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This chapter reviews the core ideas behind Open Innovation, discusses what it is and is not, and shows how it can deliver more value to organizations and to society. Outside-in Open Innovation strengthens the current business and current business model, while inside-out Open Innovation searches for alternative businesses and business models. The chapter explores the connection between technology development and the business model, and examines the use of Open Innovation in intellectual property and in services. However, Open Innovation is not a panacea. Its boundary conditions and limitations must also be acknowledged. As with Chapter 1, the processes of generation in innovation must also be supported by equal attention to innovation dissemination and innovation absorption within the firm, in order for organizations to create and capture value from Open Innovation. Finally, Open Innovation is moving beyond collaborations between two actors, to a broader ecosystem focus that connects many actors together.

Open Innovation can be a powerful engine for growth, if properly managed. P&G was an early, powerful trendsetter in achieving growth from Open Innovation. Open Innovation also can be valuable as a tool to enable environmental sustainability, as seen by Enel and Carlsberg However, even organizations who embody effective Open Innovation practices can have trouble sustaining growth over time. Practices that initially led to strong growth have been followed by periods of declining revenue, or even bankruptcy. Both Qwirky and P&G have struggled to sustain growth via Open Innovation. Open Innovation requires a certain mindset to sustain growth over time. Following the best practices alone may not keep the company ahead of its competitors. Following Open Innovation principles may prove more enduring.

The Introduction discusses the impact of the Great Recession upon innovation spending, and with it, a rethinking of how companies can and should innovate. Open Innovation itself has been affected by the recession, and is sometimes used now as a synonym for outsourcing or cost cutting, which was not the intention of the original concept. A renewed understanding of Open Innovation is needed to unlock its potential to deliver growth, rather than simply cut costs. The role of innovation infrastructure, both for the overall society and for the focal organization, is emphasized as a key to renewing growth through innovation. The Introduction goes on to describe the plan of the book, and introduces the three facets of innovation: generation, dissemination, and absorption. Four possible paths for reading the book are outlined, for practicing managers of innovation, for innovation policy makers, for academic scholars, and for very time-pressed readers.

Open science is a powerful way to discover and disseminate new knowledge. But the very norms that animate open science can sometimes inhibit its subsequent commercialization. There exists a Valley of Death between the culmination of a scientific project, and the later commercial use of that science. While a fundamental knowledge of how a technology works may have been achieved, there is far too little known for businesses to invest in developing that knowledge further. And the best use of a new discovery often is unknown to those who first discover it. This is where open science must start to give way to Open Innovation. IMEC and CERN’s ATTRACT project provide two examples wherein a strong culture of open science co-exists with a thriving Open Innovation culture as well to traverse the Valley of Death

Open Innovation in China is greatly affected by the powerful role of the Chinese Communist Party. Xi Jinping thought introduces a tension between the ‘decisive role of the markets’ to allocate resources and stimulate innovation across the economy and ‘the leading role of the Party’ to guide the development of innovation in the most important industries. This tension plays out differently in different industries in China. In high-speed rail, the tension has been adroitly managed, creating an organization with world class innovation capabilities that is a peer with the best of the rival firms in the world. In automotive and semiconductors, however, the tension has been more problematic. The state-owned enterprises are well aligned with the Party, while it is the privately owned companies and foreign companies that are driving innovation.

Lean Startup is a new and exciting process to discover new business opportunities and new business models. However, the concept must be adapted before it can work effectively inside established companies. Just as startups are not tiny versions of large companies, so too are large companies not simply large versions of startups. Lean Startup inside large companies requires careful internal negotiations with senior management, as well as getting out of the building to find customers. Open Innovation can complement and extend Lean Startup processes. Both use resources efficiently, while Open Innovation also leverages other people’s resources and shares risk. Telefonica provides a good example of Lean Startup inside a large company. It has reduced costs by 48 percent per project, increased its speed to market by 260 percent, and pursued 45 percent more chances to innovate within the same budget.

Open innovation has largely been studied in the private, for-profit sector of the economy in different countries around the world. This chapter considers the less examined role that open innovation is playing in public agencies and in non-profit organizations and we define Open Social Innovation (OSI) to be the application of either inbound or outbound open innovation strategies, along with innovations in the associated business model of the organization, to social challenges. While many elements of open innovation remain quite relevant to these different kinds of organizations, there are differences that must be considered when applying open innovation to them. We sketch these differences using qualitative evidence and secondary research, with a particular emphasis on three mini-cases: the City of Birmingham England’s child welfare agency, Emergency, and Ashoka.

Outside-in Open Innovation is widely adopted by companies and also the most often studied by academics. Yet there is a second half to the open innovation model: the inside-out portion. This chapter examines the underpinnings of the inside-out model, and sketches a number of applications of it. In particular, the chapter looks at why corporations are well-advised to allow internal projects to go to the outside, through a corporate venture spin-out process. The chapter identifies a particular novel kind of spin-out, the complex spin-out venture. Complex spin-outs require extensive integration of multiple technologies and assets in the formation of the venture, a process where a corporation may have a natural advantage over traditional venture capital. Complex spin-out ventures can create new options for the company, support business model innovation, and lead to competitively advantaged ventures that traditional VC is not well suited to achieve.