A Comparative Analysis of Open Innovation Strategies: Companies

This report provides a comprehensive analysis of open innovation strategies employed by Samsung and General Electric. It begins with an introduction to open innovation and then profiles each company, detailing their respective approaches: Samsung's collaborative strategy involving accelerators, acquisitions, ventures, and partnerships, and General Electric's open innovation challenges aimed at attracting young talent. The report evaluates the effectiveness of these strategies, comparing organizational practices against open and strategic innovation theories. A financial analysis, including current ratio, quick ratio, net profitability ratio, and return on total assets, is conducted to support the analysis. The report concludes with a comparative table summarizing key findings and a final conclusion based on the evaluation, highlighting the strengths and weaknesses of each company's open innovation approach.

OPEN INNOVATION

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Contents
Introduction................................................................................................................................1
Two firms that supports open innovation...................................................................................1
Effectiveness of their strategies.................................................................................................2
Financial analysis of both the companies...................................................................................3
Current ratio...............................................................................................................................3
Quick ratio..................................................................................................................................4
Net profitability ratio..................................................................................................................4
Return on total assets.................................................................................................................5
Conclusion..................................................................................................................................6
REFERENCES...........................................................................................................................6

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Introduction
Open innovation strategy is used by the organisations where the strategy acts a paradigm that
assumes that a firm might and must use external and internal ideas along with paths to market
as the firm searches for doing improvements in their technology. Open innovation strategy
heavily inclined towards purposively managed knowledge flows all across the organisational
peripheries using monetary and non-monetary mechanism in line with firm’s business model
(Morikawa, 2016). In this innovation strategy not only firm but other external communities
also gets involved. There are several big firms that utilises such kind of innovation strategy
for their development. General Electrics and Samsung are the two major firms that support
open innovation strategy in their business. This report showcases the open innovation
strategy used by both the company as well as it also evaluates the effectiveness of these while
comparing the organisational practices. A comparison is also made by comparing practices of
an organisation on the basis of their open innovation and strategic innovation theory. Report
also provides financial results to support the analysis.
Two firms that supports open innovation
Two firms that support open innovation in their distinctive fields are:
Samsung
In order to utilise open innovation strategy, this firm has made several type of collaboration
as a strategy. They understand the necessity in distributing the innovation process for making
the innovation more effective. Using collaboration as an open innovation strategy, they have
divided it into 4 types that include accelerators, acquisitions, ventures and partnership. As a
part of partnership, company has done collaboration with start-ups that are present in Silicon
Valley. Such kinds of partnership are very useful in adding new features into the products
that are already produced by the company. Since every partner has a different strength hence
it helps the company in making the best innovation. At the same time following collaboration
in open innovation strategy, Samsung has also used Ventures as a part of the strategy (Yun,
Jeong & Park, 2016). Such type of collaboration is used for putting revenue in the existing

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projects and providing access to new kinds of strategic resources such as technology,
workforce which Samsung can utilise.
Acquisition helps the firm to bring start-ups under them which helps in doing innovations
which are core to their future strategic area of Samsung. This type of acquisition generally
remains as a distinct unit and also joins the program of other type of collaboration i.e.
accelerators. Such acquisitions are mainly done by the firm to make strategy based
innovations and that too in different parts of the world. Along with this another type of
collaboration that is done by Samsung is in the form of accelerators. They are in the form of
start-ups providing empowering and innovative environment for creating new products (Han,
Oh, Im, Oh, Pinsonneault & Chang, 2012). Samsung gives some kinds of initial investments,
facilities to work with and specific kinds of resources to do their work. The idea towards it is
product stemming from internal start-ups that could help in adding to the product portfolio of
Samsung over a long period of time or just sometimes work as a learning experience for the
company. Samsung utilises it as their major collaboration strategy under the open innovation.
General Electrics
General electrics have a name in the market for its open innovation challenges and initiatives.
This is displayed on their open innovation page. Such kinds of challenges focus for external
open innovation as well as new ideas. Because of these challenges, the cited firm prepares
itself to future potential talents all across the globe. Such type of challenges promotes new
young talents to join with the company. The prizes for such challenges are very appealing for
the professionals and students that are young and includes prizes like Monetary rewards, paid
internships, scholarships as well as company also provide chance to work with the firm on the
issues faced by the company (Whelan, Parise, De Valk & Aalbers, 2011). The most effective
thing about this type of strategy is that it helps the company to get on top of the innovation
work. Such type of challenges also opens the possibilities they offer also has an impact on the
GE’s employer image in a positive manner. For instance the Unimpossible Mission: The
university Edition challenge was especially for the students that are creative and have higher
levels of technical skills as well as appropriate motivation for recruitment. Through such
initiatives, General Electric aims to hire three creative and smart students to have their
internships at the firm (Gawer & Cusumano, 2014). This is one of the best methods for hiring
young and talented professionals as their capabilities are being tested before hand only and
the innovations at the workplace gets boosted. The fresh minds that comes under this also

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helps in making the culture of the firm positive and more innovation friendly. This will help
the firm in the long term.
Effectiveness of their strategies
For any firm, it is crucial to find out the effectiveness in their strategies. Evaluation of the
effectiveness of the firm has been provided below.
Open innovation
Samsung utilises open innovation strategies that are best for the firm in the long term. With
new kinds of ventures, this company is capable of adding new sources of finance which is
necessary for the growth of the company in the modern times. This practice of theirs helps in
developing products in specific areas. At the same time, accelerators are also used by
Samsung as it brings positivity in the innovation environment. Such type of environment
helps the firm in the long term. This brings the best learning habits in the organisation where
firm learns new things that they might not learn through normal innovative strategy (Hong,
2012).
At the same time, partnerships are also used by the organisation for searching new methods
of doing business and to do innovations. It is a highly useful strategy in which the practice
gets developed that new features get added in the existing products of the firm. This practice
helps in bringing new kinds of expertise in their business process. Under acquisition company
develops a practice where they acquire other firm to maintain the control over the innovation
that is done by the company (Morikawa, 2016). Acquisition also helps the firm in bringing
the practice of innovation in the acquired firm and learning from the talents that are present in
that firm.
At the same time, General Electrics has a very distinct approach to open innovation strategy
where they do not act in collaboration and rather provides their platform for younger talents.
The practice of opening the challenges faced by the company for all helps them in adding
more numbers of people in their innovation approach. Young talents with relevant
information can participate in the open challenge. A very new kind of ideas comes from these
students and hence helps in resolving the problem easily (Laperche, Lefebvre & Langlet,
2011). This also brings the practice of hiring best of talents on the basis of the requirement of
the firm.

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Open innovation strategy of Samsung is much better than that of General Electric and hence
better innovations can be brought for the market.
Strategic innovation
Samsung understands the value of disruption in the market. Due to this, strategic innovation
allows the company to improve its status in the market. They have a practice of funding their
projects heavily. In the strategic innovation approach, company adds new features in the
products that are already in the market. This helps in the market development goals of the
company. At the same time, it also allows them to make products more user-friendly. They
have a practice of launching new products in a very short period of time. It is due to the
strategic innovations they do.
On the other hand, General Electrics is utilising strategic innovations for removing the
challenges that are confronting their business. Due to the involvement of young minds,
company is capable of making changes that are realistic and according to the demands in the
market (Majchrzak & Malhotra, 2013). This gives them edge over their rivals. It also brings
the practice of adding new talents through the means of internship or other methods which
reduces the overall cost of recruitment and hiring.
Financial analysis of both the companies
Current ratio
This ratio is a measure that predicts the company`s ability to pay off the short term
obligations. It helps the investors to analyse that how efficiently organisation maximises
current assets to satisfy current debts. It is said that if the current ratio is between 1.2 to 2 that
means company is more efficient in paying the current obligations. The current ratio of
Samsung predicts that the company is efficient enough to pay its current liabilities in 2017 as
well as 2018 as the ratio is 2.2 that means current assets are exactly 1.2 times more. In 2018,
the company maintained a current ratio of 2.5 times (Desai, & Oza, 2018).
On the other hand, General Electric is also efficient much regarding paying off its current
obligations. In 2017, the ratio is 1.9 that represents that organisation`s assets are 0.9 times
more than organisation’s liabilities. In 2018, the organisation`s ability to pay off has reduced

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to 0.8 times. Between both the companies, Samsung is strong enough in terms of maintaining
liquidity of the company (General electric, 2018).
Quick ratio
It is a type of liquidity ratio, which measures the capability of the organisation to utilise other
quick assets so that it can retire it current liabilities. Quick assets is the sum of accounts
receivable, cash, and the marketable securities. Most importantly, inventory is ignored as it
cannot be converted into cash very easily and with a considerable speed. A current ratio more
and equal to one is considered good. In General electric, in 2017 and 2018, the company
maintains a ratio of 0.3, which is not at all good as without using the inventory, the company
is not able enough to pay off its current liabilities. On the other side, Samsung has a quick
ratio of 0.4 in both 2017 and 2018 (Desai, & Oza, 2018).
Net profitability ratio
This ratio indicates that how much amount can be generated as a total percentage of revenue.
It is the calculation of income generating in regards to sales volume. It is considered that a
rate of 4% is good if the organisation is surviving in high competitive market. In case of
Samsung, it can be seen that the company is able to generate 17% in 2017 and 18% in 2018,
which is an extraordinary profit as it enjoys a huge brand name (General electric, 2018).
Other reason is the increased sales volume in 2017. In 2018, it raised the net profit ratio to
18%.
Return on equity is the proportion that measures the financial performance by dividing the net
income to the net shareholder`s equity. A return on equity of 5% is considered acceptable
enough, whereas a return of 15% is exceptional but this return percentage is considered as
good. In case of Samsung, it is quite visible that the company generates a return of 14% in
2017 and 13% in 2018 (General electric, 2018). The change is clearly visible that the
company had 301752090 as a shareholder`s equity and it was increased 2018 as 339357244
but at the same time, net profit also increased from 41344569 in 2017 and 43890877 in 2018.
On the other hand, return on equity was negative when it comes to General Electric because
the company is not able to use its equity capital in an efficient manner. The net profit of the
company for both the years has been decreasing severely (General electric, 2018).

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Return on total assets
This ratio is calculated by dividing the net income to the average of total assets. This ratio
indicates how efficiently a company earns before taxes and interest relative to the total net
assets. It is an indicator of how effectively an organisation has been using its total assets to
generate earnings. ROA over 5% is considered as good whereas, lower return on assets needs
high investments. Samsung generates a considerable value from its assets as the return is
above 5% that is around 14% and 13% in 2017 and 2018. Whereas, in case of general
electric, the company generates no return rather it utilises more of the company`s profit rather
than generating appropriate profits (General electric, 2018).
Factors Samsung General Electrics Which one is
better
Open Innovation
strategy
Collaboration strategy is
used by Samsung in this.
Open innovation
page is the strategy
used by General
Electrics in this
Samsung
Strategic
Innovation
Concentrates on designing
the products that are
disruptive in nature.
Concentrates on
ensuring that firm do
not face challenges in
the future.
Samsung
Net Profit 38,573,066 -22,802 Samsung
Sales Revenue 243,771,415 121,616 Samsung
Current Assets/
Inventory
145,712,720 104,276 Samsung
Current
Liabilities
69,081,510 68,269 Samsung
Cost of sales 132,394,411 95,653 Samsung
The data and the table illustrates that the performance of Samsung is better than General
Electrics in most of the domains.
Non-financial factors
There are several non-financial that supports this analysis. They are as:

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 Customer satisfaction: Samsung is known for its new kinds of innovations as well as
for making continuous changes in the product by upgrading the technology. This is
the major reason why customer satisfaction is on the higher side. Company only lacks
in terms of the fact that the price rise of the product is much higher when compared
with the amount of value their new products have. At the same time in spite of their
customer centric approach, they have not been able to achieve higher customer
satisfaction levels.
 Research and Development: Amount of research and development going on at
Samsung is much higher than general electrics. This is evident from the fact that
Samsung has made an investment of around $ 15 billion in 2017 while General
Electric made an investment of $ 5.5 billion dollars in 2017.
 Market share: The market share of General electrics is shrinking every year. It has
reduced to around 33% when compared to its last decade average which is around
43%. On the other hand market share of Samsung has seen an inclination of 2% to 3%
in the last two years.
Conclusion
A conclusion can be drawn from the above based report that both General Electric and
Samsung are bigger firms that deals in the open innovation. Samsung uses accelerators,
acquisitions, ventures and partnership as the four ways of collaborating for open innovation
strategy. On the other hand open innovation page is used by General Electric. Here
companies add young talented pool in their business by easily opening their gates for people
with skills and Knowledge. The problem statement is given to the students based on which
they have to prove themselves. Practices for both the companies in the areas of strategic
innovation and open source strategy are effective. The performance of Samsung is better than
General Electric in most of the factors.

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REFERENCES
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General electric, (2018). 2018 Annual Report. Retrieved from: https://www.ge.com/investor-
relations/annual-report
Han, K., Oh, W., Im, K. S., Oh, H., Pinsonneault, A., & Chang, R. M. (2012). Value
cocreation and wealth spillover in open innovation alliances. MIS Quarterly, 36(1).
Hong, Y. S. (2012). Modes of combinative innovation: case of Samsung electronics. Asian
Journal of Innovation and Policy, 1(2), 219-239.
Laperche, B., Lefebvre, G., & Langlet, D. (2011). Innovation strategies of industrial groups
in the global crisis: Rationalization and new paths. Technological forecasting and
social change, 78(8), 1319-1331.
Majchrzak, A., & Malhotra, A. (2013). Towards an information systems perspective and
research agenda on crowdsourcing for innovation. The Journal of Strategic
Information Systems, 22(4), 257-268.

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Morikawa, M. 2016. 16 Examples of Open Innovation – What Can We Learn From Them?.
Retrieved from: https://www.viima.com/blog/16-examples-of-open-innovation-what-
can-we-learn-from-them
Samsung, (2017). Annual report, (2017). Retrieved from:
http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_WHR_2017.
pdf
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deliver open innovation. MIT Sloan Management Review, 53(1), 37.
Yun, J., Jeong, E., & Park, J. (2016). Network analysis of open
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