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Open and Closed Innovation: The Right Balance Essay

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Updated: Jun 14th, 2020

Summary of the Article

In the presentation, What is the right balance between open and closed innovation by Ellen Enkel, the author captures the vital aspects of open and closed innovation in modern organisations (Enkel, 2012).

The author showed that Open Innovation is a concept that has gained importance in the recent past for both academics and professionals. Generally, the increased awareness of the concept has been driven by the need to collaborate with the industry peers, improved innovation cycles, growing industrial research and abilities to reduce costs of innovation as well as shortage of resources. In addition, worker mobility and multiplicity of new business models, corporation, opportunities and risks also drive open innovation.

Enkel points the dilemma that firms face when they engage in open innovation, particularly when some organisations are poised to benefit more relative to others. The situation requires effective balance between open and closed innovation. The further pointed out that Open Innovation has attracted various innovative firms to work together in order to commercialise certain ideas.

Organisations such as Henkel, IBM, P&G, and Bayer have adopted open innovations and have embarked on commercialising outcomes of such processes. However, they must also work on in-house ideas, create new knowledge and drive locus of innovation.

Enkel demonstrated that open innovation is all about knowledge exchange and enhancing markets for knowledge. Knowledge for innovation emanates from the company, external relations and from the public (Enkel, 2012). Hence, the corporate open innovation concept accounts for all these three sources of knowledge.

While open innovation is measured and growing, firms have continued to assess its drawback, and they have identified loss of intellectual property and drain of knowledge as major risk factors.

Overall, Enkel noted that organisational strategies and culture are critical in shaping the right balance between open and closed innovation.

Key Learning Points

Open Innovation is driven by several factors, including dwindling research and development funds; shorter innovation periods; increasing worker mobility; merging technologies; and assortment of various new business models, new corporations, new opportunities and risks.

Enkel shows that open innovation requires knowledge exchange and creating the market for that knowledge among various organizations. These organizations normally acquire knowledge from internal sources, external relations and the public through Corporate Open Innovation concept.

While open innovation is shaping innovation in many organisations, it leads to loss of intellectual property and drain of knowledge. At the same time, organisations also must deal with barriers such as balancing daily business needs and Open Innovation requirements. At the same time, it is necessary to evaluate the effectiveness of Open Innovation.

The presentation asserts that innovation processes should be aligned with corporate strategy and support organisational culture. Both strategy and culture are vital in determining Open Innovation because they guide the process of striking the right balance between open and closed innovation.

Open and closed innovation are guided by tendency towards Closed Innovation Model and Tendency towards Open Innovation Model as depicted by Market segment securing defenders and Opportunity-seeking prospectors respectively while Dual-oriented analyzers do not show any inclination. These strategy archetypes ensure the balance between open and closed innovation while the most favoured is Open Innovation.

Critical Analysis

Enkel’s presentation supports the idea of Open Innovation across the industry and among firms and individuals that can work together. The author shows that Open Innovation is a concept that has gained recognition significantly for both academics and practitioners in the last few years. Organisations have realised that they can overcome some drawbacks through Open Innovation approach. Such challenges have been noted in dwindling resource allocation for research and development; shorter innovation cycles; employee mobility and many emerging ideas, business models, risks and opportunities (Enkel, 2012).

Therefore, Open Innovation concept has become a hotbed for attracting many innovators and practitioners (Gassmann & Enkel, n.d). Enkel demonstrated that many multinational firms such as IBM, Bayer and P&G among others have aggressively adopted Open Innovation to commercialise such ideas by amalgamating them with in-house ideas using a common innovation platform.

Companies such as IBM, P&G, Google and others have embraced Open Innovation by opening up their boundaries to tap outside useful knowledge in order to develop new opportunities through collaborative innovation processes with external relations, customers and the public. The process involves the exploitation of new, innovative ideas to ensure that they reach the market faster to solve consumer needs. Open Innovation, therefore, requires organisations to understand how efficient to handle strategic needs in order to account for changing market needs and organisational strategic objectives.

The success of Open Innovation, for instance, is notable in IBM. Organisations strive to strike the perfect balance between open and closed innovation. However, research strategy and open processes have ensured that practitioners and innovators remain flexible to meet emerging market needs. Organisations that have adopted Open Innovation have integrated external knowledge by enhancing their collaborative strategies with their external partners when they engage in joint innovative activities.

Organisations and innovators are however concerned about risks associated with open innovation phenomenon. IBM, for instance, uses unique patent strategy to ensure that it licences other patents that cannot be integrated internally and then the company incorporates them in the business strategy. These organisations use different strategies to ensure that Open Innovation outcomes are integrated in their business processes and strategies.

Organisational strategy and culture are vital for striking the right balance between open and closed innovation. That is, organisations should master internal processes, new challenges and develop processes that can accommodate innovative processes. Thus, commercialisation of outcomes relies on flexible approaches. Other researchers have demonstrated the importance of assessing “strategic, organizational, behavioral, knowledge, legal and business perspectives, and its economic implications in Open Innovation because of their implications and trends” (Chesbrough, Enkel, & Gassmann, 2009, p. 311).

It is therefore imperative for organizations to understand all aspects of how and when Open Innovation can work, create value in knowledge creation processes and ultimately meet market needs. While Open Innovation is a robust concept, it requires evaluated interpretation and integration of the value created or the new business model for every unique situation. That is, Open Innovation offers relevant implications for emerging processes in research and development to meet market needs.

Application of the Subject Matter in a Real Business Case

Enkel identifies several factors that have driven Open Innovation across industries. Open Innovation has been adopted widely in innovative firms such as IBM, Google, Yahoo, Henkel and P&G among others. The case of IBM, for example, can demonstrate how Open Innovation works in a practical context.

IBM has been touted as an exemplary in Open Innovation in the IT industry. The company has gained recognition because of its long strategy on research and development undertakings, outstanding innovation and good relations with external stakeholders.

Today, IBM has been recognised for creating strategic partnership in which the firm undertakes innovative approaches to create and exploit joint projects with others across various industries. The company has adopted a give-and-take strategy in which it collaborates with external stakeholders to acquire knowledge, provide its own internal knowledge and technology and then incorporate the approach into its core business strategy.

Customers and partners are responsible for generating knowledge that the company requires. The company can use the same knowledge to forecast and predict market needs and meet them. Consequently, Open Innovation has helped IBM to maintain its leading market position.

The company has adopted a culture and research strategy to support Open Innovation and create greater flexibility to meet market needs.

Lessons Learnt

Enkel’s presentation shows that Open Innovation is changing the way companies engage with external stakeholders. At the same time, it assists organisations to overcome drawbacks in R&D. Thus, Open Innovation is a promising concept for practitioners and academics.

Organisations can leverage knowledge from external sources to meet unique market needs. They must however integrate their own internal knowledge to commercialise such new innovative concepts.

Although Open Innovation leads to loss of intellectual property rights and knowledge, many organisations have noted that remaining flexible through innovation processes can lead to positive outcomes.

Organisational strategy and culture are two critical elements that assist firms to attain the right balance between open and closed innovation. That is, only firms whose business strategies and cultures support Open Innovation can succeed. In addition, other attributes such as legal and business aspects and economic consequences should be taken into account.

Reference List

Chesbrough, H, Enkel, E & Gassmann, O 2009, ‘Open R&D and open innovation: exploring the phenomenon’, R&D Management, vol. 39, no. 4, pp. 311–316. Web.

Enkel, E 2012, What is the right balance between open and closed innovation? Zeppelin University, Bodensee.

Gassmann, O & Enkel, E n.d, Towards a Theory of Open Innovation: Three Core Process Archetypes. Web.

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