Rethinking Open Innovation Beyond the Innovation Funnel

Open innovation has always (implicitly) focused on new product introductions. This is illustrated by the central place of the (open) innovation funnel in Chesbrough’s seminal book on open innovation (2003; tinyurl .com/d2l6bqx). Open innovation has been defined in terms of inside-out or outside-in innovation. These two terms implicitly refer to the “open” innovation funnel where external knowledge is acquired to strengthen internal competencies and accelerate the innovation process in the company, and from where unused, internal knowledge is monetized through external paths to market. External knowledge is insourced to develop a new product or business, or internal knowledge is sold to another organization, which deploys it for its own product development. In this article, I provide two arguments to disconnect open innovation from the innovation funnel, opening in this way new directions for future research in this field. First, I argue that organizations in different types of industries can benefit from open innovation even when they are not themselves developing new products or services. This change in perspective makes open innovation relevant for a much broader range of organizations than before. Second, open innovation, with its main focus on the innovation funnel, has implicitly been focusing on R&D projects that, if successful, would bring new growth to existing businesses. Innovation scholars made few attempts to compare the case where open innovation is a means to accelerate growth of existing businesses with the case where it is used to establish completely new businesses.


Introduction
Do we need to rethink open innovation?Is this really necessary?In this article, I provide a few reasons why open innovation has to be disconnected from the innovation funnel.Once open innovation is freed from this straightjacket, we might give it a "second wind" for additional growth.
Open innovation has always (implicitly) focused on new product introductions.This is illustrated by the central place of the (open) innovation funnel in Chesbrough's seminal book on open innovation (2003; tinyurl .com/d2l6bqx).Open innovation has been defined in terms of inside-out or outside-in innovation.These two terms implicitly refer to the "open" innovation funnel where external knowledge is acquired to strengthen internal competencies and accelerate the innovation process in the company, and from where unused, internal knowledge is monetized through external paths to market.External knowledge is insourced to develop a new product or business, or internal knowledge is sold to another organization, which deploys it for its own product development.In this article, I provide two arguments to disconnect open innovation from the innovation funnel, opening in this way new directions for future research in this field.First, I argue that organizations in different types of industries can benefit from open innovation even when they are not themselves developing new products or services.This change in perspective makes open innovation relevant for a much broader range of organizations than before.Second, open innovation, with its main focus on the innovation funnel, has implicitly been focusing on R&D projects that, if successful, would bring new growth to existing businesses.Innovation scholars made few attempts to compare the case where open innovation is a means to accelerate growth of existing businesses with the case where it is used to establish completely new businesses.We are bound no longer by the straightjacket of the past.The example of the crude-oil business in oil companies is just one example of how companies that could not be considered as "open innovators" still can drive competitive dynamics through innovation ecosystems.In this setting, it is essential that the partnering companies have networked business models, meaning that the companies' business models that are mutually interdependent.As an example of a networked business model, take the iPhone: Apple creates value by setting up a platform for apps, and the number of apps determines the value of an iPhone for the customer.Obviously, the appmaker depends on the platform to create his value for the customer.have shown how such an innovation ecosystem has to be managed.However, they limit their attention to firms who themselves are technological innovators and require an ecosystem to get the technology developed and adopted.Our approach is different, leading to a different type of ecosystem and different guidelines for managing the ecosystem appropriately.

Enriching and Broadening Open Innovation by Connecting it to Strategy
Both arguments illustrate the need to integrate openinnovation initiatives into the strategy of the firm.It is time that scholars analyze how managers follow a stepwise process to link firms' strategy to open-innovation practices and take the integration of open innovation into strategy seriously.I explore these two themes in more detail in the following two sections.In the conclusions, I focus on the consequences of this attempt to broaden open innovation for both practitioners and academia.In his article, I first argue that open innovation can be applied in situations where companies do not themselves develop new products or services.As a consequence, open innovation becomes relevant for a much larger group of organizations than previously considered.Second, I argue that open-innovation scholars have insufficiently differentiated open-innovation initiatives in terms of their impact on companies' growth: some open-innovation initiatives lead to incremental innovations in an existing business while, in other cases, open-innovation initiatives are used to establish completely new businesses.Both arguments illustrate the need to integrate open-innovation initiatives into the strategy of the firm.

Citation:
Vanhaverbeke, W. 2013.Rethinking Open Innovation Beyond the Innovation Funnel.Technology Innovation Management Review.April 2013: 6-10.Keywords: open innovation, new product development, strategy, innovation funnel Rethinking Open Innovation Beyond the Innovation Funnel Wim Vanhaverbeke Conclusions When open innovation was launched as a new concept in 2003, it was tightly linked to other concepts such as new product development, the innovation funnel, and business-model change in large companies.Gradually the scope of open innovation has been broadened, introducing new concept such as open business models and open services innovation.In my view, it is time for a new major step forward by integrating open innovation into strategy.This has been a major gap in the open-innovation literature for the last 10 years and this gap has been hampering the progress of open innovation as a useful concept in the mainstream innovation literature.I have been focusing on two topics in this article.First, open innovation can be useful for companies that are not involved in new product development activities.I have described some examples where companies that are not involved in new product development can benefit by setting up a collaborative strategy wherein the open-innovation activities of other companies (in different industries) help improve the competitive strength of the former.Second, the full potential of open innovation cannot be realized as long as it is not connected to corporate strategy.Some companies use open innovation in a quite different way than the standard case studies we can read in the literature.These firms integrate open innovation tightly with corporate growth and corporate renewal objectives.This leads to a new application of open innovation: when the collaboration with technology partners takes place mainly to build new internal (technological) competences.Both topics illustrate how important it is to integrate open-innovation initiatives into the strategy of the firm.Several practice-oriented authors described already how managers follow a stepwise process to link firms' strategy to open-innovation practices.It is time that the academic literature takes the integration of open innovation into strategy seriously.

Open Innovation Beyond the Innovation Funnel Wim Vanhaverbeke Open Innovation Beyond New Product Development
within the energy industry.Oilservices firms typically receive more patents each year than most of the large integrated oil companies.The oil company gains a competitive advantage if it partners with Schlumberger (usually in combination with other specialized services companies), who has leading-edge exploration and drilling technology.An oil company can set up a research program with these partners and (co-)finance the research and development of new exploration and drilling technology.They become strategic partners in advancing this technology.The oil company will typically require exclusive use of the technology for several years before Schlumberger can sell the technology to other oil companies.
www.timreview.caRethinkingnew technologies that allow them to extract oil at greater depths.Although the oil industry is dominated by large companies with strong R&D capabilities, they rely on specialized oil-services companies such as Schlumberger and others to develop new technologies for oil exploration and extraction: the oil-services sector is a beacon of innovation

Open Innovation Beyond the Innovation Funnel
Networked or linked business models are in turn a recent development that have received the attention of Osterwalder and Pigneur, authors of the bestselling book Business ModelGeneration (2009;  tinyurl.com/cadq9x9).Chesbrough and Vanhaverbeke  (2013; in press)provide other examples, such as SkyNRG (skynrg.com) and Better Place (betterplace.com),wherea combination of linked business models and open innovation can be used to leverage any strategic driver.competitivedrivers.Thus, even in absence of any product or service innovation in the business, firms can still "nurture" their network of innovation partners and value-chain partners to become more competitive.This extension of the original open-innovation concept may lead to entirely new developments in this research field:Rethinking

Open Innovation Beyond the Innovation Funnel
Wim Vanhaverbeke is a Professor at the University of Hasselt in Belgium.He is also Visiting Professor at ESADE Business School in Spain and at the National University of Singapore.He has published in several international journals and is co-editor, with Henry Chesbrough and Joel West, of Open Innovation: Researching a New Paradigm, a book about the research challenges related to open innovation.He is a dedicated open-innovation researcher collaborating with different partners in universities and com- One way to broaden the focus of the current open innovation literature is to link it explicitly to corporate strategy.Popular open-innovation cases illustrate how a firm can benefit using external knowledge sources to dewww.timreview.caRethinking areas, new competencies have to be built along the way.This offers an opportunity to put the role of open innovation in developing new competencies and dynamic capabilities into the spotlight (Teece et al., 1997: tinyurl.com/cu49okc;Teece, 2007: tinyurl.com/c3m59tv;Helfat et al., 2007: tinyurl.com/cgodvfw).panies around the globe.He established the European Innovation Forum with Henry Chesbrough in 2012.He is frequently invited to speak at leading international conferences, and he is an adviser for several globally operating companies.He is co-editing a new book about open innovation, which will be published in 2013.