Open Innovation: The New Imperative for Creating and Profiting from Technology

Harvard Business school professor Henry W Chesbrough wrote the book titled Open Innovation, catering to the modern business environment. He argues that in today’s business environment that is filled with knowledge and information, companies cannot rely strictly on their own ideas to further their business or maximize innovation. The traditional model for innovation that focuses on internal development is becoming outdated.

To combat the irrelevance of this old model, Chesbrough develops a model called “open innovation”. Through his experiences working in Silicon Valley, compiling field research and academic knowledge, the author attempts to find the balance between the internal and external development of a firm. Internal development can be accomplished through innovation created within the existing work environment. External development can occur with the assistance of sources or research located elsewhere. This balance allows the given firm to use a variety of channels to take their product or service to the market.

Chesbrough fashions his book particularly relevant by using an in depth analysis of the innovation processes of Intel, Lucent, IBM and other major firms. He focuses on the ideas and subsidiaries that have been created as a result of this process.

Chesbrough reveals the benefits of “open innovation” as well as its ability to increase the value of a company’s ideas, research, knowledge and technology. The model exposes particular firms’ uses of R&D, incorporating their managerial and intellectual properties, the optimal means for growing the business and creating a bright future.

This book is extremely relevant for modern day global businesses and their leaders. Businesses striving for the optimal level of efficiency and productivity can use Chesbrough’s model to aid in finding their own balance between internal and external development. The concrete business examples provided by globally successful firms present further illustration to this structure.

The example provided investigating IBM’s shift from closed to open innovation was one that I found particularly interesting. Although costs were incurred, such as the laying off of large numbers of employees, the long-term health of the firm is much more optimistic. In the years following 1945 IBM was responsible for inventing or assisting in the invention (in collaboration with universities such as Columbia University in New York) of some of the world’s most prominent inventions. It was the first firm to manufacture an electronic memory system. Despite the success of this internal development, the company began to realize that if they did not begin to use open innovation, they would not be privy to much of the innovation that was occurring externally. IBM did not want to loose pace, acknowledging the continuous necessity for open and external innovation. Examples such as this make Chesbrough’s model very significant and very applicable.