Where does Open Innovation come from?
An exploration of the open innovation journey- from its origins to the present day.
The Imperative for Creating and Profiting from Technology
Within an historical context, Open Innovation was formalised as a concept in 2003 by University of California Professor, Henry Chesbrough, with the publication of his book “Open Innovation: The New Imperative for Creating and Profiting from Technology.” This is, coincidentally, the very same year that innovation consultancy InnovationXChange (IXC) was formed.
However, the history or roots of open innovation can be traced further back through Joy’s Law, which itself can be considered to be based on Hayek’s (1945) view that knowledge is distributed across society. Joy’s Law states most smart people work for someone else. This is, indeed, the key problem that Open Innovation sets out to solve.
Most Smart People Work for Someone Else
To expand upon Joy’s Law, in 1990 Bill Joy, the Sun Microsystems co-founder, was attributed with saying “No matter who you are, most of the smartest people work for someone else,” whilst he was attacking Microsoft as an “IQ Monopolist.” Joy reasoned that an organisation could never solve all of its customer needs by relying solely on its own employees. Instead, he proposed creating ‘an ecology where the world’s smartest people toil in your garden for your goals’.
Where the world's smartest people toil in your garden for your goals.
The Knowledge Society
A few years later, in the book Post Capitalist Society (1993), renowned management consultant and philosopher Peter Drucker observed our transition into a “Knowledge Society” and this concept of distributed knowledge became ever more important. In this work, Drucker noted
“value is now created by ‘productivity’ and ‘innovation’, both applications of knowledge to work. The leading social groups of the knowledge society will be ‘knowledge workers’ – knowledge executives who know how to allocate knowledge to productive use.”
Drucker also predicted then, more than 20 years ago, that we would not see more polymaths- rather, we would actually become more specialised. Therefore, what would be essential for knowledge workers is the ability to understand the key aspects of the different ‘knowledges’- such as what major new insights they had produced. Drucker believed that each major new insight in one field of knowledge would always be as a result of knowledge from a separate specialty.
The practice of sharing knowledge then became, not only desirable, but an imperative and in 1995, Knowledge Creation Theory emerged from studies of hi-tech companies in Japan, with a focus on sharing knowledge, which by default meant the process had to be open- whether this be between individuals, groups and/or organisations.
This Knowledge Creation Theory, half a century later, echoes that of Friedrich Hayek’s in his essay ‘The Use of Knowledge in Society’ where he notes in 1945 that, “The practical problem… arises precisely because…facts are never so given to a single mind, and because, in consequence, it is necessary that in the solution of the problem knowledge should be used that is dispersed among many people.”
Open Innovation in Business Success
This is exactly the challenge that open innovation sets out to solve. That key quantum of elusive knowledge which could elegantly solve a resourcing challenge, elucidate a production problem, optimise a business process, develop a new product, or expand into new markets could be unassumingly tacit within an inconspicuous university department, a lapsed patent, a retiree from a completely different industry, a neonatal start-up, a lone inventor from the other side of the globe, the intern already inside the company, or a specialist from an entirely different field.
It is within these realms of identifying and encouraging connections and collaborations– because most of the smart people work for someone else – that organisations, such as knowledge transfer networks, crowdsourcers, and innovation consultancies, operate and assist with the practice of open innovation.
With thanks to Ikujiro Nonaka, Henry Chesbrough & Marcel Bogers whose work (in New Frontiers in Open Innovation) this article is based on.