value Creation2.Value Capture

The European Network of Living Labs creates a platform where firms, public authorities and citizens can work together on developing and testing new technologies, business models and services in real-life contexts

The ultimate aim is to set up a new European Innovation Infrastructure where users play an active role in innovation

business goals

scenario planning

test user selection

prototyping

test deploymentusage analysis

user feedback

reporting

How to launch converged services… Build an IP network Test a service in the lab Launch it after a couple of years Charge a nice subscription Customers buy it We make a nice profitThink of another service…

But true convergence, and some really cool companies changed all this…

Health Care Mobility Tourism Culture &

Heritage Logistics Education e-Gov Food & Retail

Pocket PC = your office in your pocket

Consumers don’t need an office, they don’t want to sync with a PC

PDA needs to become a connected device like a mobile: turn it on, it works

Naked PDA is too difficult to turn into a fun and useful tool

i-City bridges the gap with its own Runtime Environment (Mercator)

“This converged world will require new forms of partnerships. Microsoft grew up on partnerships with companies like Intel,

HP, Dell and others -- for this next generation of innovation, the partners are

going to look like France Telecom.”

Steve Ballmer, CEO, Microsoft Corporation

1. Knowledge is inside and outside your organization. So, become an Scout

2. Business models create value (Exploration). So, capture (Exploit) it.

3. Users are the best innovators !!! So, let them evaluate your innovation

4. Your role as consultant, manager, …. is to let employees tell you their ideas and your work is to find a market and a business model for it