Table of Contents
Open innovation – Is it suitable for entrepreneurial ventures?. 1
Executive Summary. 3
2.Open Innovation. 4
2.1. Importance of open innovation. 4
3.Creating a culture of open innovation in an organization. 5
3.1.Collaboration and open innovation. 6
3.2.Digitally enabled collaboration. 6
4.Challenges in establishing open innovation. 6
This paper examines open innovation and its suitability in entrepreneurial venture. Innovation is a crucial part of an organization, in that; it helps to boost productivity and performance of the organization in the industry. Unlike the traditional approach of innovation in which the entire process was only focused on internal operations of the organization, open innovation aims at connecting the eternal and internal setting of an organization by taking technologies and ideas from within and outside the organization. In this, paper, the argument will revolve around establishing a link between internal R&D approach and external research. Open innovation provides a good basis for promoting performance of the organization by enhancing various activities such as production, design and distribution of products. Through the entire analysis, the paper will provided a comprehensive understanding of open innovation as the new trend in the entrepreneurial venture.
Open innovation is the focus on using both internal and external information and ideas in establishing strong bases in a given market. Embracing these strategies require a high level of openness to attract new relationships which can be helpful to the success of the business. Chesbrough (2011) explains the open innovation as the incorporation of the inflow and outflow of knowledge to boost the invention and innovation of new ideas in the organization. Traditionally, organizations were focused on engaging in international research and development (R&D), as a way of improving the operations of the organization. However, because of the changes in the market and stiff competition that has clobbered virtually every industry, corporations have come to understand the need for understanding both the internal and the external setting of the business. Entrepreneurial ventures are required to be keen on taking the expanding information in order to increase their level of innovation and growth both internally and externally in the target market. In a highly competitive market, the management should be well informed of the changes taking place in the market. In venture, right information can include the information about the availability of the quality raw materials, new components and the new designs that will help to boost the competitive advantage (Chesbrough 2011). This paper examines the suitability of open innovation in the entrepreneurial venture.
2. Open Innovation
Since time in history, innovation has been the key factor to the continued success of any business. Many organizations understand this, but they fail to put in place right measures and strategies to enhance the level of innovation in the organization. Innovation helps to keep corporations float even during harsh economic times for instance during the global financial crisis of 2008 (Cheng & Huizingh, 2014).Although it is important for organizations to understand the internal operations setting, having a good knowledge of the external environment is important for helping the organization to maneuver the changing markets, customers demand and the stiffening competition. Chesbrough and Garman (2009) most organizations fail to succeed in the long-term because they only direct their resources towards transient projects that are likely to bring short-term monetary gains. What they fail to understand is that directing a given portion of resources to R&D can help the organization to reap significantly in the future.
Figure 1: Showing how the growth of technology has ensured the business growth
The quality of investment increases with the increase in the growth of technology. Open innovation comes with two main properties. Firstly, the main aspect of open innovation is the use of outside information to boost the internal innovation of the organization. The second property is the use of the internal information to align the operations to synchronize with the market (Van de Vrande et al., 2009). Organizations are required to take technologies and ideas that match with the business model then implement them to improve performance. Achieving the anticipated performance, the organization should ensure that the business model is flexible enough to incorporate the changes that are introduced from outside (Enkel, Gassmann & Chesbrough 2009).
According to the research by Enkel, Gassmann and Chesbrough (2009), open innovation helps ventures to acquire a survival mechanism when confronted by tough economic challenges or a plunge of a target market. Because open innovation is more about strategizing on new measures to meet the demands of the overall market, it, therefore, helps to ensure sustainability amid the ever-changing circumstance in the industry. According to Chesbrough (2011), open innovation bridges the gap between academic analysis and practical analysis of innovation. Open innovation is an important concept that brings in diverse ideas to boost the operations of the organization. The idea of open innovation is based on the fact that organization must rely on one other in order to effectively engage in the innovation process regardless of size and area of operations (Saebi & Foss, 2015).
Another area impacted by open innovation is on efficiency and quality of products. With the consistent change in demands of customers in the market, open innovation is important for ventures seeking to promote loyalty among customers. When the firms engage in the constant innovation process, it enables them to change their operations to align with the demands of their customers. The loyalty of customers is achieved by ensuring that the products manufactured are in line with their desires. The products should be in a constant improvement mode not only to maintain the customer base but also as a strategy of promoting the competitive advantage in the market (Enkel, Gassmann & Chesbrough 2009).
Apart from promoting the long-term success of the organization, open innovation is more cost effective as compared to internal R&D strategies which only focus on the internal operations of the organization. In addition to reduction of cost of research and innovation, open innovation creates new avenues for promoting the success of the organization. There are different ways in which open innovation promotes an increase in revenue including the improvement in the quality of products, development of new markets and efficient line supply chain routes (Mina, Bascavusoglu-Moreau & Hughes, 2014).
Open innovation is an important concept that enables corporations to access ideas and technologies which they would however not achieve. Further, the ideas yield improvement of product designs, generate simple market operations strategies, in addition to helping organizations to acquires patents that for the innovations. Open innovation is also a good strategy through which organization can use commercialize their innovation especially when they do not have adequate resources or expertise to implement the innovation (Mention et al. 2013).
3. Creating a culture of open innovation in an organization
Although open innovation is an important factor in the venture, it is important for an organization to in place a culture that favors the concept. In establishing a culture that promotes open innovation, the management should first examine the main road blocks to the establishment of an effective culture of innovation. According to Felin and Zenger (2014), the culture of an organization influences how different decisions are made and how processes are conducted in the organization. Organizations should establish new values that favor open and honest communication, in addition to given the different parties in the organization an opportunity to take part in the decision making processes.
Cultural realignment of the organization is stemmed from first identifying what innovation means to the organization. Understanding the essence of innovation in the organization is important for setting goals that will guide the operations and other processes in the organization. According to Enkel, Gassmann and Chesbrough (2009), organizations should leverage on technology as a way of promoting the level of engagement among the different parties working in the organization. The internet can be used to create forums that can help employees and other parties to learn and share. It is important for an organization to encourage every member of the organization to be open to sharing and learning from others. Finally, the management is recommended to examine the progress as well as the new areas of improvement (West & Bogers 2014).
In the industry of operation, corporations are required to examine the right peers in the industry with whom they share same challenges and aspirations in the industry. A collaborative approach to the challenges facing the industry can help the firms to come with an effective solution to the problem. Effective collaboration is achieved by having a communication strategy and platforms that allow for effective sharing (Enkel, Gassmann & Chesbrough 2009).
Although collaboration is an effective means for implementing open innovation, corporations are required to select the right companies to increase their chances of success. There are different factors that should be put into consideration when choosing to collaborate with other organizations (Dahlander and Gann, 2010). Firstly, collaborating partners should have the willingness to come and work together in achieving the common goals in open innovation. Then it is advisable to examine the strengths of every partner to understand what each is bringing to the table. This should then be followed by an examination of what the organizations are coming together aims at achieving from the partnership (Garriga, Von Krogh & Spaeth 2013).
Chesbrough (2011) argues that open innovation is a complex process that entails heads of different departments to work along with other experts in the industry. Incorporating different skilled people in the partnership is imperative for the contribution of a wide range of ideas. The proponents of open innovation argue that partnering organizations should be prepared to counter the potential objection of the strategy by the employees working in the organization. The parties working on the project work as promoters on various issues facing the organization from within and work in sharing its ideas with the other members (Mergel & Desouza 2013).
The growth of technology has provided new platforms through which organizations can use to collaborate with other organizations and share information that can help boost the level of innovation. According to the research by Chesbrough (2011), organizations are increasingly entertaining the idea of digital collaboration and agree to the fact that it is a good tool for future performance in the future. The internet and social media have helped to eliminate the geographical difference that was one of the major impediments to effective collaboration between different corporations. Additionally, apart from eliminating the geographical barrier, the internet has come with flexibility so that organizations can collaborate and share without having to travel. Effective collaboration comes with the ability of not only sharing information but also creating a fertile ground for innovation (Henkel, 2010).
Open innovation, being a decentralized strategy of making decisions that are aligned with the standing of the market, is highly contingent to the collaboration of corporations. For open innovation to take a strong base, organizations are required to come together and share their ideas. Unlike the internal R&D, open innovation allows an organization to take ideas and technologies that are beneficial to the organization (Chesbrough & Garman, 2009). Additionally, organizations are also free to share their own ideas and information with other organizations in the industry. The sharing of information and idea creates an inflow and outflow of information which is used to boost the level of innovation in the organization and performance of the organization. Through the sharing of information with other partners, corporations are able to reach products in the market using either exclusive or inclusive approach to innovation strategy (Vega-Jurado et al., 2015).
Open innovation has become an important tool to boosting growth in the industry. However, it is important to understand that the implementing the new concept comes with a fair share of challenges. The first problem that faces open innovation is intellectual property issues whereby legal risks are involved in case of violation (West & Gallagher, 2016). IP challenges are caused by the fact that some companies may lack an effective policy on intellectual property therefor risk the innovations of other companies. To counter these challenges, it is important to establish laws to guide the operations of the organization to safeguard the innovations gained. Violation of intellectual property laws comes with the legal challenges that can attract huge fines as well as dent the image of an organization. Additionally, apart from operating in the local setting, technology can help to enforce IP laws beyond the geographical barrier, the internet has come with flexibility so that organizations can collaborate and share without having to travel. Effective collaboration comes with the ability of not only sharing information but also creating a fertile ground for innovation (Mention et al., 2013).
Another challenge facing open innovation is sluggishness in the implementation of the ideas. The low pace in open innovation is caused by lack of sufficient communication combined with ineffective technological tools. Organizations coming together to form a partnership should be keen on ensuring that the ideas are processed efficiently. Every collaborative innovation comes with winners and losers; therefore it is important to establish fast screening method to decide between the two (Chesbrough2011).
Since time in history, innovation has been the key factor to the continued success of any business. Many organizations understand this but they fail to put in place right measures and strategies to enhance the level of innovation in the organization. Open innovation helps to ensure that organizations are able to embrace the full potential regarding production, distribution and marketing of its products. Innovation helps to keep corporations float even during harsh economic times for instance during the global financial crisis of 2008. Although it is important for organizations to understand the internal operations setting, having a good knowledge of the external environment is important for helping the organization to maneuver the changing markets, customers demand and the stiffening competition. Collaboration is a crucial part of innovation in the sense that as organizations combine, they establish a platform through which they can use to share as well as learn from other parties in the collaboration. During the formation of the collaborative partnership, corporations are required to examine what each side is bringing to the table as well as what each party expects to gain. With the growth of technology, the internet has provided a platform through which organizations can collaborate regardless of their difference in their geographical locations. However, it is important to understand that the implementing the new concept comes with a fair share of challenges. The first problem that faces open innovation is intellectual property issues whereby legal risks are involved in case of violation.
Chesbrough, H. & Garman, A, R. 2009.How Open Innovation can Help You Cope in Lean Time. Harvard Business Review. Available at: https://hbr.org/2009/12/how-open-innovation-can-help-you-cope-in-lean-times. [October 10, 2017]
Chesbrough, H. 2011. Everything you Need to Know About Open Innovation. Forbes.Available at: https://www.forbes.com/sites/henrychesbrough/2011/03/21/everything-you-need-to-know-about-open-innovation/#3d4d7b4875f4%5BOctober 10, 2017]
Cheng, C. C., & Huizingh, E. K. (2014). When is open innovation beneficial? The role of strategic orientation. Journal of Product Innovation Management, 31(6), 1235-1253.
Dahlander, L. and Gann, D.M., 2010. How open is innovation?.Research policy, 39(6), pp.699-709.
Enkel, E., Gassmann, O. & Chesbrough, H., 2009. Open R&D and open innovation: exploring the phenomenon. R&d Management, 39(4), pp.311-316.
Felin, T. and Zenger, T.R., 2014. Closed or open innovation? Problem solving and the governance choice. Research Policy,43(5), pp.914-925.
Garriga, H, Von Krogh, G., & Spaeth, S 2013. How constraints and knowledge impact open innovation. Strategic Management Journal, 34(9), 1134-1144.
Henkel, J., 2010. Selective revealing in open innovation processes: The case of embedded Linux. Research policy, 35(7), pp.953-969.
Mina, A, Bascavusoglu-Moreau, E, & Hughes, A 2014. Open service innovation and the firm’s search for external knowledge.Research Policy, 43(5), 853-866.
Mention, SASAL., Al-Sharieh, S. & Mention, AL, 2013. Open Innovation and Intellectual Property. The Dark Side of Technological Innovation, p.111.
Saebi, T, & Foss, N J 2015. Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions. European Management Journal,33(3), 201-213.
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Van de Vrande, V, De Jong, J P, Vanhaverbeke, W., & De Rochemont, M 2009. Open innovation in SMEs: Trends, motives and management challenges. Technovation, 29(6), 423-437.
West, J & Gallagher, S 2016. Challenges of open innovation: the paradox of firm investment in open‐source software. R&d Management, 36(3), 319-331.
West, J & Bogers, M 2014. Leveraging external sources of innovation: a review of research on open innovation. Journal of Product Innovation Management, 31(4), 814-831.
Figure 2:This graph clearly shows that growth of innovation leads to the increase in the performance of the organization.
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