The Unexploited Areas of Open Innovation

Posted: October 30, 2010 in Open Innovation, Open Source
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Alpheus Bingham of Innocentive’s talk is quite interesting. He claims that the fundamental ways that open innovation (OI) can become transformative for a business are often ignored. His research has shown that this involves exploiting spot capacity, OI as a mechanism for risk distribution (financial, execution and scientific risk), and OI as a  misguided claim for diversity. When discussing spot capacity he shows through a simple use of Transaction Cost Theory how search costs and other costs related to making and post-making a transaction an organization needs to deal with are very high. However with OI this can be reduced. Risk distribution and diversity are highly linked. If an organization like a pharmaceutical company wants to find the cure for a rare disease the risk of failure will be quite high (Bingham uses Edison’s example of creating a lightbulb after having failed over a 1000 times). Shareholders of most companies are not happy to have their money ‘wasted’ on failure. In the case of OI the community takes on the risk of failure rather than one organization. By sending out an electronic call companies manage to get the attention of all the suppliers that will probably not have the people with the diverse skills that you need in order to innovate. By specifying such close criteria you strip out all diversity and thus endanger OI.  

In essence the field of vision for your company’s problem space includes scientific method, social search, and finally the open space of OI. All three have merit but they do not follow each other logically or chronologically. Sadly companies do not draw on a taxonomy of OI. Instead, they take OI as a broad field and engage in it and with it without realizing they do indeed need to have a clearer path to steer to make effective use of OI.

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