Innovation is a way of getting competitive advantage which is well known and documented since ancient times, ranging from machinery, war equipment to the beauty industry and all trial building the perpetuum mobile. What´s happened lately is the paradigm shift of opening up the innovation process from being secret and closed towards inviting for collective wisdom and creativity. We call it open innovation or sometimes Innovation 2.0.
Open innovation, is a way to forge closer relationships, gain access to the best thinking and to quickly disseminate ideas and trends by ambassadors are on the rise. In recently blog posts, by me and other bloggers, you have seen examples with Google, Apple and Nintendo. In a recently published MIT article by the Open Innovation guru Henry Chesbrough, he states that Porter’s Value chain need to be extended; as the service interaction (Service Value Web) and innovation taking place between producer and consumer must be taken into account in a greater deep than just been seen as logistics.
Another interesting innovation observation is that there seems to be a dualistic relationship between profitability and innovation; characterized by kind of market structure.
In a market with perfect competition player gain the benefits of the innovations as following;
- if there is technological leap (so-called disruptive technologies), it can revitalize an entire industry such as the iPhone and Windows did,
- but if it is about improvements, such as streamline or added features, the innovation only provide short-term benefits as the competitors will respond with lower price, imitations or substitutes.
However, if there is an oligopoly, i.e. few players who compete in the market space, innovations tend to very quickly imitated by competitors, sometimes even gets launched before, often leading to long-term reduction in profitability as research and development budgets get astronomically high.
Now, if we add to this trend Open Innovation, say the mobile phone industry which is an oligopoly market structure, already suffering from shrinking margins and increasing R&D costs, it will be very interesting … in an open approach ideas and concepts will move fast between communities, so-called leakage between communities, that in turn means that knowledge, ideas and opportunities move even faster than before when the innovation space was closed. Oligopolistic players now not only has an eye on each other but also dancing with each other’s customers in one big open innovation square dance…
Right or wrong, opportunity or threat, but the world has changed and we with it …