Open Innovation vs. Closed Innovation

OpenVsClosed-9

While PARC was focusing on the internally focused Closed Innovation paradigm, the greatest technological achievements that emerged from PARC, by contrast, could only take root – and create real economic value – when pursued in a far different context, a context of Open Innovation.  Most of these achievements were realized only when key PARC researchers left Xerox, and went to other smaller companies, or out on their own to start up new companies.  These companies could not afford to pursue the model of deep vertical integration that Xerox followed.  Instead, they had to define a business model to commercialize their own technologies.  They had to create systems and architectures that enabled their products to work with other companies’ products to build a system. Those startups that achieved commercial success, did so via applying their technology in a quite different way than they originally envisioned when they left Xerox.

A lot of projects were cut off from further internal funding because results were often not clear, and what results were obtained had little relationship to being successful in the market. This led to the departure of technologies that became the spin-off companies.
When commercializing a new technology requires the resolution of both technical AND market uncertainty, one cannot expect to be able to anticipate the best path forward from the very beginning.  You simply don’t know all the possibilities in advance.  Not only is it unknown, it is unknowable.  No amount of planning and research can reveal the facts, because they simply don’t exist yet.  Instead, you must make an initial product to learn what some customers like and dislike about it.  Then you must adapt your plans in response to the feedback as you go along, and make adjustments as more information becomes available.  In these circumstances, it is also a good idea to try to use that technology in more than one possible market, using more than one configuration.  This increases your chances of finding a highly valued use for the technology.  The history of innovation is full of examples where the eventual best use of a new product or technology was far different from the initial intended purpose of the idea.

 

 

 


Content from:

Open Innovation: The New Imperative for Creating and Profiting from Technology by Henry Chesbrough [Chapter 1]