What is the extent to which good fencing makes good neighbors? How much of your innovation process should you make public? Henry Chesbrough, the developer of the term Open Innovation, discusses open innovation processes in practice. The author provides examples from companies like Microsoft, AWS, and P&G using open innovation within the company.

During his discussion with Greg La Blanc, he delved into concepts on how companies can maintain both exploitation and exploration through innovation. This episode examines how culture and incentives play a big role in encouraging a great flow of information from the top to the bottom of an organization. 

Take notes until the end of the show. Discover which areas you can focus on to see real results. Finally, understand why there’s an exponential paradox. Even when new technologies are emerging at an accelerating rate, why do we continue to see production and wages stagnate?

Episode Quotes:

In simple terms, what is Open Innovation?

“In the 1950s, when you did R&D you often got what you were looking for. But you get a lot of other things that you didn't plan on. These other things were spillovers that flowed beyond the organization to the wider world. They were essentially unmanaged consequences that, it's too bad, but it's part of the process. It was essentially a cost of doing innovation. Well with open innovation, these spillovers become harnessed, channeled, and directed. So that now, it is not just a cost of doing business. It can be a source of new revenues. A source of greater differentiation.”

Why are exploration and exploitation equally important when innovating?

“One size fits all metrics is going to push you back to the exploitation side. If you only do the exploration, you can create a lovely artist colony and have lots of exploration going on, but you may never get scale and get critical mass.”

How do you balance exploration and exploitation when innovating?

“If you are only thinking about exploration, you can devalue, and de-motivate, the people that are doing the things that pay the bills, keep the lights on, and create the infrastructure that you're going to leverage for your future.”

Show Links:

• Henry Chesbrough Profile on UC Berkeley, Haas School of Business
• Henry Chesbrough’s Articles on Forbes
• Henry Chesbrough on Google Scholars
• Order Book: Open Innovation Results
• Order Book: New Frontiers in Open Innovation
• Order Book: Open Services Innovation
• Order Book: Open Business Models
• Order Book: Open Innovation: Researching a New Paradigm
• Order Book: Open Innovation: The New Imperative for Creating and Profiting from Technology

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