“…innovation is the process ofturning ideas into value andperspectives…”

Open Innovation & SmartBusiness Models

Alar Kolk

www.alarkolk.com

kolk@cc.hut.fi

Building New Innovation Capabilityto Identify Future Opportunities

- Identify New Growth Opportunities

- Define & Implement New Innovation Strategies

- Generate & Deliver Better Ideas

- Renew Organizatonal Capabilities

different levels of innovation

business model innovation

product & service innovation

process innovation

technology innovation

New Knowledge& Innovation…

idea!

Knowledge Creation as the Self-Transcending Process

Nonaka & Konno 1998

i : individualg : groupo : organization

week’s worth of The Times…

Nonaka, Toyama, Konno 2000

Knowledge Leadership

Knowledge Creation as the Self-Transcending Process

Nonaka & Konno 1998

FinancialInnovation…

The Dow-Jones index of the largest companies traded on the U.S Stock…

market declined 22%, the worst week in the index's 118-year history

Growth &Innovation…

Growth is top of mind for business executives. Strong, value creating

revenue growth lies within reach of corporations that pursue best practice in

innovation, strategy, marketing, operations and organizations.

For companies aspiring to grow, where to compete is just as important as how. To

choose the right battlegrounds, they must match their distinctive capabilities with

sectors where profitability growth is likely to occur.

WHERE and HOW

to Grow?

How to Grow?

ServiceInnovation…

Transformative BusinessDisciplines…

Correlating Service Innovation Outcomes to The Ten Types of Innovation

The Five Lessons of the (Service) Innovation Journey

OpenInnovation…

Open Innovation means thatvaluable ideas can come frominside or outside the company(industry) and can go to market from inside or outside thecompany (industry) as well1.

This approach places external ideasand external path to market on the same level of importance asthat reserved for internal ideasand paths to market during theClosed Innovation era2.

CLOSED & OPEN BUSINESS MODEL

OPEN INNOVATION!

1,2 H.Chesbrough, 2003

Our currentmarket

Our new market

Other firm´smarket

Open innovation

External technology insourcing

Internaltechnology base

External technology baseHenry Chesbrough, 2004

Internal/external venture handling

Licence, spin out, divest

At any given point in time, firms must follow a certain trajectory or path of

competence development. This path not only defines what

choices are open to the firm today, but it also puts bounds

around what its internal repertoire is likely to be in the

future1.

STEP OUT OF THE BOX!!!

PATH DEPENDENCY

We had become stuck in our past and weren’t stretching far enough to

innovate new ideas, to “step out of the box.”

David O. Swain, ex. CTO, Boeing1Teece et al, 1997

Learning & Diversity

Boeing VP Dick Paul & CTO David O. Swain went to P&G and asked how they were getting ideas and how they were thinking about R&D. After the visit they remarked, “P&G

had some great thoughts, which affected what we did; we went home and did a couple of things differently and that was an example of us beginning to open our eyes to the world

and trying to integrate that into our planning process

Dynamic capabilities as the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments1.

Some dynamic capabilities integrate resources (product development; strategic decision making), others focus on reconfiguration of recourses (knowledge brokering) within firm and other dynamic capabilities are related to the gain and release of recourses (knowledge creation routines; alliance, acquisition and exit routines)2.

EXPLORATION & TRANSFORMATION

DYNAMIC CAPABILITIES

Roald Amundsen, Robert Scott, Umberto Nobile

1Teece et al 1997 2Eisenhardt and Martin 2000

Developing Portfolio of Capabilities

Operational Capabilities

TechnologicalCapabilities

TransformingSeizingSensing

OpenCapabilities

Dynamic Capabilities

Learning

Innovation

1995 1998 2000 2003 20052004 2006

?

Core Search Ads Monetization Communications Collaboration ?

Microsoft® SyncMicrosoft® Sync

Platform leaders (companies that drive industry wide innovation for an evolving system of separately developed pieces of technology) are navigating challenges from wannabes (companies that want to be

platform leaders) and complementors (companies that make ancillary products that expand the platform’s market. Platform leadership is the ability of a company to drive innovation around a particular platform

technology at the broad industry level.

Cusumano and Gawer (2002)

Outside-inInnovation…

SpaceInnovation…

EADS Space Plane fromLondon to Sydney – 2,5 hours

MEETING THE CHALLENGES OF

SPACE TOURISM

Space Tourists International Space Station(ISS) uus äri ning hotell?

L-Commerce…

LOCATION COMMUNITY

LOCATION COMMERCEE-Commerce

+ M-Commerce

=L-Commerce

GPS-Enabled LBS Subscribers by Region, World Market: 2005 to 2011*

* ABI Research

SocialCommunities…

Platforms &Innovation…

PLATFORMS & Business Models

Google & Microsoft

Google Earth

Microsoft Virtual Earth

Business ModelInnovation…

GROWTH & OPEN

BUSINESS MODELThe business model provides a coherent framework that takes

technological characteristicsand potentials as inputs, and

converts them throughcustomers and markets into

economic outputs1.

A business model has two functions:

1.Value creation2.Value capture

1Chesbrough, Roosenbloom 2002

Traditional (product) Value Chain

vs.

Modern (business model) Value Chain

20 senti

2 krooni

20 krooni

30 – 70 krooni

The business model mediates betweentechnical and economic domains

Over the years, entrepreneurs have been mostly known for technical innovations. And there are many great companies that have been built on top of technical innovations like Intel, Cisco, Oracle, Apple, and arguably Microsoft.If you think of Federal Express, Google, Netflix, these companies were built on

business model innovations.

Business Model:

• market segment

• value proposition

• value chain

• c/profit mechanism

• value network

• competitive strategy

EconomicOutputs:

e.g., value, price, profit

TechnicalInputs:

e.g., feasibility,

performance

Measured in technical domain Measured in economic domain

Focus in Business ModelA business model is a conceptual tool that contains a big set of elements and their

relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers

and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable

and sustainable revenue streams. Osterwalder, Pigneur and Tucci (2005)

... improve it

Portfolio of Capabilities

& Business Model

OpenCapabilities

DynamicCapabilities

OperationalCapabilities

TechnologyCapabilities

Portfolio

how do you measure the success of a business model?

Revenue Growth, Life Cycle & Innovation Dynamics

Business model innovation has captured the attention of executives tasked with achieving growth in the face of increasing competitive pressure. Business model innovation suggests

that if you took an existing product and repackaged how you sold it, you can hold off competitive pressures and even capture entirely new market segments.

Business Model & Culture