Open Innovation Strategies and Barriers

The assignment focuses on innovation ecosystems and requires an analysis of the structure of technological interdependence among firms to understand how it affects firm performance in new technology generations. Students are expected to explore business model innovation, opportunities, barriers, open innovation, systems of innovation perspectives, and the financing of R&D and innovation. The assignment also encourages a review of innovation research in tourism and information systems innovation for environmental sustainability.

Unit 8
INNOVATION

TABLE OF CONTENTS
INTRODUCTION................................................................................................................................3
TASK 1.................................................................................................................................................3
P1 How Innovation is important for employees of Birch box....................................................3
M1 Sources of Innovation and how Birch box is developing the culture of innovation............4
D1 Development and Measurement of Innovation.....................................................................4
P2 How Innovation can be shaped by Teamwork and Leadership.............................................4
TASK 2.................................................................................................................................................5
P3 4P's of Innovation..................................................................................................................5
M2 Analysing and applying the innovation funnel in a company...............................................6
P4 Development in frugal innovation and its use in an organisation. .......................................7
M3 Role of frugal Innovation in an organisation........................................................................7
TASK 3.................................................................................................................................................7
P5 Importance of Commercial Funnel and application of NPD. ...............................................7
M4 Detailed Innovation Business Case......................................................................................8
P6 Innovation Business Case for Birch box................................................................................8
D2 Nature of Innovation.............................................................................................................9
TASK 4.................................................................................................................................................9
P7 Tools used in the organisation................................................................................................9
M5 Supported evidence based evaluation of these tools............................................................9
CONCLUSION..................................................................................................................................10
REFERENCES...................................................................................................................................12

ILLUSTRATION INDEX
Illustration 1: Innovation Funnel..........................................................................................................5

INTRODUCTION
Innovation refers to the production of innovative ideas or to modify an existing product or
idea that results in something valuable. First telephone was an invention but invention of
smartphones can be called as innovation because it includes modifications and new idea from the
concept of telephone (You, Henryson and Lyytinen,2010). In any business or enterprise, innovation
can act as a moderator to success and growth. These can be categorised in two categories-
Evolutionary and revolutionary. Innovations that are evolutionary are continuous which comes from
increments in technology but innovations that are revolutionary are discontinuous and most of the
time are new and sometimes troublesome also. Here taking example of an SME i.e. Small Medium
Enterprise, Birch box. Birch box, founded in 2010 is a UK based small organisation which is an
online subscription in which they send four to five kits containing make-up products to their
subscribers. Their make-up kits contain all women essential products as skincare, perfumes etc.
TASK 1
P1 How Innovation is important for employees of Birch box
Innovation is the concept of creating innovative ideas and using those ideas to modify the
products etc. It helps in a fast growth of the employees as well as of the organisation. Discontinuous
innovations are evolutionary and continuous innovations are revolutionary. As in case of Apple,
when they released iPod, that time there were many other music players also but the main issue was
many songs in a very less memory space. Rather than focusing on chips or internal devices, they
focused on the customer's requirement (Chesbrough, 2010). Combined it all together, developed an
iPod that is now having 56% revenue share in the market. They could do all this by innovation.
They understood the user's requirement. Birch box is also focusing on the customer's requirement.
That's why every month it sends make-up kits to its subscribers and after every month, takes a
feedback if any customer has some issue about the quality or packaging, if any, Birch box replaces
the same with the new product.
It gives a huge importance to feedbacks which makes it one of the best online marketing
store. This way innovation helps Birch box in growing so fast since 2001. It also creates more
competition in the market. So, Birch box also is continuously focusing on innovative ideas to satisfy
the customers at the most (Teece, 2010). If there will be no creativity in the business, it will lose its
place in the market because everyone wants perfect products with innovative ideas. The Virgin
group also started from a small publishing venture and by developing creativity in innovative ideas
and technologies, they are now a big chain as Virgin Atlantic, Virgin Express etc. This improvement

in Virgin groups was due to two reasons, entrepreneurial aggressiveness of Branson and the will to
develop innovative ideas to satisfy more and more customers. Birch box employees are very
creative and they all share their stuff and ideas with the other employees which make their work
more creative and innovative.
M1 Sources of Innovation and how Birch box is developing the culture of innovation
There are seven sources of innovation which a company develops for a fast growth.
Describing a few of them:
1.The Unexpected - It is sometimes important to expect the unexpected. The market can change
dramatically as people sometimes take unexpected decisions. To look for different opportunities, a
market place is the best place (Ander and Kapoor, 2010). The employees of Birch box are already
trained if there will be some unexpected decisions of the customers. They behave patient, consider
the matter and find innovative solutions according to the present situation.
2. Incongruity - What the situation is and what it should be are two different things.
Incongruity means being not compatible. It means to think differently from the competitors
as well as the society. Birch box employees always focus on creating ideas that are quite
different from the other brands so that they can make their mark more effective.
D1 Development and Measurement of Innovation
Innovation can help in developing challenges as in creating new modules or art pieces by
using some innovative ideas, in eliminating the unappreciative art pieces that have not been sold for
a long (Leinonen and Heft, 2010). It helps in economic development. Innovation does not only
mean high tech products but it means modification of the old ones with some new creative ideas in
which the customers take interest in.
Merging the art and science together is measuring innovation and it is a challenging task to
do. Birch box considers well the processes they do in innovation processes but also takes care of
what the outcome is of the process. They have their focus on both the qualitative as well as the
quantitative side.
P2 How Innovation can be shaped by Teamwork and Leadership
 The leadership of a company in right hands means a lot. If the leader is dedicated, it will
affect the behaviour of other employees also. Steve Jobs, CEO of Apple is a best example of
this. As he described, their forte was not about the chip, material or design of their products,
but they first considered what the users really want. Mainly, leadership is of two types-

Participative and Autocratic (Crossman and Aladdin, 2010). Autocratic means when the
leader does not need any ideas or suggestions from others but in Participative, ideas and
suggestions from others are welcomed. So, Birch box should follow the participative
because a combined suggestion is better than one. It will be more creative.
 Teamwork of a workplace is also another factor. In Virgin group, it was the teamwork that
made the group so successful. The employees are so compatible with each other that they
share all their ideas, discuss about it and try to innovate something new and much better. In
Birch box also, they conduct sessions from time to time in which everyone shares their ideas
about innovating something new. Whenever something is troubling between any members,
rather than having grudges, they sort it as soon as possible.
 Vision of an organisation plays an equal key role. If the company have a vision that is not
impressing the customers that much, it means they must either change it or to modify it. As
many of the make-up brands provides products which consists a part of the chemical
composition (Ander and Kapoor, 2010) Birch box considers on producing organic products
which will attract a lot of customers as they will make no harm to the skin.
 Culture in a workplace affects the team progress. If the culture is friendly and compatible in
communicating with each other, they can share their ideas and it is the responsibility of
management to consider it for the innovation of the company. In Birch box, the employees
have a good relationship with each other so they communicate well with one another and the
management considers all their ideas, discuss about it if they can help the company.
TASK 2
P3 4P's of Innovation
The model of 4P's of innovation is described as under:
1. Paradigm: A typical example of something is called Paradigm. It means how to frame what
is being done. There could be many changes but it is important to remember that all
changes may not result positive. Some results negative also. Imaginations are great but when
leading to profit. Birch box did this by replacing the published print products to online
advertisements.
2. Product: It means what does a company offer. In Birch box, employees keep taking feedback
from their customers about how they can improve their products or include any modification
if required (Gassmann, Enel and Chesbrough,2010).

3. Process: It refers to how a company offers its products to the customers. This not only
includes preparation but also the supplying, recruitment of people, training etc.
4. Position: It means the target of the products being produced and supplied. Birch box always
changes its context of serving its products. Sometimes they send a gift along with the make-
up kits and sometimes they offer them some claim award. This attracts more customers and
helps the company in gaining an advantageous position in the market.
Innovation Funnel is very useful in shaping ideas that are innovative.
In the first step, wide mouth of the funnel, the company tries to increase its information base and
knowledge. Secondly, it represents the narrow segment which involves goal matching where they
will relate and then, the third step is to release the new products or services in the market.
M2 Analysing and applying the innovation funnel in a company.
In the first stage, which represents an open and wide mouth of the funnel means now, the
company is focusing on developing innovative ideas and skills. More the ideas a company have,
more they can apply on the products. Birch box applies the same strategy (Chesbrough,2010). They
take feedback from the customers and tries to involve all in the manufacturing of the new products.
The second step involves screening of the previous step. In this, they match the ideas with
the goals whether they are required or not for achieving that.
The third step involves the release of the new products in the market. When Birch box
includes any modifications, then they do its marketing and again takes feedback from their
customers. This concept is very simple to adopt (Ander and Kapoor, 2010).
Illustration 1: Innovation Funnel
(Source: Teece, 2010)

P4 Development in frugal innovation and its use in an organisation.
Framework of Frugal innovation is described below:
 Innovation: It means an organisation not following a particular set or format for doing tasks.
It means the involvements of various experiments with respect to that.
 Dominant Mind-set: No framework is defined yet that ensures innovative success. These
mind-sets are actually, which creates alternatives and effective solutions to all the issues.
 Implementing the mind-sets: It helps in creating comprehensive solution which further helps
in achieving the main objectives.
 Seed of the mind-set: The overall framework starts from here only. After that it is being
converted in actions having that passion for evolving changes.
The minimization of cost and complexity of a product and its services is called Frugal
Innovation. It eliminates non-required features from a product (Leinonen and Heft, 2010). Apple
used this innovation as they developed a player which has a high capacity of storing songs but it
occupies very less space as compared to a huge list of songs. Frugal innovation is something which
acts even more than a strategy. Birchbox can also develop frugal innovation which can help it in
reducing the complexity of the goods. They can develop it in a various ways. Like Apple removed
all the unnecessary chips that was just making the iPod heavier, nothing else. They also developed
frugal innovation which helped them in removing unnecessary chips and focusing on what people
want.
It termed effective for the customers as well as increased the sales of the company.
Birchbox can focus on building circular value networks. It can replace their old linear chain analysis
as well because it is costly as well as time consuming. The management at Birchbox should operate
their chains, by using some sustainable techniques like Cradle to Cradle (C2C) etc. It can help them
to a cost effective system as well as regular reuse of the material including wastes also. The
employees at Apple removed unnecessary chips that were of no use in the iPod. In their mobile
phones also, when they produced the first model phone, it was not as good as the latest released
iPhones. By following the same, they have now released I phone 7s which is far better and user-
friendly than their first model. So, after presenting their first I phone, they replace the memory chips
by the new ones which can store a much larger amount than the previous one. Similarly, Birch box
can also remove the chemical composition from the products by making it organic and good for the
skin of the customers. Development of frugal innovation helped Birch box a lot as the customers
are loving the organic products because they cause no harm to their skin (Crossman and Aladdin,
2010).

M3 Role of frugal Innovation in an organisation
Frugal Innovation helps an organisation in eliminating the unused and unnecessary products.
It also helps in minimising the cost as well as complexity of the products. Also, it helps in reducing
the production services (Ander and Kapoor, 2010). If a company is eliminating the compositions or
products that are of less use in their production or the components that have not been used in their
products for a long time, it will help the company to reduce the cost of unused components and thus
will gain some profit for the company.
TASK 3
P5 Importance of Commercial Funnel and application of NPD.
The applications of new product development (NPD) are essential for a focused and flexible
approach.
Purpose of NPD Process – The process has been divided into various stages which has the
involvement of various further processes. Different stages involves different purposes. The stages
are discussed as under :
 Idea generation and Screening – The following stage involves all the marketing related
processes i.e. research, financing etc.
 Business Analysis – It includes marketing along with the sales and finance.
 Beta Testing and Marketing – It consists of all the research about the market, products, its all
planning and the related strategies.
 Pricing and Launch – This is the last stage of the process which involves the whole supply
chain, finance and the logistics.
Explaining the importance of NPD in the innovation of business is discussed as under:
1. Generating Ideas – The start for production of a product starts from a concept. Then
the process of checking the reason ability of the product starts. Different people gives
different ideas.
2. Idea screening - In this, screening of the ideas takes place in which unsuitable ideas
are rejected for some reasons.

3. Testing and development of concept – Personal ideas does not matter. What matters
is the need of customers (Teece, 2010).
4. Business Analysis – After the ideas have been finalised, an analysis in Birch box is
finalised to check whether the services for the new product are beneficial for the
company or not.
5. Product Development – If the product has been approved, it has been send to the
development department where they complete the development of the product and
prepares it for marketing.
6. Test Marketing - In Birch box, they follow the planned plan for the strategy of the
marketing of the product which is called Test Marketing (Chesbrough,2010).
7. Commercialisation - It is after the product has been produced and checked for
further complications, then it is released in the market is called Commercialisation.
8. Launch – Whenever Birch box develops a new product, they plan a proper strategy
for the commercialisation as well as for the launch. A proper plan is required so that
the launch goes smooth and it has the maximum impact on the customers.
M4 Detailed Innovation Business Case.
Here describing detailed innovation of Birch box, in Birch box, employees share their ideas
together and the management considers it and decides what innovative ideas are to be developed
and how they are beneficial for the company. They also do frugal innovation in which they remove
the unnecessary components which they are using in their services or products. The employees in
Birch box follows participative innovation (Ander and Kapoor, 2010). It is so because in autocratic,
only one person is inventing innovative ideas for the production and marketing. In participative,
different ideas come from different people which results in a perfect idea. It is obvious enough that
combination of many ideas can result better than a single idea. This strategy has helped Birch box a
lot and now it is one of the top online marketing businesses.
P6 Innovation Business Case for Birch box
Innovation Business case can be consider the modified processes or adding more creativity
in the products, processes and ideas. The purpose of involving innovation in a business means
making the business more effective by creating some new ideas in it. In Birch box, they try to
remove the uncertainties as soon as possible. Birch box deals with participative leadership which
means including the ideas and suggestions of others also. Participative innovation has helped Birch

box till now in satisfying the needs of the customers by developing the products that attracts an
enormous number of customers.
Problem to be solved - Birchbox was facing some issues with the customers. The customers was
losing interest in the company and its products. So, it was affecting the customers of Birchbox and
they were not able to retain them back.
Proposed Solution - Then, by the help of participative innovation, they started developing organic
products which is a very good idea to attract customers as they cause no harm to the skin
(Gassmann, Enel and Chesbrough,2010).
Justification on how the solution is innovative - Birchbox choose the use of organic products only
to deal with the problem because the customers have lost their interest in their routine care products.
So, they decided to choose something different that can remain healthy as well for protecting the
skin of their customers.
Customer research outcome – While developing methods for satisfying the customers and retaining
their interest back in their products, Birchbox had a research. In that they contacted many people
about what is their need of the hour. IN what sort of products, they are interested in. After all that
research, they come to know that presenting organic products would be a good idea.
Customer survey outcome – Birchbox had an overall survey on the main question that was on their
mind i.e. what the people want as their essentials. They come to know about involving organic
products. It refereed a good idea as it cause no harm to the skin and it is gentle on almost every skin
type.
Design and Development Plan – After proper research, the organic products will be developed. The
development of the new products will be done under supervision of the management. It also ensures
the use of original organic ingredients in their products.
Investment requirements-
Marketing – Birchbox after properly developing the organic products, planned a marketing event
for their new products. On their event, they discussed about all their new essentials and they even
disclosed some of the essential ingredients as well.
Finance – For development of the new products, they took a small loan from a bank. They know it
is very important for them to gain the attention of customers again. Then it will be easy for them to
repay the loan.
Project Management – They did it all together. Each and every employee was focused to cover the
loss of the company. Their hard work resulted in development of a new range of essentials i.e.

organic and hopefully can bring many benefits to the company.
Expected Benefits-
Financial – They will recover all the loss after developing a new organic range. It can prove very
beneficial for them and help them in covering all the loss which they had witnessed before.
Social – The overall development will have a huge impact on the business. The regular views of the
Birchbox website can also start increasing very fast which will help them in gaining more followers.
Environmental – The new developed range will be totally organic, therefore healthy for the
customers as well as for the nature. It will contain no chemicals and will be fully organic. It will be
very beneficial for the skin of customers and for the environment as well.
The company has also involved frugal innovation, so they are removing the products that are of no
use or very less use or the product they do not want in the manufacturing of the new products. Many
Companies often miss to check the issues of the stakeholders, but Birch box takes care of it properly
by regularly checking the feedbacks. In-fact after every delivery, it contacts its customers if they are
satisfied or not. This feature makes Birch box a leading online marketing company.
D2 Nature of Innovation
It can be either Product innovation or Process Innovation. Product innovation means the
presentation of new products or any modification in the previous product. It involves new products,
the products made from innovative ideas, the modified products etc. Process Innovation means the
launch of new schemes or processes for production and delivery of the products. In this, it invents
new processes so that they can have more methods which they can use in the development and
production and then supply of the products.
TASK 4
P7 Tools used in the organisation
Describing below the methods that are used to protect ideas:
1. Patents: Having patents gives the owner the permission to exclude others from producing,
marketing or designing. Patents can be of utility, design and plant types. Almost 90% of the
patents in organisations are utility patents. Design patents are those who prepares a modern
design (Leinonen and Heft, 2010).
Advantages – a) It helps in enabling more investments and bigger returns on the investment.
b) Makes the invention liable.

Disadvantages – a) It may reveal the invention to the rivals.
b) It may be expensive.
2. Copyright: It means protecting the original works which includes the whole make-up
collection. It does not provide any methods or suggestions of operation. In-fact it protects
the ways the things are expressed.
Advantages – a) There is no formal process to save the file.
b) Terms of protection increases for the real editor
Disadvantages – a) The ideas and concepts are not protected. The expression is protected only.
There may be several exceptions following the creator's rights.
3. Trademarks: It gives the information from the competitors about the sources where goods
are being produced. Birch box is also registered with US Patent and Trademark Office
(USPTO).
Advantages – a) Helps the innocents from someone taking advantage of them.
Disadvantages – a) A registered trade mark does not mean registering in the internet domain
names.
4. Trade Secrets: Trade Secrets are being protected by Texas Uniform Trade Secrets Act
(TUTSA). Formulas, patterns, devices, methods, financial data list etc. are included in the
trade secrets (Crossman and Aladdin, 2010).
Advantages – a) Helps in extending the protection for a finite time period.
b) The protection seems easy and inexpensive to obtain.
Disadvantages – a) The patent of the trade does not remain secret with another party.
b) The loss or neglect of security and protection.
M5 Supported evidence based evaluation of these tools.
The various methods for protecting data has several advantages as the employees in the
Birch box are free to change or develop innovative ideas (Teece, 2010). They can apply their
innovative ideas on something after taking the permission of the management. They are free to use
as many ideas they want to experiment on the makeup piece but it should be in favour of the
customer and it should cause no harm to their skin or beauty. They have the potential to stand in this
competitive market. In copyright, there is no need of official registration (Adner and Kapoor, 2010).
In Trademarks also, it prevents the employees from someone taking advantage of them. A patent has

given equal rights to immediately stop someone from using their invention. Any company or
organisation having a patent gives them the power of removing any one from their ideas or
suggestions etc.
CONCLUSION
Innovation is necessary in any organisation to keep the spark on. The customers also get
bore of the same products and they want to take a break sometimes. Using new and creative ideas
for the development of a new product attracts the customers more. Birch box involves participative
innovation because one person alone cannot do better than a combined decision. It is because
different people share different ideas which can result in better conclusions. It also follows frugal
innovation in which they remove all the unnecessary elements or compositions they don't use or
what is not attracting the customers much. When the product is finally checked and tested, then it is
sent to release in the market which is commercialisation. After that they plan a proper strategy to
launch the product in the market. Birch box has developed well because of their innovating team
which helps the company in creating and developing more creative products which can benefit the
company.

REFERENCES
Books and Journals
Adner, R. and Kapoor, R., 2010. Value creation in innovation ecosystems: How the structure of
technological interdependence affects firm performance in new technology
generations. Strategic management journal.31(3). pp.306-333.
Chesbrough, H., 2010. Business model innovation: opportunities and barriers. Long range
planning. 43(2). pp.354-363.
Crossan, M. M. and Apaydin, M., 2010. A multi‐dimensional framework of organizational
innovation: A systematic review of the literature. Journal of management studies. 47(6).
pp.1154-1191.
Dahlander, L. and Gann, D. M., 2010. How open is innovation? Research policy. 39(6). pp.699-709.
Edquist, C., 2010. Systems of innovation perspectives and challenges. African Journal of Science,
Technology, Innovation and Development. 2(3). pp.14-45.
Gassmann, O., Enkel, E. and Chesbrough, H., 2010. The future of open innovation. R&d
Management. 40(3). pp.213-221.
Hall, B. H. and Lerner, J., 2010. The financing of R&D and innovation. Handbook of the Economics
of Innovation. 1. pp.609-639.
Hjalager, A. M., 2010. A review of innovation research in tourism. Tourism management. 31(1).
pp.1-12.
Huizingh, E. K., 2011. Open innovation: State of the art and future
perspectives. Technovation. 31(1). pp.2-9.
Leiponen, A. and Hela, C. E., 2010. Innovation objectives, knowledge sources, and the benefits of
breadth. Strategic Management Journal.31(2). pp.224-236.
Melville, N. P., 2010. Information systems innovation for environmental sustainability. MIS
quarterly. 34(1). pp.1-21.
Teece, D. J., 2010. Business models, business strategy and innovation. Long range planning. 43(2).
pp.172-194.
you, Y., Henriksen, O. and Lyytinen, K., 2010. Research commentary—the new organizing logic of
digital innovation: an agenda for information systems research. Information systems
research. 21(4). pp.724-735.

Online
Tidd J., 2005. Innovation Strategy. [PDF]. Available
through :<http://www.innovation-portal.info/wp-content/uploads/4Ps-explanation.pdf>.
[Accessed on 6th July 2017].