Open versus Closed Business Models
19 important questions on Open versus Closed Business Models
What is the traditional closed model?
- Internal innovation, relying primarily on their own R&D departments
- Only innovation projects matching the company's strategy are developed
What is the open innovation model?
- More dynamic and less linear approach
- Companies look both "inside-out" and "outside-in": innovation moves more easily between the external environment and the companies' internal innovation process
- Companies' boundaries are becoming a semipermeable membrane
What are Rothwell's five generations of innovation models?
- First and second: the linear models - need-pull and technology-push
- Third: interaction between different elements and feedback among them
- Fourth: the parallel lines model, integration with the firm, upstream with key suppliers and downstream with demanding and active customers, emphasis on linkages and alliances
- Fifth: systems integration and extensive networking, flexible and customized response, continuous innovation
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Which factors are behind the change of paradigm and how are they related to value capturing?
- Global competition.
- Shortened product life cycles.
- Increased complexity of new technologies and knowledge and convergence of technologies.
- Increasing costs and risks of innovation.
- Supply and mobility of researchers and engineers.
- Capabilities of actors in the (global) value chain (“not all smart people in the industry work for you”) / Dispersion of knowledge.
- Better educated and more demanding consumers.
How can open innovation help firms to capture more value from innovations?
- Ability to leverage R&D developed outside.
- Extended reach and capability for new ideas and technologies.
- Opportunity to refocus some internal resources on finding, screening and managing implementation.
- Improved payback on internal R&D through sales or licensing of unused IP.
- A greater sense of urgency for internal groups to act on ideas or technology.
- Over time, the opportunity to create a more innovative culture from the “outside in” through continued exposure and relationships with external innovators.
- Ability to conduct strategic experiments with less risk and fewer resources in order to extend core business and create new sources of growth.
How can open innovation limit the value captured from innovation?
- Extra costs of managing co-operation with external partners.
- Adverse impact on flexibility.
- Loss of (some) technological competencies.
- Lack of control.
- (over)dependence on external parties.
- Potentially opportunistic behaviour of partners.
- Increased risk of leakage of proprietary knowledge and involuntary spillovers.
Why are information processing capabilities limited?
- Oversearching can occur
- Attention based view
- Reduction in overall evaluation quality
Why does knowledge have characteristics of public goods?
- It can easily produce unintended "spillovers"
- Investments in knowledge production through R&D cannot be fully appropriated
What are formal mechanisms?
Legal protection
Tangible representation
Strategic mechanisms
Secrecy, lead time
What are the core processes?
- Outside-in process
- Inside-out process
- Coupled process
What is the outside-in process?
What is the inside-out process?
On which factors does openness depend?
- The importance of the technology
- The firm's business strategy
- The industry's characteristics
What are the industry's structural characteristics and changes and open innovation model?
- Globalization: open innovation in global industries results in economies of scale, powerful standards and dominant designs.
- Technological intensity: even the largest companies in high-technology industries lack all the necessary capabilities to cope with emerging technology, hence the need for co-operation with external parties.
- Technology fusion: the more interdisciplinary cross-border research is
- required, the less a single company’s capabilities are sufficient for innovation.
- New business models
- Knowledge leveraging
What is user innovation?
What are the differences between user and manufacturers that develop innovations?
What are the motivations for users to innovate?
- Direct utility
- Intrinsic benefits such as learning skills and personal fulfilment
- Reputation effects
- Expected (mutual) benefits of improvements of the innovation by others
How can open source be defined?
How did open source software start?
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
