Open Innovation and Business Success

MA-Thesis / Master von Monika Gawarzynska

Introduction:

Innovation is a crucial topic in the study of economics, business, technology, sociology, and engineering. The questions asked in research nowadays focus not on it why innovation is important, but how to innovate and how innovation processes can be managed. Furthermore the discussion on innovation is about how to maintain strong economic growth in an era that is increasingly being defined by the globalisation of competition, major financial and demographic challenges.

Recently the economy continues to upset the market and recession tempts to cut back on the investments in research and development in the organizations. But even now in spite of crisis and its impacts on the economy seems to be the perfect time to increase firms’ innovation efforts.

The increasing competition processes and the development of Web 2.0 technologies (soon Web 3.0) are challenging the business to build more interactive relationship between the real-time market participants. The companies must nowadays find out how to achieve a competitive advantage for future.

This paper presents the concept of Open Innovation, which can help public and private institutions achieve better performance or business success and at last win the competition with market rivals.

Research motivation:

Inspiration for this study was the report ‘Innovation systems - the engine of the economy’ by Belitz and Schrooten from the German Institute for Economic Research. The authors provide in their analysis the international comparison of the national systems and examine Germany's international competitiveness, its innovation capability as well innovation performance. Researchers from one of the leading research institutes in Germany recommend bringing in action important activities for German innovation policy makers:

- Investment in education with new educational approaches concepts to increase the willingness and ability for studding.

- Promotion the innovation processes to large sections of the population.

- Strengthening incentives for innovation.

- Securing the diversity of the national innovation system.

- Seizing opportunities from international integration.

The DIW’s suggestions are pointed out above to indicate on importance in the promotion of the innovation process and its popularization using the policy mixes. It is significant for German economy to support the innovative entrepreneurs at national as well local level. A worrying issue is that there have been evidenced some weaknesses of the innovation performance in Germany. According to German Institute for Economic Research ‘Germany’s innovativeness among leading industry countries is in a wide midfield after the leading trio from Sweden, USA and Switzerland’.

Recently discussed both in academia and in practice concept of Open Innovation could solve the Germany innovation performance problematic case.

First who introduced the concept of Open Innovation theory and examined the organizations that have shifted from so-called Closed Innovation processes towards a more open way of innovating was Chesbrough in his work: ‘Open Innovation - The new imperative for Creating and Profiting from Technology’. The concept challenges to build through cooperation with innovative entrepreneurs, universities, partners, suppliers and with innovative customers an Open Innovation business model. This model shall to enable the new innovators to bring new ideas and technologies, to speed up the innovation process and to improve the innovation based growth strategies.

Table of Contents:

Text Sample:

Chapter 4.4.1, Leadership and culture in Open Innovation:

Studies on Open Innovation state the conclusion that most important role of the companies’ management or leadership concentrates on supporting people ambitioning to be innovative. Chesbrough emphasises in his works the IP management and its protection as one of the important activities to achieve success in managing Open Innovation, whenever it is large or small organization. Other researchers indicate on leading role of top management such senior executives who essential support employees in the cultural shifting to Open model.

There are actually few articles analyzing leadership in that new Open concept. One of these articles discusses management in the world’s first Open Innovation Community: the Internet Engineering Task Force community. Authors, Fleming and Waguespack argue that future leaders must first make strong technical contributions and then integrate their communities in order to mobilize volunteers. Two correlated but distinct social positions - social brokerage and boundary - spanning between technological areas can assure success in the integration process. The role of broker in Open Innovation community is described as social because, individuals who broker work in collaborations are more likely to assume leadership, but the effect is strongly contingent on physical presence within the community. Authors indicate that overcoming lack of trust encounters difficulties when brokers attempt to span technological boundaries within the community.

Boundary spanners, in contrast, do not suffer from a lack of trust and are more likely than brokers to assume leadership positions. In summary, future leaders are most likely to be individuals that make a strong technical contribution from a structural position that can bind the community together. Fleming and Waguespack suggest that ‘leadership in such communities depends more on the trust and mobilization of peers than on approval of superiors”. Furthermore they understand that ‘members cannot be fired or forced to participate in any activity, nor can they be compelled to pay attention to any other member’.

Witzeman et al. see the leadership’s challenge not only in changing of technological systems. Researchers depict the leaders’ role in changing systems, process, values and cultures as follow: ‘Harnessing external technology for innovation requires a fundamental change in employee thinking. The ‘Not Invented Here’ syndrome is replaced with the ‘Invented Anywhere’ approach”. Authors propose following management methods in contributing cultural shifting into the Open Innovation concept as good practice:

- Re-energizing the planning process by explicitly including external resources as an available resource base (employees identify the external resources that will allow them to accomplish their goals quickly and cost-effectively).

- Senior management role must be visible, committed and relentless in its drive to support external innovation.

- Real communication between management and employees should be a ‘dialog of actions’ (‘desktop analysis” with the management criteria to evaluate).

- Adjustments to the infrastructure through ‘Want-Find-Get-Manage’-model (e.g. engagement of companies like innovation intermediaries InnoCentive or NineSigma).

- Technical and legal employees work together to craft agreements that cover all relevant collaborative activities.

- Usage of information technology tools to capture and track information from external programs (e.g. web-enabled tools for knowledge management).

The leaders role should concentrate on managing to involve the external sourcing e.g. in project management process and on activities supporting employees’ to encouragement into Open Innovation cultural shifting.

German scientist Herzog tested Open Innovation und Innovation culture in leading multinational company specialized on chemicals industry. He argues that supporting innovative behaviour and creating an environment that allows for constructive dissent, are likely to increase employees' job satisfaction. He refers to Chesbrough’s most important challenge in companies - cultural overcome the syndromes: NIH ‘not-invented–here’ and NSH ‘not-sold-here’ that both seem to be more relevant in managerial practice (Herzog 2008; 208). Herzog proposes that managers should communicate positive experiences with external technology sourcing and commercialization, which have been made by other firms or business units. In supporting of Open Innovation initiative personal management should recruit those employees who are characterized by the necessary proactive, creative, and result-oriented personality; prospective employees could be asked to participate in a personality test.

Summarizing in all these managerial approaches and methods there is necessity of cultural changes and new skills of management in implementation of Open Innovation concept. The management role (especially senior executives or personal management) is crucial. It is more important the social aspect and trust based behaviour then the supervisor meaning that accelerate the application of the Open concepts into organization.

The fact is that new technology doesn’t replace existing management practices, but it improves the company’s receptivity to external inputs into its innovation activities. Technology only assists internal ‘Openness” by helping build effective communications between disparate groups in the company.