The era of open innovation - Chesbrough, 2005

Question 1

Closed innovation

Answer 1

Developing products internally and marketing them yourself. It is all internal and requires control. Companies invest heavily in R&D, hire the brightest people, protect their intellectual property and are the first to market, resulting in high margins. This is then reinvested in R&D, resulting in a virtuous cycle of innovation .

Question 2

Cats eyes example

Answer 2

Percy Shaw in 1934. Patented reflective road studs. Shaw drew upon the 1927 reflective road sign patents. he set up his own company, Reflective Road Studs ltd. to make and sell them.
This company still makes these products today.

Question 3

Drawbacks of closed innovation

Answer 3

Creates a barrier to innovation.
Internal R&D is no longer as much of a strategic asset. Patents make it difficult for firms to be completely closed. It can be too much for one company to try and control everything, especially due to increased worker mobility and thus the spread of ideas.
There is a risk of losing false negative ideas - Xerox PARC losing mouse and GUI to Apple

Question 4

Apple, an exception to the rule

Answer 4

• Apple never show off their products before a keynote event, fans can merely speculate about what is to come
• Famously tight lid - there is only ever strategic leaks by the company themselves
• Success lies within secrecy and their marketing muscle
• They have access to extensive internal research labs, designers, software producers and many valuable staff, making them extremely well positioned to innovate within the business itself
• It is Apple’s closed innovation in hardware, that leads to open innovation in software

Question 5

Open innovations

Answer 5

• New start ups are challenging established businesses, not by developing ideas of their own but acquiring them from somewhere else
• Open innovation tends to accelerate internal innovation, and expand markets
• The sharing of intellectual property between shareholders results in the best innovation possible being produced.
• Transparency with consumers leads to customer loyalty and excitement
• Boundaries between firms and surrounding environment are porous - innovation moves easily between the two

Question 6

Apple and open innovation

Roush, 2010 - The Apple paradox: how a company that is so closed can foster so much open innovation

Answer 6

Apple use open innovation principles through the development of its app store. They allow many third party app developers to create apps for their platform. They are not paid directly by Apple and return 30% of all revenue back to Apple themselves. This has allowed them to create an app store rivalled by none.