1. Open Innovation and Strategy MOOI Theme # 1 presentation & discussion December 3, 2013

2. MOOI Theme 1: Open Innovation and Strategy Prof. Henry Chesbrough, University of California, Berkeley & ESADE Prof. Wim Vanhaverbeke, Hasselt University, ESADE & National University of Singapore Dr. Nadine Roijakkers, Hasselt University December 3, 2013 3. Statements about OI and strategy the need to align open innovation with the organizational strategy . firms need to audit the current status of their innovation strategy and identify areas where value could be added by open innovation Innocentive project: Quantitative Model to Aid Strategy Decisions When Applying Open Innovation Crowdsourcing applied to the link strategy & open innovation 3 4. Overview OI and corporate strategy OI and business strategy OI and strategy types A process view on the link between strategy and OI 4 5. OI and corporate strategies 5 6. OI and corporate strategy Corporate strategy: Long-term growth of the company in which industries/technologies a firm wants to be active new business development OI and cap ability building (dynamic view): Absorptive capacity/connective capacity/desorptive capacity (Lichtenthaler and Lichtenthaler, JMS 2009) OI as instrument to drive cognition of future strategy (Itami & Numagami, SMJ 1992). OI frames and drives the way managers think try to integrate it in the corporate strategy formulation process 6 7. The McKinsey Growth Model 7 8. McKinsey Model & innovation strategy 8 9. McKinsey model and OI Innovation efforts aimed at all three time horizons H1: Current business: BM determined/clear Incremental innovations with existing partners Market related partners more important? Short OI innovation cycles with low uncertainty 9 10. McKinsey model and OI H2: Related businesses H3: New businesses or disrupting businesses Work on the three horizons simultaneously 10 11. BCG matrix Adapted for OI Frank Mattes - Applied Innovation management - nr 3 2011 (p. 13) 11 12. Deloittes Growth Framework 12 13. Growth matrix Adapted for OI Frank Mattes - Applied Innovation management - nr 3 2011 (p. 14) 13 14. Incubation and EBAs: Growing beyond the mainstream businesses Role of corporate incubators & EBAs (DSM) in growth strategy of the firm OI in EBAs is quite different than in mainstream businesses New capability building through external relations Also: capabilities become non-strategic, obsolete (open up to 3rd parties, e.g. Philips Research in specific technical areas) 14 15. Accelerating and supporting innovation Page 15 DSM Innovation Center EBA Biomedical EBA Advanced Surfaces EBA Bio-based Products & Services Business Incubator New Business Development ~80% ~20% CTO Office Venturing Excellence in Innovation Licensing Enablers 16. OI and the cognition of future corporate strategies Different people working together with external partners: Different views on the technical and market opportunities Scouters, incubators, EBAs: focusing on LT technical developments vs. mainstream businesses Tools to bring bottom-up insights into corporate strategy? (corporate strategic dialogues?) Page 16 17. Capability building (Lichtenhaler & Lichtenthaler, JMS, 2009) Knowledge exploration Knowledge retention Knowledge exploitation Internal (intrafirm) Inventive capacity Transformative capacity Innovative capacity External (interfrm) Absorptive capacity Connective capacity Desorptive capacity 17 18. Top-down & bottom-up approaches Ifm report (2009) 18 Top down Strategically driven Bottom up Achieved by evolution DistributedOIActivities CentralisedOIActivities 19. Interactive poll 1 19 20. OI and Business Strategy Page 20 21. Chesbrough & Appleyard (CMR 2007) ABSTRACT: The article discusses a process of business innovation known as open innovation and its relation to traditional business strategy. The competitive strategy developed by Michael Porter emphasized rivalry, buyer power, and barriers to entry as forces that could enhance a producer's surplus. The authors discuss the impact of the Porterian value chain, the processes of production through to the consumer, on subsequent business practices. However, this theory does not account for external sources of value to a company, such as innovation communities, volunteer contributors and surrounding networks, including social networking web sites, open source software and the Wiki model of open contributions. The concept of openness requires shifting from ownership to value creation and value capture. 21 22. Chesbrough & Appleyard (CMR 2007) 22 23. Chesbrough 2006 23 A business model performs two important functions: it creates value, and it captures a portion of that value Creation of value: by defining a range of activities that will yield a new product or service valued by a (target) customer group Value capturing: by establishing a unique resource, asset or position within that series of activities where the firm enjoys a competitive advantage 24. Chesbrough 2006 24 Open business models: Division of labor: one party develops a novel idea but does not carry this idea to the market itself sells it to another party,who carries it to the market Open business model: uses the division of labor to create greater value by leveraging more ideas (external ideas) capture greater value by using key asset, resource, or position not only in the companys own business but also in other companies businesses 25. The relation between OI and OBM 25 Open Innovation Closed Innovation Closed Business Model Open Business Model I-Pod Apple http://open-- innovation.blogspo t.nl/2010/02/ipod- thanks-to-open- innovation.html SkyNRG http://skynrg.com Tide (P&G) http://www.acs.or g/content/acs/en/ education/whatisc hemistry/landmark s/tidedetergent.ht ml Senseo (Philips/Sar a Lee) http://www.entrepre neurship.ethz.ch/edu cation/lectures/Allian ce_Advantage/Trust_ Risk_de_Man_2009.p df (P/SL) 26. OI and Strategy Types 26 27. Jaruzelski & Holman/Booz & Company (Ivey Business Journal, 2011) 27 28. OI and Innovation strategy types Frank Mattes - Applied Innovation management - nr 3 2011 (p. 20) 28 29. A PROCESS VIEW ON THE LINK BETWEEN STRATEGY AND OI 29 30. Slowinski & Sagal (Research Technology Mgt 2010) 30 31. Interactive poll 2 31 32. References - Abernathy and Clark, Harvard Business R., September 1981 - Chesbrough & Appleyard, California Mgt R., 2007 - Chesbrough and Crowther, R&D Mgt, 2006 - How to implement OI, IfM report, 2009, University of Cambridge - Itamy & Namagami , Strat Mgt J., 1992 - Lichtenthaler & Lichtenthaler, J Mgt Studies, 2009 - Jaruzelski & Holman/Booz & Company, Ivey Business Journal, 2011 - Mattes Frank, How to make OI work for your R&D, Applied Innovation management - nr 3 2011 - Slowinski & Sagal, Research Technology Mgt, 2010 - Brandenburger en Nalebuff, Co-opetition, HBS press, 1996 32 33. Q&A 33