OPEN INNOVATION
Researching a New Paradigm
Chesbrough 2006
and Nokia IBM
Chandler (1977, 1990) Vertical integration from R&D to
Distribution
Successful innovation requires control
Increased mobility of knowledge (manpower)
Availability of Venture Capital
Interfirm modularity and subdivision of labor Langlois
(2003)
Open Innovation: the business model utilizes both
internal and external ideas to create value, while
defining internal mechanism to claim some portion of
that value (Chesbrough 2003)
LEVELS OF OPEN INNOVATION
Individual and Group level
How Open Innovation affects incentives of R&D
workers. From innovation creation to system
integration
External innovations returns or other interest?
(own utility Von Hippel, 1988 2005)
Groups
Implications for firms
Faster time to market?
Explorative - Exploitative (March, 1991)
Incremental innovative output or faster
metabolism of knowledge?
Control of spillovers more or less ?
What circumstances motivate firm to Open
Innovation? Industry, size,
Management of Intellectual Property from
Identification to licensing Conflict between
internal and partner’s goals
External ideas network requires internal network
Inter organizational value networks
Alliance
Size
Management
Industry Sector
Infant or rapidly changing industries
Specialization within firms, degree of technical
modularity audio digital components
Entry barrier analysis: Amazon and E trade no
distribution channels
National Innovation Systems
National, EU, US
Legal framework
Innovation Policy
Clusters
Sector
ISRAEL SYSTEM OF INNOVATION
CHIEF SCIENTIST
Ministry of Industry
Other Ministries
Grants to Firms
MAGNET
Biotechnology
Satellite Communication
Technological Incubators
TNUFA
BI NATIONAL FUNDS
US BIRD
U.k
FRANCE
NETHERLANDS
VENTURE CAPITAL FUNDS EU R&D FRAMEWORK PROGRAM
YOZMA
OTHERS
OCS R&D Grants are available to companies whose
projects have been approved by the Research
Committee of the OCS. The grants are a percentage
(between 30% and 66%, depending on circumstances)
of the estimated R&D expenditure. In cases where the
government assisted R&D results in a commercially
successful product, the developers must repay the grant
through royalties.
The MAGNET program allows the encouragement of
generic- pre- competitive technological cooperation
executed by consortia of industrial companies and
academic research institutes.
Multi-lateral Programs
European Union - The Sixth Framework Programme
of the European Union's Commission on Science,
Research
and
Development
EUREKA - the Israeli Liaison Office of EUREKA
CELTIC
The
European
Cooperation
in
Telecommunications
GALILEO - Galileo is a Euro 4B project managed by
the EU and ESA for a new Global Navigation Satellite
System
Bi-National Research
India - Second Call for Proposals – India-Israel Initiative
for Industrial R&D (i4RD)
Finland - Call for Proposals For Joint R&D Projects in
Information and Telecommunications Technologies
Victoria (Australia) First Call for Proposals – VISTECH
FUND - Victoria (Australia)- Israel R&D Cooperation
Program
France MOU for cooperation between the OCS and
ANVAR
Second Call for Proposals - Israel-France Industrial
R&D Cooperation Program
FIRAD - The France-Israel Industrial R&D
Cooperation Framework new website
Germany - German-Israel Technological & Industrial Cooperation
Maryland / Israel Development Fund (MIDF) NEW!! MarylandIsrael call for proposals
Italy - Italy- Israel Industrial Cooperation Programs
Sweden - MOU for Industrial Cooperation between Swedish and
Israeli Companies
Ireland *
The Netherlands
Portugal
Spain
USA: BIRD - Binational Industrial Research and Development
Foundation
USA: USISTC - US-Israel Science and Technology Commission
UK: BRITECH - UK-Israel Industrial R&D Foundation
Canada: CIIRDF - Canada-Israel Industrial R&D Foundation
India - MOU for Industrial Cooperation between India and Israel
China - THE PROGRAM FOR CHINESE-ISRAELI
TECHNOLOGICAL COOPERATION
Hong Kong - HONG KONG -ISRAEL TECHNOLOGICAL
COOPERATION
KORIL-RDF Korea-Israel Industrial R&D Foundation (the web site
www.koril-rdf.or.kr is under constraction).
Singapore: SI-IRD - Singapore-Israel Industrial R&D Fund
Multinational Corporations
Technological incubators
Technological incubators are support corporations that give
fledgling entrepreneurs an opportunity to develop their
innovative technological ideas and set up new businesses in
order to commercialize them. The incubator program is applied
in all parts of the country, under the guidance and with the
support of the Office of the Chief Scientist of the Ministry of
Industry and Trade.
The program supports novice entrepreneurs at the earliest stage
of technological entrepreneurship and helps them implement
their ideas by turning them into exportable commercial products
and forming productive business ventures in Israel
Budget
Between US $350,000 to US $590,000 per two years.
Grant
Level of grant: 85 percent of approved budget.
Ownership
Regular Incubators – General manager directives 8.2
Initial ownership in the Project Company is as follows:
At least 50 percent— the developer/entrepreneur;
At least 10 percent— key staff members other than
developers/entrepreneurs;
Up to 20 percent— the provider of supplementary financing (i.e.,
additional to the State grant) for project implementation. (Of course,
this may also be the developer/entrepreneur.);
Up to 20 percent— the incubator
Privatized Incubators – General manager directives 8.3
Initial ownership in the Project Company is as follows:
Between 30 to 70 percent— the developer/entrepreneur;
Between 30-70 percent— the incubator (including the provider
of supplementary financing)
State Support
.1Incubator Project
The Grant between US $150,000 to US $250,000 per year for up
to two years, i.e., total between US $300,000 to US $500,000.
Level of grant: 85 percent of approved budget.
.2
Incubator Administration
Grant of up to up to NIS 729,500 per annum (about $175,000),
including the incubator director's salary, administrative expenses,
outlays for sorting and studying of ideas, and organizational
expenses for project commercialization and marketing.
Results
By the end of June 2004, 806 projects had left the incubators (in addition
to the 200 that remained). Of these "graduates," 45 percent have
continued on their own steam and 55 percent have been discontinued.
Most of the ongoing projects have managed to attract private
investments.
The total private investment obtained thus far is in excess of US $773
million.
The technological incubators have become massive repositories of
potential ideas for new high-tech venture funds in the future.
European Union
6th 7th Framework Agreement
An active participant in the European Union’s R
& D Framework program since 1996
Israel continues to be active in the 6th Framework
Agreement that began in November 2002
Technological Incubator Projects
• 23 technological incubators operate
• 200 projects operate currently
• 735 projects have left the incubators in the last
decade
• 54% have received further private investment
NETWORKING AS A MEANS TO STRATEGY CHANGE.
THE CASE OF OPEN INNOVATION IN MOBILE
TELEPHONY Koen Dittrich
Exploration is often characterized by opportunistic
behaviour and enables a firm to bridge two distinct
networks of firms, thereby benefiting from the
resources of both networks (Burt 1992). ‘weak ties’
Non-equity alliances
Exploitation of existing knowledge and capabilities
on the other hand is associated with refinement,
selection, production and execution (March 1991).
‘strong ties’ longer-term relationships
Companies that follow an exploration strategy will
look for partners with distinctly different capabilities
Companies pursuing an exploitation strategy will
search for companies with similar technological
capabilities
Exploration networks partner turnover will be higher
than in exploitation networks.
Exploration networks will make use of
flexible legal organizational structures, whereas
exploitation alliances are associated
with legal structures that enable long-term
collaboration
In the late 1980s and 1990s Nokia was one of the
forerunners in mobile telephony.
During the late 1990s Nokia tried to maintain its
prominent market position in the development of
3rd generation mobile telephony, changing from
an exploitation strategy towards an exploration
strategy.
Nokia Group defines the company’s core
competencies to be in three fields: mobile
handsets, network technology and middleware.
First, will Nokia be able to produce the technology fast
enough to do it alone? Second, does the
company have the necessary competencies to
produce it in a short time period?
Core mobile handsets: the largest production
volume of mobile phones is still in high-wage
countries such as Finland Germany and the
USA
Network elements (switches, routers and
modems, and standardized software platforms ).
Nokia buys them from SCI, Flextronics Finland
and Elcoteq Networks Oyj, since they can
produce them much more efficiently
complementary products, such as integrated
circuits, Nokia will
simply buy them from e.g. Texas Instruments
Nokia typically joins forces to create a new market,
for instance with other
mobile phone manufactures like Ericsson,
Siemens and Motorola. Market creation
was the main goal for entering the joint venture
Symbian in 1998.
general trend is that Nokia shifts from pure subcontracting in production, to manufacturing
partnerships, to
R&D sub-contracting and ultimately to R&D
partnerships.
Exploitation and exploration in innovation
networks at Nokia Corporation
80’s First technological trajectory
NMT standard initiated by Ericsson
85-96 Second technological trajectory
Licensing of technology with Motorola (and
Tandy) and a 4-year joint venture for R&D on
cellular communication with Alcatel, AEG and
Standard Elektrik Lorenz (SEL)
In 12-year period, Nokia only engaged in 25
alliances, mostly in bilateral agreements., 14
were joint development agreements, 6 were
licensing and technology sharing agreements
and 5 were joint ventures
One cross-licensing agreement In 1993 Motorola
and Nokia engaged in a cross-license
agreement, which allowed the exchange of all
future GSM contracts
More than half of all alliances were on
telecommunications and almost one sixth
on both software and microelectronics
Exploration
Third Trajectory Period 1997-2002
48 strategic alliance agreements, of which 25 were
joint development agreements, 16 coproduction contracts, six joint ventures and one
a standardization consortium.
Joint development agreement with Nordea Bank
and Visa International.
pioneering pilot to test and verify mobile
payment services based on dual chip technology
Partnerships with competitors joint development
agreement standard setting is a strategic alliance
with the Japanese NTT DoCoMo. Nokia and NTT
DoCoMo open mobile architecture for WCDMAbased third-generation mobile communication
services : browsing, messaging and application
execution
Agreement between Nokia, CMG Wireless Data
Solutions,Ericsson/Sony Ericsson, Comverse,
Logica, Motorola and Siemens, founded the
Interoperability Group for the Multimedia
Messaging Servcices.
Strategic repositioning by means of
alliance networks:The case of IBM
UNIX was an ‘open’ operating system, supported
by Sun and Hewlett-Packard, which offered
customers the first attractive alternative to IBM’s
mainframe computers (Gerstner,2002).
IBM failed to see that personal computers (PCs)
would be widely used by business and
enterprises
IBM gave control over the operating system to
Microsoft and the microprocessor to Intel, and
in the early nineties IBM’s leadership position
started to deteriorate
Fujitsu, Digital Equipment and Compaq were the
competitors for hardware components
EDS and Andersen Consulting were gaining
ground in information services, while Intel and
Microsoft were more profitable in the PC market
than IBM
First force: systems integration for business
enterprises and bundled software and services
for the consumer market ICT industry would be
service-led rather than technology-led.
Second force: the emergence of the networked
model of computing that would replace the standalone PCs that dominated the market
Computing infrastructure and software would have
the future
Exit commodity hardware technologies
and concentrate on higher-margin software and
services, and especially integrated (ebusiness)
solutions
IBM's alliance network: 1991-2002
91-92
55 strategic alliances, 23 were in the field of computer manufacturing, mainly in
the development of microprocessors, and 23 in the field of software
development, mostly related to operating systems and software architecture
two important alliances with Microsoft and Intel. Microsoft and IBM crosslicensed Windows New Technology and with Intel, IBM had a long-term
agreement on the development of microprocessors.
However,
in the period 1991-1992 IBM and Apple shared ten strategic alliances, mainly
related to the development of microprocessors and software architecture.
microprocessors for PowerPCs and mainframe computers
96-97
Exploitation multiple partnerships with Toshiba and
Motorola are all in developing microchips,
Exploration joint R&D in the development of multimedia
and browser software.
6 out of 32alliance agreements dealt with the Internet,
Netscape, Oracle, Sony, Nintendo, Sega Enterprise and
NEC
Internet browsers, ThinkPad, WebSphere and other ebusiness applications. e-business solutions
2001-2
Software: Microsoft, Peoplesoft, and Citrix
Systems
Telecom: Cisco and Nortel Networks, and leading
mobile phone manufactures such as Ericsson,
Nokia and NTT DoCoMo