Open Business Models: How to Thrive in the New Innovation Landscape

by Henry William Chesbrough and Henry Chesbrough

In his landmark book Open Innovation , Henry Chesbrough demonstrated that because useful knowledge is no longer concentrated in a few large organizations, business leaders must adopt a new, "open" model of innovation. Using this model, companies look outside their boundaries for ideas and intellectual property (IP) they can bring in, as well as license their unutilized home-grown IP to other organizations. In Open Business Models , Chesbrough takes...

• Format: Hardcover
• Language: English
• ISBN: 1422104273
• ISBN13: 9781422104279
• Release Date: December 2006
• Publisher: Harvard Business Review Press
• Length: 272 Pages
• Weight: 1.30 lbs.
• Dimensions: 1.0" x 6.3" x 9.5"

Customer Reviews

Well-written, concise, with specific examples

As with his previous book Open Innovation, Chesbrough provides a concise and easily read review of important new trends in high-tech management. In this book the focus is on the path an innovation takes to profitability in the marketplace. Among the topics reviewed are novel "intermediate markets" for ideas and technology. I particularly appreciated the chapters of the book that provide nine examples of companies that are more-or-less "pure play" innovation intermediaries. Companies like Innocentive, Ocean Tomo, and UTEK are profiled in depth. I appreciate the specificity, which will allow the reader to evaluate Chesbrough's insights into the future: By following up on the progress of these companies, we'll see how well Chesbrough hit the mark. This specificity is rare in business books. It will be interesting to see where Chesbrough's interests flow in future. I would welcome a focus on public sector research institutions. A comparison of the innovation and commercialization models among universities, NIH, NASA, ESA, etc. could be helpful to policy makers as Open Innovation ideas gain wider acceptance.

Open Business Models for Those Who Rely on Technology Innovation and Need Intellectual Property Prot

This book is misnamed. Rather than being about open business models, the book's topic is about how to open business models to benefit from access to more technological innovation and strengthen your competitive posture through intellectual property. As a result, Professor Chesbrough creates a misapprehension that successful open business models are almost always linked to technological innovation as their main purpose and benefit. My own research (with Carol Coles in The Ultimate Competitive Advantage: Secrets of Continuously Developing a More Profitable Business Model) indicates just the opposite point: Technological innovation is rarely the most effective way to open up your business model to create improvements. So, this book's value is mostly to those who work in achieving or creating more benefits from technology innovation. If that is your interest, you've come to the right book. If that's not your interest, skip this book. Why do those involved in achieving or creating more benefits from technology innovation need to open their business models? Professor Chesbrough points to several influences: 1. Technological innovation is coming from more sources than ever before. As a result, you will be developing inferior technology without accessing the best of what the world has to offer. 2. Most intellectual property isn't used for any practical purpose. That's a waste of social and company resources. 3. The protections for intellectual property are stronger now, and your pathway to progress will be blocked without collaborating with those who have complementary IP. 4. Product cycles are shorter and costs of developing new technologies are higher; open business models offer the promise of getting to market sooner at lower cost so that your business has a better chance of earning a decent return on new technology. 5. Large companies need to make new product development more productive if they are to meet their growth goals. Professor Chesbrough does a nice job of developing those themes. He balances theoretical arguments with case histories of recent practices. Of even more value, he explains how companies will have a hard time finding all of the technology they need without help. As a result, he feels that intermediaries will turn out to be important to helping connect organizations. His case histories of such intermediaries are very interesting in showing how difficult it is to play such intermediary roles without deep pockets. For those who are new to the subject of technological innovation in the context of business models, you will find his descriptions of what a business model is (see page 182) and types for assessing your business model (see pages 132-133) to be helpful. The only quibble I would make with his types is that in his examples he assumes relative undifferentiation in industries and business types where there are often large nontechnological differentiations. I found the last chapter to be by f

Innovation requires an open mind...and the courage to challenge "the ideology of comfort and the tyr

What is an open business model? In Chapter 1, here's Henry Chesbrough's response to that question: "A business model performs two important functions: it creates value and it captures a portion of that value. It creates value by defining a series of activities from raw materials through to the final consumer that will yield a new product or service with value being added throughout the various activities. The business model captures value by by establishing a unique resource, asset, or position within that series of activities, where the firm enjoys a competitive advantage." Having thus established a frame-of-reference, Chesbrough continues: "An open business model uses this new division of innovation labor - both in the creation of value and in the capture of a portion of that value. Open models create value by leveraging many more ideas, due to their inclusion of a variety of external concepts. Open models can also enable greater value capture, by using a key asset, resource, or position not only in the company's own business model but also in other companies businesses." These two brief excerpts are provided because Chesbrough`s definitions of various terms are far clearer and more authoritative than mine could possibly be. Also, these excepts address the "what" so that in the balance of this brilliant book, Chesbrough can then focus almost entirely on the "why" and "how" concerning the design, implementation, modification, and performance measurement of open business models. I was especially interested in what Chesbrough has to say about what several quite different exemplary companies -- including IBM, Qualcomm, Genzyme, Procter & Gamble, and Chicago (the musical stage show and film) -- share in common: "each started with an idea that traveled from invention to market through at least two different companies" which shared the work of innovation, and, all were assisted by effective management of an open business model. Chesbrough also devotes a substantial attention to IBM whose type 3 business model (i.e. multiple segmentations, "inside-out" mindset) reached a financial crisis in 1992. Had the IBM board not replaced its then CEO with Lou Gerstner and fully supported his leadership throughout an immensely complicated and equally difficult transformation , it is probable that IBM would not have survived. Gerstner deserves much of the credit for the success of that "cultural revolution" (as he once described it) but much credit should also be assigned to IBM's open source business model. Procter & Gamble is another company which completed an especially difficult transition from having internal staff members who protected (hoarded?) various technologies so that other companies, including potential competitors, could not use them to becoming a company with a much more open approach to innovation. Chesbrough notes that P & G began to pay much greater attention of external licensing of its technologies, (e.g. to BearingPoint), now stron

The World It Is a'Changin

We have become accustomed to the fact that innovation has become a standard of the industrial world. Indeed companies like Microsoft market (very successfully) what is essentially nothing but an arrangement of bits. One of the things that this book brings to mind is that a lot of other companies (Procter & Gamble, Air Products) are innovative in a business that you wouldn't think of as being particularly innovative. This book is exploring fairly new ground in its concept of 'Open Innovation,' that is creating a marketplace for innovation itself. You might not be able to capitalize on your new innovative idea, perhaps Air Products can, or perhaps you can use something that Procter & Gamble has done. And where that's a market like that, there are new specialty companies in the business of marketing innovation between companies. We live in a time where the future is going to require major changes, peak oil and global warming to name two harbingers of change. Companies that continue to live in the old world are going to have a very hard time -- go look at Ford and GM

Insightful modern thinking on business

Professor Hank Chesbrough of UC Berkeley has done it again, another insightful book about modern thinking on business. Building on his first book, Open Innovation, Chesbrough goes beyond innovation to put it in the broader context of strategic management. Granted, I have only had opportunity to read 1 pre-release chapter of the book, but I can tell it's going to be an important book for managers-across an entire enterprise-to study. I say it speaks to managers from across an entire enterprise because the book presents a holistic way of thinking about innovation. Chesbrough provides a definition of the Business Model of a corporation that integrates elements from Marketing, R & D, IP Management, Supply Chain Management, Competitive Intelligence, Strategy, Sales, Purchasing, Finance, and even University Relations. HR and accounting weren't integrated, at least not in the chapter I got to read, nonetheless it's an impressively comprehensive synthesis of a vast array of strategic management topics into one concise construct, the Business Model. By having a single definition of a Business Model, managers within a corporation finally have a common language to relate to each other when changes need to occur. This common language is critical to ensuring that innovation happens holistically. For instance, from a company's end-customer's perspective, it doesn't make sense for the company to innovate on its core technology if it doesn't translate into new marketing messages the customer would care about. To pull off integrated innovation, departments in a corporation need to recognize when changes in other departments-that is to say innovation in other departments-should ripple through the organization as innovation in other functional areas of the business. The shared language of a Business Model allows one department or job function such as R & D to suggest a new idea that will have a certain departmental benefit but entails a change to the company's business model. Because all other departments are listening for potential changes to the business model, a signal from another department that a change is coming to the business model can spark cross-functional debate, planning, and cooperation to ensure the change is implemented for global, not local, departmental optimization. Maybe there will even need to be a new profession called the Business Model Manager, akin to a Product Manager, that's responsible for looking after the health of the business model. Will there be a new management association for these professionals? The Business Model Managers Association (BMMA), or will it become an extension of Product Development Management Association?