Adapting Open
Innovation In ICT
Ecosystem
Dynamics
By: Mohamed Eldishnawy
Supervisor: Docent Kalevi Kilkki
Comnet Research Team – Prof. Heikki Hämmäinen
Outline
• Background: What is Open Innovation?
• Research Focus: What exists Vs. What is missing
• Methods: From the dynamic and static point of view
• Results
•
Interviews outcome – perception of open innovation
•
System Dynamics model
•
Business aspect of open innovation
• Conclusion
• Possible future work
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Background
What is Open Innovation?
Innovation
”An innovation is something original, new, and
important - in whatever field - that breaks into (or
obtains a foothold in) a market or society”*
Innovation Vs. Invention
*Based on Frankelius, P. (2009), Questioning two myths in innovation literature, Journal of High Technology Management Research, Vol. 20, No. 1, pp. 40–51.
Innovation Process - Innovation Funnel
Innovations acts as a competitive advantage
G A Stevens, "3,000 raw ideas= 1 commercial success," vol. 40, no. 3, 1997.
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Closed Vs. Open Innovation
Adapted from Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology (HBS Press, 2003)
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Closed Vs. Open Innovation
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Closed Vs. Open Innovation
Adapted from Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology (HBS Press, 2003)
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Research Focus
What exists Vs. What is missing
• Revealing internal resources
to external environment.
Current
Research
Focused only over behavioral,
managerial and legal aspects of
open innovation
• Out-licensing or selling
products acquire inventions.
• Input inventions to the
innovation process.
• Firms informal and formal.
Studying static aspects of open innovation
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Research
Questions
• Modeling open innovation
constitutional functions and
variables
• Explore Open innovation
Business Phenomena
Static and dynamic view of
open innovation.
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Methods
From the dynamic and static point of view
Interviews
• Review of scientific bibliography to analyze the main dimensions
of open innovation.
• Build semi-structured interviews questions.
• Adapting multi-case nested experimental design.
“An empirical inquiry that investigates a contemporary phenomenon
within its real-life context; when the boundaries between
phenomenon and context are not clearly evident; and in which
multiple sources of evidence are used”*
*R. K. Yin, "Case Study Research: Design and Methods," Sage, Newbury Park, CA., 1989.
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System Dynamics
“Understanding the behavior of complex systems over time”*
How open innovation starts and diffuses in innovative
environments?
• Ideas and successful products as stocks and flows
• Analyzing Feedback and Causal loops
Stocks Term for any entity that accumulates or depletes over time.
Flows Rate of change in a stock
MIT System Dynamics in Education Project (SDEP)
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Open innovation business aspects
Areas of interest of open innovation
M., Fredberg,T. and Ollila,S. Elmquist, "Exploring the field of open innovation," European Journal of Innovation Management, vol. 12, no. 3, 2009.
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Open innovation business aspects
The long-tail business model
C Anderson, Long tail, the, revised and updated edition: Why the future of business is selling less of more.: Hyperion Books, 2008.
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Results
Interviews outcome – perception of open innovation
System Dynamics model
Business aspect of open innovation
Interview Outcomes
Perception of Open Innovation
Open innovation is an ecosystem that includes multiple
structures connected to each other in an evolutionary
development.
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Interview Outcomes
What delays innovation?
• Absence of leadership
• Lack of interest
• Extreme Inbound open innovation
• Mistrust
What foster innovation?
• Entrepreneurship spirit
• Mixing the clusters
• Monitoring the dwarfs
• Active government and universities activities
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Open Innovation System Dynamics
R1
Researched
Ideas
R2
Developed
ideas
R3
Commercialized
ideas
R4
Successful
product
R1: Rate of introducing new ideas into the firm
R2: Rate of developing ideas
R3: Rate of commercializing and marketing the idea
R4: Adoption rate
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Introducing new ideas into the firm
Organizational
difference
Knowledge
compatibility factor
+
Establish external
knowledge network
+
Knowledge
outdate rate
+
External Knowledge
network partners
-
+
Researched
Ideas
+ R1 +
Knowledge
Absorption+
+
Successful
product
New internal
knowledge creation
+
+
Investments
Resources
+
+
Knowledge Assets
+
Openess
R1: Rate of introducing
new ideas
Level
of trust
+
+
Company
absorption
capacity +
+
Learning capacity
Learning
willingness
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Adoption Rate & Discard Rate
Bass Diffusion Model Revisited
R5
Product
outdate rate
R4
+
+
+
+
+
Successful
product
+
B Market
saturation
• Discard rate to resemble the
outdate of product.
+
Repeated
Purchase rate
Purchase rate
Commercialized
ideas
Adopter Average
Consumption
• Repeated Purchases.
R Word
of mouth
Adoption from
advertising
B Market
+
saturation
Advertising
effectiveness
+
Adoption from
Word of Mouth
+
+
Total population
+
Adoption fraction
Contact Rate
R4: Adoption Rate
R5: Discard Rate
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The Causal Loops
Importance of absorption capacity to firms
Knowledge
Absorption
+
+
+
Knowledge Assets
Wesley M. Cohen and Daniel A. Levinthal, "Absorptive Capacity: A New Perspective on Learning and Innovation,"
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The Causal Loops
The need of heavy investment in innovation process at the
beginning to improve the internal knowledge creation
Established external
technology
development network
Establish external
knowledge network
+
External Knowledge
network partners
+
+
Knowledge
Network
Level of trust
External
development
network
+
+
Development
Network
Level of trust
+
+
R1
Researched
Ideas
Successful
product
+
R2
Developed
ideas
Successful
product
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The Causal Loops
The strength of the relationship between an individual's
Repeated
relative attitude and repeat patronage*
Purchase rate
+
• Firms need to focus on building the
loyalty of customers
+
Loyalty
loop
R4
+
Successful
product
The return of adopting customers to potential customers stock
R5
• An indirect effect on the market
saturation
• A threat that can be an opportunity
Product
outdate rate
Initialization
loop
R4
Commercialized
ideas
Successful
product
*Alan S. Dick and Kunal Basu, "Customer Loyalty: Toward an Integrated Conceptual Framework,"
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The long-tail Phenomenon of innovation
Breakthrough innovations are found in the “long-tail”*
*Lee Fleming, "Breakthroughs and the "Long Tail" of Innovation," MITSloan Management Review, vol. 49, no. 1, pp. 69-74, Fall 2007
Novozymes. [Online]. http://www.novozymes.com/en/about-us/Pages/default.aspx.
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The Android Case – Open Source
Source: Gartner and IDC
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The Mobile Application Store
Top 25% App account 28% of total revenue of ~7€ Billion
Source: Flurry analytics
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Where Current Players Exists?
Number of collaborating actors
N
Internal cross-functional
collaboration
Internal R&D
Mass collaboration
R&D Alliance
2
Outside
Inside
Locus of innovation process
M., Fredberg,T. and Ollila,S. Elmquist, "Exploring the field of open innovation," European Journal of Innovation Management, vol. 12, no. 3, 2009.
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Conclusion
General Findings
•
Open Innovation is a must for firms to survive in existing ICT ecosystem.
•
Trust and behavioral aspects are important in collaborative environment.
•
There is an intersection between the different factors affecting the innovation
process.
•
The strategy of a firm needs to change rapidly with open innovation.
•
Mass Collaboration is challenging and differentiating.
•
The value results from open innovations usually lies in the “long-tail”.
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Possible Future Work
• Developing the System Dynamics model further.
• Data mining.
• Stochastic simulation of the model.
• Studying firms in a micro-level (Human Centric Approach).
• More investigation in the long-tail phenomenon.
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Thanks!
Any Questions?
[email protected]
www.mohamed.eldishnawy.com
Supporting Slides
Interviews
Interviewee
Annakaisa Häyrynen (AH)
Mobile Operator/ ICT
About
AK is head of discovery project at
Elisa Oyj. She has more than 15
years of experience in innovation.
She studied open innovation from
the master Henry Chesbrough
himself in Berkeley.
Short Description
Elisa Oyj is the leading ICT company in Finland. As head of discovery project AK
responsibility is to find new business opportunities, analyze them, validate them and
foster them in the organization.
Kalevi Ekman (KE)
University/Research
KE is professor at Aalto
university. He is managing Aalto
design factory. His research focus
is
in
Integrated
product
development.
As manager of Aalto design factory, KE have long relation in collaboration between
universities, research centers and companies. As described by KE “Design Factory is
the symbiosis of the state-of-the-art conceptual thinking and cross-disciplinary handson doing. It leads a way towards a paradigm shift in education and business by
providing a constantly developing collaboration environment for students, researchers
and business practitioners” [26]. The design factory now opened in Chili, China,
Australia. Expansion is ongoing and collaboration with universities around the globe is
highly active.
Janne Parantainen (JP)
Mobile/ ICT Vendor
JP is head of solutions,
technology
to
business
acceleration at Nokia Siemens
Networks (NSN)
JP is responsible in NSN to produce proof of concepts and validation to ideas. To
reach this result, his team collaborates with different parties till they reach validation
and proof of concept for the idea, then the idea can move to further stages within
NSN internal network.
Kimmo Pentikäinen (KP)
Government
Startup
KP is member of the board of
Tivit Ltd, a non-profit company in
Finland
that
focuses
on
collaboration
and
funding
research projects that are with
industry. KP as well has long
experience in entrepreneurship
for last 10 years.
Tivit is a “strategic center for science, technology and innovation in the field of ICT in
Finland launches research programs in the ICT industry and services sectors. It
channels both private and public funding towards these programs”.
As member of the board, KP analyzes the applications by universities and companies
for funding. He provides his point of view and decision to the board based on the
applications and his broad experience in the area of innovation and experience. The
projects’ only gets accepted if it creates a cutting edge and breakthrough in
technology in a market-driven approach [27].
Raul Soderstrom (RS)
ICT Vendor
RS is innovation manager at
Ericsson R&D head-quarters in
Finland
Fostering innovation, RS work with his team to check possible business opportunities
in different areas. Product design and fitting the innovation in Ericsson ecosystem is
part of his team responsibilities. Collaboration with external resources is needed to
achieve that.
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System Dynamics Models
Technological
capability difference
Established external
technology
+
development network
<External knowledge
network partners>
+
External
development
network
Researched
Ideas
+
+
Developed
ideas
- R2+
Technology
outdate rate
Knowledge
management skills
Ideas
Implementation
capacity
+
+
+
+
Level of trust
+
Successful
product
Resources
+
R&D investments
Internal Incentives
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System Dynamics Models
Identified
opportunities
Resources
acquired
+
Business models
generated
Developed
ideas
+
+ +
Commercialized
ideas
R3+
Technology market
relevance +
+
New technology
market relevance
Technology
existence period
+
Market demand
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