Open innovation (オープンイノベーション) is the idea of creating new value by bringing in outside technology and ideas held by universities, other companies and so on, while also releasing your own technology to the outside.
Closed innovation
Open innovation
Where technology comes from
Mainly the company's own labs
The company plus universities, other firms and startups
Handling of own technology
Kept inside the company
Unused technology is offered to others
Development burden
The company bears all the time and cost
Outside results help cut time and cost
The traditional approach of keeping R&D entirely in-house is called closed innovation, and it is the counterpart of open innovation. Ways to bring technology in include joint research, partnerships with companies that own the technology, and patent licensing. Open innovation also covers offering technology you do not use to other companies, turning it into revenue or new applications.
AnalogyIt is like no longer brainstorming only in your own meeting room, and instead holding a study session that outsiders can join, then using the ideas that come up there in your products.
How to rememberIt is the same "open" as in open source, where source code is made public: open to the outside.
Exam points
ExamOne way to bring in outside technology is cross-licensing (クロスライセンス), where patent-holding companies grant each other the right to use their patents.
Mix-upOutsourcing (アウトソーシング) hands fixed tasks over to outside parties. Its purpose differs from open innovation (オープンイノベーション), which works with outsiders to create the innovation itself.
The innovator's dilemma (イノベーションのジレンマ) is what happens when a successful, well-run large company pours its effort into its existing customers and into improving its current technology, falls behind the market shift brought by a new technology, and loses its position.
Keep improving to meet key customers' requests
A cheap, simple new technology appears in a small market
The new technology improves until it is good enough for mainstream customers
Newcomers take much of the market and the incumbent loses its position
Companies that entered with the new technology take a large share of the market, and the established leader loses its position.
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Improvements that keep raising the performance of existing products are called sustaining innovation, while a technology that starts out weaker but wins new customers by being cheaper and simpler is called disruptive innovation. Established leaders stumble because they focus so heavily on the former that they respond too late to the latter.
AnalogyIt is like a long-established maker that kept refining high-end film cameras, dismissed digital cameras at first for their rough image quality, and then found the market had been taken by them.
How to rememberThe name comes from the title of the book by Clayton Christensen, who proposed the idea. A dilemma is a bind where either choice causes trouble, and here it captures the paradox of sound decisions backfiring.
Exam points
ExamThe cause is not laziness. A leading company (優良企業) acting rationally to protect its current market position by refining the technology it already has is exactly what makes it lose that position.
The chasm (キャズム) is the deep, hard-to-cross gap that a new product meets as it spreads, at the point where adoption moves from early adopters to the early majority.
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Diffusion of innovations theory sorts consumers into five groups by how early they adopt a new product: innovators, early adopters, early majority, late majority and laggards. The first two groups value novelty, while the majority wants a track record and peace of mind, so adoption tends to stall at the boundary between them. Geoffrey Moore pointed out this gap and argued that reaching the mainstream market takes a different way of selling aimed at the majority.
AnalogyA new kitchen gadget is the talk of a few enthusiasts but struggles to reach the many households waiting for word of mouth and a sales record in stores; the invisible valley between them is the chasm.
How to rememberIn English, a chasm is a deep crack in the ground. It is not a ditch you can step over but a rift you can only cross by building a bridge.
Exam points
ExamThe chasm (キャズム) is the gap between early adopters (アーリーアダプター) and the early majority (アーリーマジョリティ); unless a product crosses it, adoption stops within a limited group.
The Devil's River (魔の川) is the first barrier on the road to a new business, where results from research must move on to development aimed at a product.
Management of technology sees a new business as passing through four stages, from research to development, commercialization and finally industrialization, and gives names to the barriers between them. However interesting a research result is, if no one can see what it is for or what product it could become, it is not picked for development and stops here.
AnalogyAn interesting effect found in the lab sleeps on in a research notebook because no one can see a use for it; that is the first river.
How to remember"Devil" here is something that leads people astray. Picture research results with no clear use losing their way and being swept off by the river.
Exam points
Mix-upThe question at the Devil's River (魔の川) is whether the use of a research result and the shape of the product can be settled. Raising money becomes the big hurdle at the next step, moving from development (開発) to commercialization (事業化).
The Valley of Death (死の谷) is the barrier between development of a technology or prototype and commercialization, where it is sold as a product for profit.
Commercialization needs a lot of money for mass-production equipment, a sales setup and staff, but there is no revenue yet, so projects often stall for lack of funds and resources. It is the second barrier to a new business and comes after the Devil's River between research and development.
AnalogyYou are holding a finished prototype, but the money for mass production never comes together, so launch day never arrives.
How to rememberIt translates the English "Valley of Death". Think of the valley floor as the place where the money runs out.
Exam points
Mix-upThe chasm (キャズム) and the Valley of Death (死の谷) are both hard-to-cross gaps, but the chasm lies along the way a product spreads through the market, while the Valley of Death lies along the way developed technology becomes a business.
The Darwinian Sea (ダーウィンの海) is the barrier between commercialization of a product and industrialization, where it grows into a business large enough to support the company's results.
Research
Devil's River
Development
Valley of Death
Commercialization
Darwinian Sea
Industrialization
Once all three barriers are crossed and industrialization is reached, the new business supports the company's results.
4 / 4
After a product reaches the market, other companies enter the same market, and it faces competition over whether customers keep choosing it. The name borrows from the theory of evolution, in which living things are selected through the struggle to survive, hence Darwin.
AnalogyA new product that has finally made it onto store shelves is tested, in an aisle where look-alikes keep appearing, on whether it keeps being chosen; that open ocean is the sea.
How to rememberRiver → valley → sea. The barrier names run in order from a narrow upstream river to the wide sea downstream.
Exam points
ExamThe Darwinian Sea (ダーウィンの海) is the last of the three barriers, and beyond it lies industrialization (産業化).
Open innovation covers not only taking in outside technology but also releasing your own technology to others.
The innovator's dilemma is the paradox that a leading company's string of rational decisions leaves it behind the market shift caused by new technology.
The chasm sits where adoption passes from the small groups who like novelty to the majority who want a track record.
On the road to a new business, the barriers appear in order from upstream: the Devil's River → the Valley of Death → the Darwinian Sea.