Open Innovation and Case Study

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Abstract

Kennametal Inc. is a 72 year old company founded in 1938 who employs 14,000 people with operations in 60 countries around the world. The company reports $2.3 billion dollars in annual revenue as the premier provider of tools, engineered components, and advanced materials utilized in manufacturing and construction. The company is comprised of three divisions; Advanced Materials Solutions, Metalworking Solutions Group and J&L Industrial Supply. Its’ customer base is as broad as it is wide with no one customer representing more than 3 percent of total revenue. In an effort to increase its’ presence and service delivery Kennametal Inc. markets its products and service via large network through multiple channels including direct sales, marketing, the Internet, integrated supply programs and a plethora of industrial distributors. The case study evaluates the innovative processes Kennametal employs as it relates to three distinct company goals in its operations which is split in half between the Western and Eastern hemispheres; 1) getting its operations closer to its customers in the Asia Pacific region, 2) to become a business of complete solutions and 3) achieving operational excellence which includes increasing sales by 40% (www.kennametal.com), customer service excellence, becoming an employer of choice. The methods Kennametal employs towards an innovation strategy is presented in this study.

Corporate executives and leadership are faced everyday with challenges in meeting revenue goals, efficiency in operations, continuously improving service delivery to their customers, attracting and maintaining a pool of the best talent, new customer acquisition and other operational objectives. More and more organizations are finding benefit to using the method of innovation to meet those and other objectives, all of which are intricately interrelated. In previous work, researchers outlined a five-step strategy toward achieving open innovation (Chesbrough, 2009). The work offers a methodological approach to achieving maximum efficiency in a downturn but the principles introduced can be of benefit in any financial climate and in any industry. The use of the five steps introduced in the Chesbrough article is evident in the study of Kennametal Inc. One thing missing in the two aforementioned works is the fact that neither of them addresses the problems that can arise with IP, a key component in achieving open innovation, according to Chesbrough (2009).

By its definition and scope, open innovation creates an exchange of ideas and property, some of which are tangible and others intangible. This creates a dichotomous relationship between the IP and its original owner. Because organizations are collaborating more than ever and incorporating member so their network and the public at large in their innovative process, the idea of property rights is also treated in this paper relative to the Kennametal study. Some companies (such as Kennametal) focus their energy on a closed innovation model in certain departments. However, as Birgitte Anderson points out, an appropriate and relevant IP and IPR policy and management should be in place for both owners and users of IPR (Andersen, 2008).

Since the Kennametal study touches each of the five concepts presented by Chesbrough a more detailed study of their specific management of IP and IPR should be considered for future research. In addition, additional academic consideration should be given to how Kennametal implements its open innovation gates to its customers. As it is well known that customers provide a wealth of information regarding the effectiveness of products and services, using online methods to capture data (Bughin, 2008) should be explored. It would be of use to the academic and corporate sectors to observe a company with such a broad worldwide reach.

There is a logical flow of information as well as continuity in the literature. Each piece that is introduced in this...
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