Closed and Open Innovation in the Business Essay Sample
This essay sample will focus on the explanation of open and closed innovation, the importance of innovation, the difference between open and closed innovation, and how to choose between open or closed innovation in the business of the company.
‘Innovation’ is a concept or an idea that is being used by various companies to specifically cater to the needs of the customers and to meet the goals of the company. It applies research and information process to increase the value of the product or service generated by the company at an economical price.
What is open innovation?
The ‘open innovation’ terminology was used by Henry Chesbrough who is a researcher at the University of California.
An open innovation according to Henry Chesbrough is using external ideas and combining them with internal processes to effectively move towards the direction of innovation.
It is the use of internal methods and external knowledge to expand the market of the company and making its innovation suitable for its growth.
What is a closed innovation?
A company with a closed innovation process usually develops it’s projects within the well-defined boundaries of it. Every single process in the departments of the company takes place within the four walls of the company.
Technology, market processes, intellectual property rights are all under the control of the company itself and does not get influenced by the external factors. It can very well survive even without an active collaboration with the outside market players.
Henry Chesbrough believed that the innovations are developed internally and all the internal processes, methods, research, and development take place within the organization. The internal processes and activities generate products and services to be sold and distributed in the market.
Importance of Innovation
- Innovation is very important for any company to grow and survive in the competitive market for the long run.
It provides the business of a company to have an edge over the other companies in the market competition.
- It also allows the company to seek and generate better opportunities to build its brand image and awareness.
It helps in diversifying the product ranges by creating a high-profit margin and expanding the market for the business.
- The innovation process helps in increasing the creativity and productivity level of the staffs and the innovators.
It creates an overall innovation culture in the organization by allowing more scientific and experimental technological processes. It boosts the economy through job growth in company.
Difference between Open and Closed Innovation Processes in the Business
- Companies using a closed innovation process carry out every work in the closed environment of the company.
While the company using an open innovation process shall use external knowledge for making any innovation strategies and work in collaboration with the outside market, not within a closed space.
- Closed innovation includes the ideas and opinions of the internal staff of the company. All the testing, development, technology, research, Intellectual property rights are all dealt with within the four walls of the company and are in control of it.
It is a traditional approach but works well for some of the businesses and all the work load lies on the shoulders of the internal staff for generating an innovative new product.
- While an open innovation includes elements of the external environment and actively increases the potential through an effective innovation technique.
The company using this modern innovation process combines internal and external ideas, sales channels, and technological strategies to generate innovative products.
It includes opinions of not only internal staff but also of the suppliers, employees, consumers, and competitors.
It is a modern approach towards innovation and technologies and places a greater value on the internal and external sources as well.
How to choose between Open or Closed Innovation for the company
When a company has to make a choice between a closed or open innovation process or strategy it needs to consider the nature of the innovation, need to evaluate innovation for product generation, uniqueness of product or service, nature of the product to be produced, and the company’s individual and market goals.
Companies can increase the risk of technological advancements making the company feel more insecure as the innovation can get leaked to the competitors in the market through an open innovation process.
It can lead to product lines being open for copying and imitations which can create a negative impact on the product range.
Companies with competitors in the market must use a closed innovation process to remain secretive.
Only the companies which require new ideas to benefit them must refrain from using an open market policy. An open innovation shall only be suitable for any ongoing process and benefits which are generated only through cooperation.
Do not get anxious due to assignment writing and submission on time!
The above sample explains the open and closed innovation processes used in the business.
Business Management Course QQI Level 6, Advanced Business Management (QQI Level 6 Major Award), Business Studies QQI Level 5, Marketing and Human Resources QQI Level 5, Business Administration Course QQI Level 5, Innovation Management QQI Level 8, Marketing, Innovation, and Technology Course QQI Level 5 students must read this essay to understand the business, marketing, and management concepts.
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