Opportunity identification and selection

For the exclusive use of D. DIXON, 2019. www.hbrreprints.org Plenty of companies have tried—and failed—to increase innovation. Here’s how to apply the lessons of free trade to the market for new ideas. Open-Market Innovation by Darrell Rigby and Chris Zook Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 2 Open-Market Innovation 11 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications Reprint R0210F This document is authorized for use only by DAINE DIXON in New Product Development Summer 2019 taught by ARCHANA KUMAR, Montclair State University from Apr 2019 to Jul 2019. For the exclusive use of D. DIXON, 2019. Open-Market Innovation The Idea in Brief The Idea in Practice Challenged by the anthrax crisis of 2001, Pitney Bowes swiftly developed imaging technologies for detecting suspicious mail. How? It used open-market innovation. By going outside its boundaries—to fields as diverse as food handling and military security—it gathered 82 ideas, then distilled the best solution. REWARDS AND RISKS Some of the fastest growing and most profitable businesses are using open-market innovation to improve the pace, cost, and quality of innovation. Through strategic alliances, joint ventures, and licensing, companies as diverse as IBM, Boeing, and Eli Lilly are opening their innovation borders to vendors, customers—even competitors. COPYRIGHT © 2002 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. Open-market innovation carries benefits and risks. The key to using it? Determine when it’s right for your company, then institutionalize it. Open-market innovation offers four advantages: • Independent entrepreneurs can produce equally good (or better) innovations than your corporate R&D lab. • Importing new ideas multiplies innovation building blocks—ideas and expertise. Companies that collaborate with outsiders on R&D generate more of their total sales from new products than companies that don’t. • Industry turbulence forces you to innovate without knowing which direction to take. Cisco Systems explored multiple product strategies with outside partners to navigate the volatile market for optical switching equipment. • Exporting ideas raises cash and improves employee retention. IBM earns nearly $2 billion a year in royalties from exported patents. This signals the need to act fast on new ideas—or watch them depart. Creative people stay, knowing their good ideas won’t get buried. • Disparate sources must coalesce to bring a promising idea to market. Cargill Dow—a $500 million joint venture between Cargill and Dow Chemical—discovered how to make plastic from renewable crops. Cargill provided the technical know-how; Dow, customer requirements. • Exporting ideas reveals an innovation’s true worth. Eli Lilly offers licenses for pharmaceutical compounds under development when their value is still unclear. If outside labs aren’t intrigued enough to bid, Lilly resets it sights. INSTITUTIONALIZING OPEN-MARKET INNOVATION • Exporting and importing ideas clarifies your core business. To increase return on R&D dollars, Boeing focused on innovations it could develop better than anyone else. Through outside collaboration efforts, it learned its competitive advantage lay in systems integration, not manufacturing.