Innovation and Open Innovation

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Damian Gordon Innovation and Open Innovation
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Transcript of Innovation and Open Innovation

Page 1: Innovation and Open Innovation

Damian Gordon

Innovation and Open Innovation

Page 2: Innovation and Open Innovation

Invention and Innovation

Idea

Page 3: Innovation and Open Innovation

Invention and Innovation

Technology

Idea

Page 4: Innovation and Open Innovation

Product

Invention and Innovation

Technology

Idea

Page 5: Innovation and Open Innovation

Business

Product

Invention and Innovation

Technology

Idea

Page 6: Innovation and Open Innovation

Sustainable Business

Business

Product

Invention and Innovation

Technology

Idea

Page 7: Innovation and Open Innovation

Sustainable Business

Business

Product

Invention and Innovation

Technology

Idea

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Diffusion of Innovations

Developed by Everett Rogers

Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system.

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2º 3º 4º 5ºRANKING MUNDIAL DE USUÁRIOS DE INTERNET

1º 6º Knowledge Person becomes aware of an innovation and has some idea of how it functions

PersuasionPerson forms a favorable or unfavorable attitude toward the innovation

DecisionPerson engages in activities that lead to a choice to adopt or reject the innovation

Implementation Person puts an innovation into use

ConfirmationPerson evaluates the results of an innovation-decision already made

Adoption of Innovation Step Process

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Adoption of Innovation over time

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Adoption of Innovation over time

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Adoption of Innovation over time

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2º 3º 4º 5ºRANKING MUNDIAL DE USUÁRIOS DE INTERNET

1º 6º Relative advantage

Compatibility

Complexity of transition

Possibility of testing

Visibility of benefits

Adoption probability grows if innovation has clear advantages for product, service or current behaviorThe more innovation is consistent with pre-existing higher the adoption probabilityComplex changes involved in innovation, reduce adoption likelihood

A chance to try an innovation before making a final decision increase adoption likelihoodThe more obvious innovation benefits the greater adoption likelihood

5 Critical Factors Influencing Innovation Diffusion

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Innovation

Following Joseph Schumpeter’s 1934 book “The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle” innovation is distinguished from invention by the fact that innovation is usually applied successfully in practice.

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Innovation - Diffusion

When innovation occurs, innovations may be spread from the innovator to other individuals and groups.

This process has been proposed that the life cycle of innovations can be described using the 's-curve' or diffusion curve. The s-curve maps growth of revenue or productivity against time.

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Innovation - Diffusion

In the early stage of a particular innovation, growth is relatively slow as the new product establishes itself.

At some point customers begin to demand and the product growth increases more rapidly.

New incremental innovations or changes to the product allow growth to continue.

Towards the end of its life cycle growth slows and may even begin to decline. In the later stages, no amount of new investment in that product will yield a normal rate of return.

Page 18: Innovation and Open Innovation

Innovation - Diffusion

The s-curve derives from an assumption that new products are likely to have "product Life". i.e. a start-up phase, a rapid increase in revenue and eventual decline.

But in fact the great majority of innovations never get off the bottom of the curve, and never produce normal returns.

Page 19: Innovation and Open Innovation

Innovation - Diffusion

Innovative companies will typically be working on new innovations that will eventually replace older ones. Successive s-curves will come along to replace older ones and continue to drive growth upwards. In the figure above the first curve shows a current technology. The second shows an emerging technology that current yields lower growth but will eventually overtake current technology and lead to even greater levels of growth. The length of life will depend on many factors.

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Open Innovation

Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology”.

The boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward.

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Open Innovation

The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (e.g. patents) from other companies. In addition, internal inventions not being used in a firm's business should be taken outside the company (e.g., through licensing, joint ventures, spin-offs)

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Open Innovation

Idea Generation Selection Execution Commercialization

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Open Innovation

Idea Generation Selection Execution Commercialization

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Open Innovation

Idea Generation Selection Execution Commercialization

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Open Innovation

Idea Generation Selection Execution Commercialization

DevelopNew ideas

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Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

DevelopNew ideas

Page 27: Innovation and Open Innovation

Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

DevelopNew ideas

Page 28: Innovation and Open Innovation

Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

SelectSuccessful

Ideas

DevelopNew ideas

Page 29: Innovation and Open Innovation

Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

SelectSuccessful

Ideas

DevelopNew ideas

Tech

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gy

Lice

nsin

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Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

SelectSuccessful

Ideas

DevelopNew ideas

Tech

nolo

gy

Lice

nsin

gIN

Page 31: Innovation and Open Innovation

Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

SelectSuccessful

Ideas

Prototypes and

Production

DevelopNew ideas

Tech

nolo

gy

Lice

nsin

gIN

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Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

SelectSuccessful

Ideas

Prototypes and

ProductionIP

Li

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IN

IPLi

cens

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DevelopNew ideas

Tech

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Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

SelectSuccessful

Ideas

Prototypes and

ProductionIP

Li

cens

ing

IN

IPLi

cens

ing

OU

T

DevelopNew ideas

Tech

nolo

gy

Lice

nsin

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Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

SelectSuccessful

Ideas

Prototypes and

ProductionIP

Li

cens

ing

IN

IPLi

cens

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OU

T

Product brought

to market

DevelopNew ideas

Tech

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Lice

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Open Innovation

Idea Generation Selection Execution Commercialization

Ideas and innovations

from inside the organisation

patents and innovations

from outside the organisation

SelectSuccessful

Ideas

Prototypes and

ProductionIP

Li

cens

ing

IN

IPLi

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Product brought

to market

Tech

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Crowdfunding

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The Status Quo

Venture capital difficult to find for smaller requirements

Debt finance hard to come by Business angels – limited investments

– Typically a syndicate each investing £10k - £100k What if there was a way to have say 5000 angels

each investing £10? What if anyone could become a business angel?

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• Crowdfunding is an approach to raising the capital required for a new project or enterprise by appealing to large numbers of people for small donations

• Crowdfunding examples• Kiva.org - $325m funding raised, >777,000 lenders,

~800,000 entrepreneurs• Kickstarter.com – >24,000 projects funded, >

$250m pledged to-date, 2m people have pledged

Crowdfunding

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Three Types of Crowdfunding

1. Donations, Philanthropy and Sponsorship where there is no expected financial return

– Kickstarter, IndieGoGo, RocketHub, Faithfunder, CharitySub, ChipIn, Catchafire

2. Lending/Borrowing– KIVA, RateSetter, Funding Circle

3. Investment in exchange for equity, profit or revenue sharing

– Profounder, AppBackr, PeerBackers, Quirky, GrowVC

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Fast Growing Retail Business

Funding Circle is a UK clearinghouse for semi-anonymous lenders and borrowers (bank)

Primarily for expanding existing small businesses

Variable loan rates/term Average return 8.3% Funding Circle does the credit

check, rates risk Lender amounts small $40 million in transactions to date

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Common Crowdfunding Mistakes

1. Asking for Too Much… or Too Little2. A Bad Promo Video: too long, not clear on the

benefits, no humour, no excitement3. No Clear Itemized Budget4. Poor or Overpriced Perks5. Failing to Promote Your Project to Your Social Media

Network6. Failing to Inspire - No Good Story or Hook7. Giving Up Too Early