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(originally published by Booz & Company)


Reinventing R&D Through Open Innovation

Contrast that process with the one followed by video-game developers, which routinely look outside for ideas. Some successful games are based on popular brands, such as John Madden Football or Star Wars. Developers hunt for hot properties to license and turn into new games. Other successful titles, such as the Grand Theft Auto series, were coded by small groups of developers (such as Rockstar Games). These titles were later acquired by larger companies (such as Take-Two Interactive Software Inc.) that could provide distribution and marketing.

“Any company spending 5 percent of sales on R&D and seeking higher revenue growth would likely benefit from shifting to open innovation.”
As the toy industry illustrates, the principle of open innovation isn’t limited to high-tech industries. In fact, any company spending 5 percent of sales on R&D and looking to get higher revenue growth would likely benefit from shifting its R&D to a more open stance.

But the key to change isn’t simply finding partners; it is embracing a management philosophy that reorients an enterprise’s innovation activities away from the search for “Eureka!” moments. Instead of building R&D laboratories far away from others to protect the ideas inside, innovators today are locating new facilities next door to universities to gain faster access to the ideas outside. The winners create value when they combine their ideas with those of others, and when others use their ideas.

Henry Chesbrough, [email protected]
Henry Chesbrough is an assistant professor and the Class of 1961 Fellow at the Harvard Business School. He is the author of Open Innovation: The New Imperative for Creating and Profiting from Technology (Harvard Business School Press, April 2003).
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  1. “Here Comes Hyperinnovation” by Michael Schrage, s+b, 1Q 2001; Click here.
  2. “Adventures in Corporate Venturing,” by Jill Albrinck, Jennifer Hornery, David Kletter, and Gary Neilson, s+b, 1Q 2001; Click here.
  3. “The Cluster Effect: Can Europe Clone Silicon Valley?” by Des Dearlove, s+b, 3Q 2001; Click here.
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