Innovation is the lifeblood of the modern enterprise. Companies must continually revise, refine and expand their portfolio of products and competencies if they are to thrive in the modern economy. The ability to identify or create new opportunities and to respond to those opportunities is often the determining factor in the success of failure of an organization. Continual innovation is no longer just an advantage. It is a survival skill.
But true innovation is hard. It is expensive. It is risky. And by many measures it is in decline. Invention is up as reflected in the number of patent applications submitted each year, but invention is not innovation. As Jan Fagerberg of Oslo University puts it, “Invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out into practice.” Innovation only occurs when invention is acted upon and a true benefit, social, economic or strategic is actually realized. This usually involves a network of engineers, product managers, marketers, financiers and a host of other players. Each of these actors contributes to the process of turning the creative spark captured in a new invention into the tangible benefits indicative of true innovation.
US Patent Applications 1963-2011 (source US Patent Office)
Most intellectual property (IP), the umbrella label for invention of any sort, never makes it to this stage. Too often it is filed away as a hedge against future litigation or used as a tool to instigate litigation. More commonly, a patent gets shelved simply because the owning company doesn’t know what to do with it. The classic “not invented here syndrome” has evolved into a pervasive attitude of “That’s not what we do here” or even “That’s not what we sell here.” As a result, companies are sacrificing opportunity on the altar of core competency. If a potential innovation does not cleanly align with the company’s current business model, it is unlikely to be acted upon except to ensure that competitors cannot benefit from it in any way.
The current climate of knowledge hording and defensive licensing is not new. Closed innovation has been the standard accepted model for over a century. Internal research and development activities lead to internally developed products that are then distributed by the company. This approach has held sway from Thomas Edison’s Menlo Park through AT&T’s Bell Labs and beyond. In a pre-internet world, such an approach made perfect sense and worked well. That world no longer exists. Globalization and modern telecommunications have moved us from an environment of knowledge scarcity and skills secrecy to one of knowledge abundance and ubiquitous access to expertise. The world has changed. It is time for our approach to innovation to change as well. The closed model of innovation must become open, radically open.
Thriving in a global economy requires embracing opportunity regardless of where it originates, who participates and how it is ultimately delivered. To accomplish this, the boundaries of the enterprise need to become porous. The inflow of external ideas, assets and information should be placed on an equal footing with the outflow of product and licenses. Proprietary innovation, expertise and data should no longer be jealously guarded and labeled as “for internal use only.” Rather than forcing innovation to conform to a particular business model, the open enterprise must look for what new business models any given innovation may suggest and partner with whomever is best positioned to realize its potential.