Open Innovation at Philips and Facebook

Open Innovation

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Contents
Introduction...........................................................................................................................................2
Open innovation at two companies........................................................................................................2
Effectiveness of their strategies.............................................................................................................4
Comparison of organisation practices................................................................................................4
Companies financial results...............................................................................................................5
Facebook Inc.........................................................................................................................................5
Profitability ratio...............................................................................................................................5
Liquidity ratio....................................................................................................................................6
Asset efficiency ratio.........................................................................................................................6
Capital structure ratio........................................................................................................................7
Phillips limited......................................................................................................................................8
Profitability ratio...............................................................................................................................8
Liquidity ratio....................................................................................................................................9
Asset efficiency ratio.........................................................................................................................9
Capital structure ratio......................................................................................................................10
Comparison of the results....................................................................................................................11
Non-financial factors...........................................................................................................................12
Conclusion...........................................................................................................................................12
REFERENCES....................................................................................................................................13

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Introduction
Open innovation strategy acts a paradigm which assumes that an organisation can and should
use internal and external ideas as well as internal and external paths to market as the
organisation searches for making advancements in their technology. It is a distributed
innovation process that relies on purposively managed knowledge flows throughout
organisational peripheries utilising pecuniary and non-pecuniary mechanism in line with the
business model of the firm (Morikawa, 2016). This kind of innovation is not only firm -
centric but also involves communities of user innovators and creative consumers. There are
many big firms that are using this strategy for their growth. Philips and Facebook are the two
big companies that are using open innovation strategy for making innovations in their
business. This report highlights the open innovation strategy used by Philips and Facebook
and also evaluates its effectiveness by comparing organisation practices using open
innovation and strategic innovation theory. It also compares the financial results to support
the analysis.
Open innovation at two companies
Among the different companies Facebook and Philips are the ones who have a very different
kinds of open innovation strategy used for their growth and innovation.
Philips
Philips is using very different types of open innovation activities. It is having the challenges,
the platform and it triggers own workers to think openly. As a part of the strategy, company
has opened innovation campus at Eindhoven in the year 2003. This high tech campus is
widely open for different types of firms to work for. It provides them with tools to assist
accelerating their research projects and their business (Arrigo, 2012). Such type of open
innovation strategy has helped the company to work with other firms and hence utilise most
of their projects.
The campus runs autonomously but there is presence of Philips helps them in providing
facilities and resources that helps in open innovation. This gives them an opportunity where
there is presence of more than 140 companies where all of them work inside a physical
campus. A better innovation eco-system is created where the ideas of the companies are
being shared with each other (Seebode, Jeanrenaud & Bessant, 2012). Creativity and
knowledge of different companies are being used for developing products that are for the

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future of the society. Such type of physical space gives the company a space where there is
larger possibility to bring great open innovation. This is also because a greater force is
created between the companies where they share their technologies to open up firm’s
innovation to the masses. In one-on-one close collaboration physical proximity is still a major
factor. Even though physical proximity is not necessary still staying close helps in creating
personal bond which is necessary for benefitting society (Gardien, Djajadiningrat, Hummels
& Brombacher, 2014).
Facebook
In Facebook, for promoting open innovation company utilises events such as hackathons for
their employees. The aim behind this hackathons event is that the workers generate new
innovation and ideas and create initial version of it. This type of event is not only conducted
for developers but for anyone within the firm. The idea behind is this strategy is that
employees of the firm work with something that they do not work on regular basis. The
motive behind this is that when an employee does things outside then their day-to-day work
they express their ideas and creativity (King & Lakhani, 2013). They enjoy their differences
and works with each other to generate ideas that are called out of the box thinking. This
strategy also helps the company in identifying new talents and also helps the company in
finding the new skills and knowledge present in their employees. Since the developers and
designers have specific way to thinking about the problems hence such events will bring new
talents within the firm. This works very well for finance and marketing department. When the
employees from different department meet, they share tactical knowledge with each other
(Morikawa, 2016).
At the same time, it creates a sense of team spirit throughout the firm and creates a
meaningful relationship within the firm. All the employees come together for innovating and
creating something new for the firm. Due to this type of collaboration, it is easier for the
organisation to generate product-innovation centred culture within the firm (Jung & Lee,
2011). The success of this event can be seen with the example of the product features such as
live chat, Facebook timelines, like buttons. The pride flag feature which permitted Facebook
to modify their profile picture for supporting LGBTQ community and the idea was given by
two interns of Facebook. Hackathon helped it in spreading at both internal and external
levels. This strategy also helps in building multiple skills in the company.