Open innovation: Using research from everywhere for new product and service development

The broad availability of useful knowledge has made the vertical control of research and development (R&D) obsolete. The proliferation of players and better communication have opened up new opportunities for creating value and have challenged institutions that seek exclusivity or lag in exploiting their own discoveries. Joint ventures, spin-offs and better integration of university research into industrial research are all providing new routes to creating new products and services.

In this Executive Technology Report, Peter Andrews interviews Henry Chesbrough, an assistant professor of business administration at the Harvard Business School and author of a book published in March 2003 entitled "Open Innovation: The New Imperative for Creating and Profiting from Technology." Henry holds a joint appointment in the Technology and Operations Management (TOM) and Entrepreneurial Management (EM) areas at the school. He received his Ph.D. in Business Administration from the University of California-Berkeley in May of 1997, in the area of Business and Public Policy. He also holds an MBA from Stanford University, where he was an Arjay Miller Scholar. He holds a BA from Yale University in Economics (with an Engineering minor), where he graduated summa cum laude and was elected to Phi Beta Kappa.

In his own words, "I am a disk drive industry retread, from Quantum Corporation, and now I am a professor at Harvard Business School. I study the management of technology and innovation. I sometimes think of this work as 'why bad things happen to good technology.'"

Peter Andrews: Your research has taken you to a concept you call open innovation. Could you tell me a bit about it?

Henry Chesbrough: Sure. The basic insight of open innovation is that useful knowledge these days is widely diffused. No one has a monopoly on knowledge the way that, say, IBM had in the 1960s in computing, or that Bell Labs had through the 1970s in communications. When useful knowledge exists in companies of all sizes and also in universities, non-profits and individual minds, it makes sense to orient your innovation efforts to accessing, building upon and integrating that external knowledge into useful products and services.

The other half of the concept is that your own ideas can no longer languish on the shelf. If you don't utilise your own ideas readily, chances are they will diffuse out to the wider environment anyway. So, it is folly to restrict ideas to yourself if you have no plans to use them, and it is wiser to monetise those ideas through external licensing, joint ventures or spin-offs.