Open innovation is the process by which organizations use both internal and external knowledge to drive and accelerate their internal innovation strategy in order to fulfil existing market needs or to access new market opportunities.
The concept of open innovation implies that an organization has the willingness and desire to source and utilize external knowledge, ideas, intellectual assets and technologies, in addition to its internal capabilities, to identify solutions to problems, capitalize on opportunities, develop new technologies, create new products and services, improve processes, or design new organizational systems and business models.
Henry Chesbrough has been a great advocate for open innovation as demonstrated by his book Open Innovation: The New Imperative for Creating And Profiting from Technology, which describes the difference between closed and open innovation. The key characteristics of closed and open innovation are compared and contrasted in the table below:
Open innovation is about collaboration with external organizations to co-create future opportunities, technologies and products that address existing or new markets for an organization. A great example of an organization practicing open innovation is Proctor & Gamble, where many of its products have been developed with external partners providing research, development and cross-licensing of intellectual property.
Open innovation is sometimes confused with the term ”open source”. Although the terms are not mutually exclusive, open source is defined as the practice of providing open access to a product’s source material. For example, Wikipedia is an example of an open source platform where knowledge and information, including intellectual property, is shared and made available in the public domain. Open source can be viewed as a subset of open innovation. Although open innovation is about collaboration between two or more parties, access to intellectual property may involve varying degrees, from confidential to publicly available. In contrast to open access, open innovation can involve private or exclusive participants, where intellectual property is protected or kept confidential.
Dr John Kapeleris