What Is Open Innovation In Data Science?

Daniel Morales
Feb 26, 2021


Open innovation is a term used to promote a different and open mindset towards innovation that goes against the secrecy and traditional mentality of corporate R&D labs.

The use of the term "open innovation" refers to the growing acceptance of external cooperation in an increasingly complex world and environment.

It has been promoted in particular by Henry Chesbrough, associate professor and faculty director of the Center for Open Innovation at the Haas School of Business at the University of California, Berkeley.

The term was originally referred to as "a new paradigm that assumes that companies can and should use both external and internal ideas, and internal and external paths to market, as companies seek to advance their technology."

More recently, it is defined as "a distributed innovation process based on intentionally managed knowledge flows that cross organizational boundaries, using pecuniary and non-pecuniary mechanisms consistent with the organization's business model".

This more recent definition recognizes that open innovation is not just about the firm: it also includes creative consumers and innovative user communities.

The boundaries between a company and its environment have become more permeable; innovations can be easily transferred inward and outward between companies with implications at the consumer, company, industry and societal levels.

Since innovations are often produced by outsiders and by the founders of new firms, rather than by existing organizations, the central idea of open innovation is that, in a world of widely distributed knowledge, firms cannot afford to rely entirely on their own research, but must buy or license processes or inventions (i.e. patents) from other firms.

This is referred to as inbound open innovation. In addition, internal inventions that are not used in a company's business should be taken outside the company (e.g., through licensing, joint ventures or spin-offs).

The open innovation paradigm can be interpreted as going beyond the mere use of external sources of innovation, such as customers, rival firms and academic institutions, and may involve both a change in the use, management and employment of intellectual property and in the technical and research-driven generation of intellectual property. 

In this sense, it is understood as the systematic encouragement and exploration of a wide range of internal and external sources of innovation opportunities, the integration of this exploration with the company's capabilities and resources, and the exploitation of these opportunities through multiple channels.

Advantages

Open innovation offers several benefits to companies operating in a global collaboration program:
  • Reduced research and development costs.
  • Potential for improved development productivity
  • Incorporation of customers/developers early in the development process.
  • Increased accuracy of market research and customer orientation
  • Potential for synergy between internal and external innovations
  • Viral marketing potential
  • Enhanced digital transformation
  • Potential for entirely new business models
  • Leveraging innovation ecosystems.


Models

Government-driven
There are countries with knowledge transfer partnerships that act as a funding mechanism that fosters a partnership between a company and a knowledge-based partner.

Product platforms
This approach involves the development and presentation of a partially completed product in order to provide a framework or set of tools for partners to access, adapt and exploit.

The goal is for contributors to extend the functionality of the platform product while increasing the overall value of the product for all involved.

Off-the-shelf software frameworks, such as a software development kit (SDK) or application programming interface (API), are common examples of platform products.

This approach is common in markets with strong network effects where the demand for the product implementing the framework (such as a cell phone or online application) increases with the number of developers attracted to use the platform toolkit.

The high scalability of platforms often results in increased complexity of administration and quality assurance.

Competitions of ideas
This model involves the implementation of a system that encourages competitiveness among contributors by rewarding successful submissions.

Developer competitions such as hackathons and many crowdsourcing initiatives or data science competitions fall into this category of open innovation.

This method provides organizations with cost-effective access to a wealth of innovative ideas, while providing insight into the needs of their customers and contributors.

Customer immersion
Although mostly geared toward the end of the product development cycle, this technique involves extensive interaction with the customer through the host organization's employees.

In this way, companies can accurately incorporate customer input while allowing them to be more closely involved in the design process and product management cycle.

Collaborative product design and development
As with product platforms, an organization incorporates its collaborators into product development.

This differs from platform creation in that, in addition to providing the framework within which the collaborators develop, the host organization still controls and maintains any products developed in collaboration with its collaborators.

This approach gives organizations greater control by ensuring that the right product is developed as quickly as possible, while reducing the overall cost of development. Dr. Henry Chesbrough recently endorsed this open innovation model in the optics and photonics industry.

Innovation networks
Similar to idea competitions, an organization leverages a network of collaborators in the design process by offering a reward in the form of an incentive.

The difference is related to the fact that the network of collaborators is used to develop solutions to problems identified within the development process, as opposed to new products.

Emphasis needs to be placed on assessing the capabilities of the organization to ensure value creation in open innovation.

In science
In Austria, the Ludwig Boltzmann Gesellschaft launched a project called "Tell us!" on mental health issues and used the concept of open innovation to obtain feedback on research questions.

Innovation intermediaries

Innovation intermediaries are individuals or organizations that facilitate innovation by linking multiple independent actors in order to foster collaboration and open innovation, thereby strengthening the innovation capacity of firms, industries, regions or nations.

As such, they can be key players in the transformation from closed to open modes of innovation.

Innovation intermediaries is a concept in innovation studies to help understand the role of firms, agencies and individuals that facilitate innovation by providing the bridging, brokering, knowledge transfer necessary to bring together the range of different organizations and expertise needed to create successful innovation.

In this sense DataSource.ai acts as an innovation intermediary to democratize access to innovations derived from new technologies such as data science and machine learning.

The term open innovation intermediaries was used for this concept by Henry Chesbrough in his 2006 book as "companies that help other companies implement various facets of open innovation".

Innovation intermediaries

Innovation intermediaries are individuals or organizations that facilitate innovation by linking multiple independent actors in order to foster collaboration and open innovation, thereby strengthening the innovation capacity of firms, industries, regions or nations. 

As such, they can be key players in the transformation from closed to open modes of innovation.

Innovation intermediaries is a concept in innovation studies to help understand the role of firms, agencies and individuals that facilitate innovation by providing the bridging, brokering, knowledge transfer necessary to bring together the range of different organizations and expertise needed to create successful innovation. 

The term open innovation intermediaries was used for this concept by Henry Chesbrough in his 2006 book as "companies that help other companies implement various facets of open innovation".

Role

Innovation intermediaries are variously described as "bridges", "change agents", "brokers". 

They are important because the promoters of a new invention or technique are rarely connected with its potential users, or with companies and organizations that have complementary experience, expertise and resources. 

The same applies to potential users of innovations, so intermediaries are needed to bring organizations and knowledge together to create supply networks and markets. 

For example, technology intermediaries are created to help companies leverage their technological advances.

There are three main areas of focus:
  1. Business model innovation; 
  2. Intellectual property management; 
  3. Service innovation.

Intermediaries have also been defined as a system of complementary organizational categories that shape, drive and ensure systemic integration, reducing transaction complexity, enabling institutional change and promoting crucial learning dynamics between system components, organizations and entrepreneurs; at all levels relevant to political, economic and social innovation. 

These categories could be established together, allowing for a holistic approach to the issue of intermediation. 

The novel notion of a system of intermediary organizations could also facilitate the coordination and evaluation of their profiles and missions over time and space-based needs.

Intermediaries play a wide range of roles, facilitating the bringing together of various actors in different parts of innovation processes, such as ideation, invention, standards development, IPR management, commercialization, creation of new market segments, etc. 

These intermediaries can specialize in different services. Their basic functions include 
  • coordination of processes and the search for solutions between innovation seekers and potential solution providers, 
  • knowledge and funding brokering, testing, standardization, project appraisal and portfolio management, etc. 

Each of these activities facilitates the exchange and creation of new knowledge, creates opportunities for experimentation, helps the emergence of common standards and goals, and the formation of partnerships.

Open innovation intermediaries are responsible for facilitating the open innovation activity undertaken by companies, focusing on the full exploitation of the benefits of mutual action and thoroughly mitigating the disadvantages and risks for all companies.

In the special field of technology development of enterprises, technology intermediaries are set up to help enterprises leverage their knowledge. 

The intermediaries are specialized in different R&D and R&D-related activities and can help companies build absorptive capacity.

Impact

From an economic perspective, innovation intermediaries create "multi-sided" markets by delivering value to multiple agents in a matching market, create the market and manage the matching process.

In the Internet age, there are an increasing number of online services and platforms that explicitly seek to play the role of innovation intermediaries, including technology search services, crowdfunding and crowdsourcing services, meetups, open competition platforms, etc. 

Despite the trend of online platforms, a management role is necessary for effective network linkage building or efficient technology sourcing.

“What Is Open Innovation In Data Science?”
– Daniel Morales twitter social icon Tweet

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