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Beyond Borders and Boundaries Not only are firms establishing research centers outside their own geographic bor-

ders, but also they are finding new ideas beyond their corporate boundaries. In the

CASE IN POINT

spirit of “open innovation,” companies are opening their internal R&D processes to external parties.

13

Henry Chesbrough, a professor at U.C. Berkeley’s Haas Business School who

IN 2001, PROCTER & GAMBLE launched an open innovation initiative

coined the term “open innovation,” says that it “can be understood as the antithesis

called Connect + Develop. A network of

to internally developed products that are then distributed by the firm.”

dispersed around the world serve as in-

of the traditional vertical integration approach, where internal R&D activities lead 14

in-house “technology entrepreneurs” novation scouts, scouring research labs,

Chesbrough was among the first to articulate that organizations not only can but

suppliers, retailers and competitors for

every organization and business unit can benefit from looking both inside and out-

created a secure IT platform for sharing

should use external as well as internal ideas and paths to market. He contends that 15

side for innovative ideas and for assistance in developing and commercializing them to maximize returns from new product development.16

Open innovation originally referred to an inbound and an outbound process: on the one hand, companies would commercialize external ideas, and on the other,

they would spin off or license internal ideas.17 Chesbrough suggests that companies should look for ideas and technologies that fit their business models. The internal ideas that don’t fit should be allowed to go outside, where others can bring them into their innovation processes.18

Companies such as Procter & Gamble, Unilever, General Mills, Hewlett-Packard,

ideas. To support this effort, P&G also technology briefs that defined the problems the company was trying to solve. Since the inception of this program, P&G says it has increased R&D output by about 60%, and it has exceeded its goal of acquiring 50% of its innovations outside the company. Externally sourced innovations include Swiffer Dusters, Mr. Clean Magic Eraser, Olay Regenerist, Tide Total Care and the Oral B Pulsonic Toothbrush.19

Kraft, Philips and L’Oreal have all successfully implemented open-innovation ap-

proaches, generating great ideas in partnerships with universities or picking them up by paying careful attention to consumers, high-tech entrepreneurs and others.

Asked which type of external partners assisted with innovation processes, respondents to a 2007 Economist survey ranked universities the highest (cited by 60%), followed by customers (50%) and suppliers (47%). (See chart on page 6.)

13

Lichtenthaler, U. 2011. “Open Innovation: Past Research, Current Debates, and Future Directions.” Academy of

Management Perspectives. 25 (1): 75-93. 14

Chesbrough, H. 2011. “Everything You Need to Know about Open Innovation.” http://www.forbes.com/sites/hen-

rychesbrough/2011/03/21/everything-you-need-to-know-about-open-innovation/ (Accessed 20 February 2012.) 15

Chesbrough, H. 2003. Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston:

Harvard Business School Press. 16

Grönlund, J., et al. 2010. “Open Innovation and the Stage-Gate Process.” California Management Review. 52 (3):

106-131. 17

Lichtenthaler, U. 2011.

19

Huston, L., Sakkab, N. 2006. “Connect and Develop: Inside Procter & Gamble’s New Model for Innovation.” Har-

18

Chesbrough, H. 2011.

OPEN INNOVATION… IS A MORE DISTRIBUTED, MORE PARTICIPATORY, MORE DECENTRALIZED APPROACH TO INNOVATION, BASED ON THE OBSERVED FACT THAT USEFUL KNOWLEDGE TODAY IS WIDELY DISTRIBUTED, AND NO COMPANY, NO MATTER HOW CAPABLE OR HOW BIG, COULD INNOVATE 20 EFFECTIVELY ON ITS OWN."  Henry Chesbrough

vard Business Review. 84 (3): 58-66. 20

Chesbrough, H. 2011.

5

Profile for BattenInstitute

Briefing_GlobalRandD_Feb12  

[From the Innovators' Roundtable Series] Corporate innovation does not take place only within the vacuum of a company’s R&D unit. New produc...

Briefing_GlobalRandD_Feb12  

[From the Innovators' Roundtable Series] Corporate innovation does not take place only within the vacuum of a company’s R&D unit. New produc...