University Report: Open Innovation for Product Development Strategies

This report delves into the concept of open innovation, examining its emergence in response to globalization and increasing competition. It explores the core principles of open innovation, emphasizing the importance of knowledge sharing and collaboration. The report analyzes the causes behind the rise of open innovation, the fundamental rules governing its implementation, and the critical role of intellectual property rights. It identifies key challenges and risks, including issues related to focus, customer understanding, and the potential for intellectual property infringement. Furthermore, the report presents case studies of both successful and failed open innovation initiatives, offering practical insights and ethical considerations. Finally, it discusses the management of open innovation within organizations, providing a comprehensive overview of strategies for leveraging external knowledge and fostering innovation. The report is a valuable resource for understanding and implementing open innovation strategies for product development.

Running head: INNOVATIVE PRODUCT DEVELOPMENT
Open Innovation
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction......................................................................................................................................3
Concept of open innovation.............................................................................................................3
Causes that have made open innovation prominence in the recent years........................................4
Fundamental rules of open innovation............................................................................................6
Intellectual property and open innovation.......................................................................................6
Main issues that occur in the open innovation.................................................................................7
Long and short-term risk in a business while implementing open innovation................................8
Case evidence of successful open innovation..................................................................................9
Case evidence of failed open innovation.......................................................................................10
Ethical issues in open innovation..................................................................................................10
Management of open innovation...................................................................................................11
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Literature Review
Introduction
In the recent years every business industry has been facing major challenges in their
business due to globalization, huge competition and the high operating cost. These factors lead
the organizations to innovate new ideas in their business to gain competitive advantages.
Innovation is an effective approach for the business organization to stay competitive in the global
market (Chesbrough et al. 2014). Creativity is the main area of innovation. A business can be
innovative if they foster and incorporate creative ideas in their business. Open innovation is one
kind of innovation that contributes more in the success of a business. This current literature
focuses on the effectiveness of the open innovation in the business industry in creating a
competitive edge for the business.
Concept of open innovation
Open innovation refers to the inflows and outflows of the skills and knowledge to
facilitate an internal innovation in an organization. This innovation helps an organization to
enhance their market for the external use of the innovation that is developed internally (West et
al. 2014). The challenges, as well as the boundaries of an organization, can be reduced once they
adapt open innovation. Hence, the organization is able to combine their resources with the
external-co-operators. The open innovation is more effective in comparison to the closed
innovation. In the closed innovation ideas, investigation and development of a product are
completed within the organization and the aim of such innovation is to introduce the products in
the external market. On the other hand, in the open innovation process an organization utilizes

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the external technology and the resources and at the same time, they introduce their own
innovation to the external market that can be utilized by other organizations.
The flow of the external knowledge is the vital area of the open innovation system. Open
innovation leads an organization to utilize the external sources and knowledge within the
organization and to transform it into a project (Lichtenthaler 2015). This type of innovation
allows the organization to make a collaborative work with their external partners as a result;
external technology is incorporated into the organization. On the other hand, an organization is
able to sell this innovation to other organization as a technology, which enhances their profit
margin.
Causes that have made open innovation prominence in the recent years
Open innovation becomes more popular in the business world as this leads the
organization to bring innovation to their own organizations and to sell innovation to the other
organizations. Open innovation has gained prominence today as it helps the business owners and
the employees to lead their organization to evolve (Freel and Robson 2017). However,
innovation acts as the key driver behind the success and growth of any business industry. Open
innovation makes the employees and the business owner as a better manager to take the
challenges in their organization. In the recent years, maximum businesses focus on the open
innovation rather the closed innovation. However, open innovation leads the business to invest in
their innovation process and to achieve profit by selling this innovation at the same time. Open
innovation leads a company to be open and exhibits their strategy to the employees to gain
success.

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Open innovation is significant for the business as it allows the organization to maintain
transparency, which demonstrates that a particular organization has a clear strategy. For the
business, it is important to identify the right providers with the right solution. However, closed
innovation is not suitable in this context but by the application of open innovation, an
organization is able to state their details clearly. Open innovation generates a great idea for a
business. That is the vital reason, why companies are adopting open innovation rapidly. Open
innovation provides a broader platform for a business through which an organization is able to
share their strategy and knowledge with their partners. This brings a big opportunity for the
organization to be global and competitive. Large companies adopt open innovation by scanning
the eternal ideas, using external networks and technology (Chesbrough 2017).
Adoption of the crowd sourcing can be done in the smaller organizations by open
innovation. This crowd sourcing allows an organization to use the diverse skills, which was not
possible earlier by using traditional innovation process. Among the younger organizations, open
innovation is very popular in the recent years as this innovation technique allows such
organization to include crowd source in their process and to establish a collaborative innovation
with their larger partners. In the present time, increased competition in the global market is a big
challenge for any business. They have to gain a good position in the international market along
with the competitive advantage. As argued by Santoro et al. (2017), without collaborative work
it is not possible for an organization to make them competitive in the global market. Thus, there
is an urge among the business industries to adopt open innovation to minimize their struggle and
to incorporate talent into their business. This innovation helps the organization to integrate the
technology in their innovation and being engaged with the external collaborators, which facilitate
a significant growth in the business.

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Fundamental rules of open innovation
In order to incorporate the open innovation in a business, there should be a crystal clear
understanding between the company and their partners (Martinez-Conesa et al. 2017). The
companies that are involved in an open innovation need to develop a common understanding
between them. Each partner needs to identify the problem and the solution. From the first day of
the open innovation, each partner has to understand the importance of the intellectual property
rights. Analysis of the assets, needs and the ecosystem should be done in the implementation of
open innovation system (Knudsen et al. 2017). An organization needs to track a report about
their present resources and their needs to proceed to the next step. As a result, a business owner
is able to identify the exact needs of their business. Therefore, internal and external readiness is
crucial for open innovation. Internal readiness can be done by providing training to the
employees to improve their skill. On the other hand, external readiness allows the organization to
be a disruptor in their industry or to take a suggestion from other to enhance their strategy. Apart
from this, a clear communication is required between the external and internal channels.
Intellectual property and open innovation
Intellectual property refers to the creative work, symbols and artistic work those are used
in the commerce. In the present times, the R&D fields show the technological complexity.
Hence, it is important to maintain the intellectual property rights during the development of the
products and service. It has been found that the numbers of patents have been increased as a
result; the organizations have to depend on the third party’s intellectual property rights to bring
innovation (Bican et al. 2017). In an open innovation, the organizations need to make a
collaborative work with R&D performers in order to establish an innovation solution. However,
intellectual property rights are followed to resist other organizations to copy idea and creativity

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of another firm. In an open innovation knowledge and skills are shared among the partners,
however, intellectual property rights excluded other firms to copy the knowledge of other
organizations. In order to manage the open innovation in an organization, it is crucial to maintain
the intellectual property rights as it makes the open innovation project effective.
In the context of a business open innovation helps an organization to use the external
ideas and resources for their innovation and to sell their innovative ideas to the external market.
However, management of Intellectual property right is necessary as it allows other organizations
to observe the idea of an organization but they have no right to copy it. Sharing of the intellectual
property is done in the open innovation system. Companies those are involved in the open
innovation organize the strategic alliance and licensing activities to develop a pro-active
intellectual property approach (Toma et al. 2018). This approach focuses on the haring of the
technologies rather than the use of the intellectual property as a defense mechanism.
Main issues that occur in the open innovation
One of the major issues of the open innovation is the lacking of focus. However, in an
open innovation process, many ideas come to a business as a result, it is often difficult for the
business to keep their focus on their goal (Bogers et al. 2017). This hampers the success of an
open innovation. On the other hand, insufficient customer understanding is another big challenge
that occurs during the implementation of open innovation. In order to generate a radical idea, it is
important for an organization to develop a good understanding of customer needs. Employees
need to understand their customer’s demand while bringing innovation in their organization.
However, in the context of open innovation, it is difficult for an organization gets much
information about the customer needs as there are some limitations due to the maintenance of

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intellectual property rights and the technology. There is fear of failure in the open innovation
process. In an open innovation, partners are involved as a result, complexity occurs in the
decision-making process. This affects the success of an open innovation. On the other hand, open
innovation is associated with the incorporation of the external technology as a result; there is
lack of creative thinking, which is a major drawback of the open innovation (Gasco-Hernandez
et al. 2017). Apart from this, there is no proper structure in the open innovation process. This is a
major concern of such innovative process, which may hamper the effectiveness of this process.
Long and short-term risk in a business while implementing open innovation
Open innovation contains some risks that may leave a long-term effect on the business.
As argued by Bogers et al. (2018), one of the major risks of the open innovation is the sharing of
intellectual property. However, in an open innovation process an organization uses external
resources besides that they can share their innovative ideas with the other organizations. In this
situation, the intellectual property is shared, which is a big risk for the business. This can affect
the unique feature of a business. In the closed innovation process ideas are secured, however, in
the open innovation process a collaborative work is established by the business partners. As a
result, skills and knowledge are shared between the partners, which hamper the aim of the
intellectual property rights.
On the other hand, implementing cost of the open innovation is high that can enhance the
operating cost of a business as result, the profitability margin of a business can be hampered.
This is a long-term risk that is present in the open innovation process. Therefore, open
innovation depends on the external knowledge as a result, key knowledge can be lost. On the
other hand, strategic power, creativity, and flexibility are affected. This highlights the short-term

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risk in a business and the society. Lack of creative thinking reduces manpower as a result, the
organization fails to make their business unique and unemployment occurs, which is a big social
issue (Tsang and Lee 2018).
Case evidence of successful open innovation
Open innovation is associated with the success of an organization. However, it leads an
organization to integrate the technology into the business and bring an innovation in an
organization. As commented by Rosas et al. (2018), open innovation gives an organization a
broad platform to exhibits their ideas by making a collaborative work. As for example, Fujifilm
is a popular organization of Malaysia. They offer various types of digital cameras with
innovative technology. They have implemented open innovation in their business to enhance
their product diversification. For this organization, open innovation means the collaborative
innovation. In their open innovation system, they select their partners very carefully to make a
collaborative work. Then they meld the ideas and technology to develop a new value for their
business. They have got success by developing revolutionary products through open innovation.
They have established themselves as photographic film manufactures by implementing
open innovation in their business. They have implemented their successful innovation in the
healthcare sector. They have introduced Wide-View film or WV film by using external
technology. They have developed such innovative product by making a collaborative work with
the materials and panel manufactures through open innovation (Fujifilm.com.my 2018). This
initiative leads them to get a good market share in the global industry.

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Case evidence of failed open innovation
Often business organization faces difficulties to implement open innovation as this
innovation process contains some major risks. As criticized by Holgersson and Granstrand
(2017), sharing of the intellectual property is the major loophole of open innovation. As for
example, Hoya Electronics has faced issue during the implementation of open innovation.
However, this organization has tried to combine the electronics and the light technology by using
open innovation. They focus on the innovation to improve their lenses technology by producing
the high quality optical product. For this purpose, they shared the intellectual property and idea
with their partners. This affected the decision-making process as some of their partners have
denied to use their innovative idea. On the other hand, high implementation cost of the open
innovation resisted Hoya electronics to utilize the effectiveness of open innovation. Hoya has
spent the high amount in the technical innovation, which increased their operating cost and
affected the profit margin (Hoya.com. 2018). Hence, this organization was not successful to
incorporate open innovation in their business due to its high cost of implementation.
Ethical issues in open innovation
Open innovation is associated with the use technology from the external sources.
However, it is important for an organization to keep the confidentiality while using information
technology in an open innovation system (Rosas et al. 2018). Open innovation leads an
organization to develop a collaborative innovation. Hence, it is crucial to protect the personal
information of the partners otherwise the organization can face the ethical issue. Hence, the right
of the privacy is a big ethical challenge for the business organizations that use open innovation.
Therefore, sharing of intellectual property is a part of open innovation. However, for an

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organization is crucial to keep their ideas protected from other organizations. Thus, sharing of
intellectual property and keeping the business unique is difficult in an open innovation.
Management of open innovation
Open innovation is the establishment of an external relation of an organization with other
external organizations. In order to manage the open innovation, the firm needs to involve all the
stakeholders in this process and a clear understanding should be developed between them. In the
next step, the organization needs to choose the project properly through which their organization
can be benefitted (Bogers et al. 2017). Therefore, resource allocation is vital to manage the open
innovation. An organization needs to arrange and allocate the resources as per the need. A firm
needs to integrate the external technology in the open innovation. For this purpose, training
should be given by the organization. This will help the employees to use the external technology
and utilize it in the open innovation system. Establishment of the cross-functional team work and
internal information sharing team are required to manage an open innovation.
Conclusion
The entire piece of work focuses on the importance of open innovation in an
organization. However, in the recent year, open innovation is more popular then closed
innovation as it allows an organization to use external resources for their innovation and to sell
their innovation in the external market. Besides the advantages, open innovation includes some
disadvantages. One of the major issues occurs during the sharing of intellectual property in open
innovation and this process has no accurate structure. Apart from this type of innovation is
beneficial for the business that wants to incorporate technology to develop service or product.

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References
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