Open Innovation

Henry Chesbrough is the Executive Director of the Center for Open Innovation at the University of California, Berkeley, Haas School of Business. He is also a professor at the Haas School.

Open Innovation applies the principles of free trade to innovation,

advancing new ideas through the use of tools such as partnerships,

joint ventures, licensing and Strategic Alliances. By collaborating

with outsiders—including customers, vendors and even

competitors—Open Innovation enables the laws of comparative

advantage to drive the efficient allocation of R&D resources. By

reaching beyond corporate borders, a company can import lowercost,

higher-quality ideas from a wide array of world-class experts

to improve the speed, quality and cost of innovation. This approach

allows the business to refocus its own innovation resources

where it has clear competitive advantages. Ideas also are exported

to businesses that can put them to better use.

Methodology

Open Innovation requires a company to take these steps:

• Focus resources on its core innovation advantages. Allocate

resources to the opportunities with the best potential to

strengthen the core businesses, reduce R&D risks and raise

the returns on innovation capital.

• Improve the circulation of innovation ideas. Develop information

systems to capture insights, minimize duplicate

efforts and advance teamwork.

• Increase innovation imports. Gain access to valuable new

ideas, complement core innovation advantages, improve the

company’s collaborative abilities and build its reputation as

an innovative partner.

• Increase innovation exports. Establish incentives and processes

to assess objectively the fair market value of innovations.

Carefully structure joint ventures and Strategic Alliances

to protect the company’s rights, raise additional cash and

strengthen relationships with trading partners.

Common uses

Companies use Open Innovation to:

• Clarify core competencies

• Maximize the productivity of new product development without

increasing R&D budgets

• Decide quickly and effi ciently whether to buy or sell patents

and

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