Open and Closed Innovation

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Innovation is about helping organisations grow. Growth is often measured in terms of turnover and profit, but can also occur in knowledge, in human experience and in efficiency and quality; Innovation is the process of making changes to something established by introducing something new that adds value to customers. As such it can be radical or incremental and it can be applied to products, processes, or services and in any organization. It can happen to all levels in an organization, from management teams to departments and even to the level of the individual. Organisations can innovate through open innovation or closed innovation though open innovation is now becoming the most fashionable innovation approach as compared to closed innovation. Closed innovation entails the use of internal information to make some innovations.

Henry Cherbrough (2003) defined open innovation as a paradigm that assumes that the firm can and should use external and internal ideas and internal and external paths to market as the firms look to advance technology. Additionally open innovation can be defined as the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation respectively. Open innovation is the methodology and mindset where an organization has well-defined structures, and makes use of individuals and/or organisations outside the organizations’ hierarchical structure to have an input as to the Research and Development, idea generation and problem solving of that organization. As a way of innovation, open innovation is now becoming a fashionable approach to innovation building on the advantages of networking. On the other hand the implementation of open innovation might throw up some problems to the organization which is implementing it hence retarding the organisations effectiveness and efficiency.

To come up with the problems which are brought about by open innovation implementation, some advantages of networking based on innovation building can be mentioned and then the problems which arise from open innovation are discussed. Open networks vary significantly based on such factors as network size, vetting size, solution provider qualifications, confidentiality needs, business relationships, intellectual property protection considerations and upfront resource investment and potential return on investment. Based on the above characteristics, open innovation networks fall into one of the three categories which are non-qualified, prequalified and business partners which can include suppliers, customers, shareholders, government and the community at large.

As stated earlier, advantages brought about by open innovation include speedup time to market. The period in which the goods and services innovated are brought to the market is reduced since the organization will have collected much information pertaining to the products. Reduction of risk of innovation is another advantage of open innovation. There will be less risk because the organization will have gathered much external information as possible before innovation takes place. There will also be less risk guessing what the market wants. Since open innovation involves gathering information from the potential buyers, it is likely to produce what the market expects of its products or services. Furthermore, research and development and operating costs can be reduced through increased sales volume of goods which have a ready market after open innovation had been initiated. Other advantages include integrated community innovation, innovation can come from anywhere and anyone and the community can tell the organization what it wants.

However, implementation of open innovation can throw up some problems to the organization which is using such an approach to innovate. There is need to comply with legal frameworks which might be too rigid and stifling to open innovation resulting in inefficiencies of the...
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