An Open Innovation Business Model Commerce Essay

An Open Innovation Business Model Commerce Essay It is very important to know what innovation is before we can further proceed in answering the question. An innovation is a product or service with a bundle of features that is new in the market, or that is commercialized in some new way that opens up new uses and consumer groups for it. Innovation is invention implemented and taken to market (Chesbrough 2003). Invention however is the creation of something that was previously unknown (Chesbrough, Vanhaverbeke et al. 2006). In summary, INNOVATION= INVENTION+COMMERCIALIZATION. Today companies who, want to deliver consistent organic growth to their shareholders, customers, and their employees can do that only through innovation (Chesbrough 2006). So what is â€Å"Open Innovation†? Illustration 1: Concept of open innovation â€Å"Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. [This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology.† (Henry Chesbrough, Open Innovation: Researching a New Paradigm). As mentioned by Chesbrough, there are a total of 5 paths to â€Å"Open Innovation†. Firstly, the old fashion model. It work like a fortress, the firm will take ideas internally to market. This path works the same as a closed innovation concept. The second path would be opening up the abilities for others. This can be achieved by bringing in ideas internally; ideas that does not fit into the firm business but might be useful for others. The third path would be acquiring ideas externally. Ideas are everywhere; firms can acquire ideas from university, individuals, start-up companies and etc. They can then come out with new opportunities and solutions using these acquired knowledge by taking them to a new market; a market that the firm might not have got ten into. The forth path would be to bring in external technologies and ideas to fill the gap that the firm might be facing problem with. Without open innovation, companies might need to use more resources to fill the gap. Lastly, an internal project that does not look promising until a certain level of development can be taken out and allow the team to continue working on it outside. This process can help to raise new money, acquire new customer and hire new employees (Specialist) to further develop the project. At certain point, if it seems feasible and viable, firms have the option to bring the project back if it turns out to be strategically interesting. The 5 paths are very important in helping use to understand why firms are moving towards the open innovation business model. The opposite of Open Innovation-The Closed Innovation In order to understand â€Å"Open Innovation† better, we will need to know the opposite of it- the â€Å"Closed Innovation†. In short, â €Å"Close Innovation† is a paradigm that successful innovation requires control and ownership of the Intellectual property (IP). A company should have full control of everything that relates to ideas. Some companies therefore decided to run their own research and development (R&D) units. The entire new product development cycle was then incorporated within the company where innovation was done in a â€Å"closed† and self-supporting way (Wikipedia).