Corporate Pirates?

When I asked Google for a definition of innovation, the top result provided a short explanation informing me that innovation is “an invention; a creation (a new device or process) resulting from study and experimentation.” Now I don’t mind this definition, it’s a lot simpler than many definitions I have been exposed to during my time at University. However, more recently I have come across some more interesting terms.

Yesterday, during a discussion with a colleague of mine, I was handed a book by Henry Chesbrough titled Open Innovation. Open Innovation proposes the sensible idea that a firm cannot rely on ideas developed entirely within its own walls. In short, Organisations should reach out from their confining boundaries to obtain innovative resources. This instantly brought to mind an image from War of the Worlds, where the aliens came to earth, wiggled their long tentacles around in manic attack pose, and plundered the Earth of its resources by sucking it dry.

I’m quite aware that this image the book commanded was a little over the top. On a plus note, it did bring back nostalgic memories of watching a War of the Worlds Theatre production in Manchester a couple of years ago, but I digress. I completely agree with Chesbrough’s notion that innovation cannot be defined to the internal environment of the firm. In such a world where knowledge is so widely distributed, ideas aren’t just going to come along, you have to go out looking for them. As such, Chesbrough’s theory is completely relevant to business.

But what tactics can an organisation employ to source out new ideas from the external environment? Can we rely on firms to be ethical about seeking out this knowledge? Could these approaches lead to some degree of conflict? These are all questions I have been churning over in my head over the last day or two. I haven’t yet come to a conclusive plane of thought, but I have had a few thoughts I think worth mentioning.

The main issue I have is with the implementation of open innovation strategies; without a well considered approach, fully fledged open innovation could be considered stealing… swashbuckling pirate comes to mind! What I am referring to is intellectual property (IP). Chesbrough suggested that through open innovation an organisation could legally utilise licenses, joint ventures and IP from other firms. But what restricts them from utilising the knowledge from other groups, rather than simply its competitors and unrelated industries?

Students, for example, are an interesting bunch to consider. What are the ethical and moral considerations an organisation should take if it focuses its energies on obtaining innovative ideas from those studying within the education system? A firm could organises a group of students together and provide an environment where these individuals can bounce ideas off each other. The end product of such a process would be a well developed idea which would ideally be internalised within the organisation, or sold on to the highest bidder. Top prize would be a completely disruptive innovation which the firm could leverage for future rewards.

But where would this leave the students who developed and mind-sparred the idea, and who in essence came up with this innovative spark? Going back to my earlier points, are there moral and ethical considerations a firm should take if it were to perform similar activities to this? Both groups must bring something to the table for such an approach to be successful, but the balance of reward for such an arrangement must be appropriate for the circumstance at hand. Would the firm be perceived as honest facilitators of innovation, or will they be looked upon as corporate pirates?

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2 Responses to Corporate Pirates?

  1. Alexey Mitko says:

    Why so pessimistic Andi?
    I absolutely agree with the opinion expressed in the “Open Innovation”, that a firm can no longer only look within itself for new ideas. Nowadays it seems that disruptive and game changing ideas seem to be able to emerge within a multi million dollar research lab or in your neighbor’s garage with equal ease. However, as you rightly mentioned, there are several ways to internalize those inventions, some ethical and some are not.

    For an ethical (more or less) example we can look at Silicon Valley. Here big firms look outside their own research labs by acquiring small firms with innovative ideas. If a small firm creates something unique that other firms can use, I think its fair for the big firms to pay them X amount of money for their ideas and buy the firm. A small firm also has some leverage since competition among the rest of the big firms will not let the X amount of money to be unfairly small.

    Another example of “looking outside” is a nifty website www2.innocentive.com where companies can post problems they need solutions for and reward they are prepared to pay for the solution. People from around the world can participate and pitch their ideas and the best idea (chosen by the company) will get the reward regardless of whether it was proposed by an accomplished engineer or 5 year old. Although useful, in my opinion, ethical issues arise when companies patent and license created solutions as their own.

    I think that distinction has to be made between creating an idea and actually implementing it. In example of students above, it’s possible that those students wouldn’t be able to implement the idea without company’s help due to lack of resources or expertize. Due credit (both morally and financially) has to be given to companies who take ideas and develop them in blockbuster products, since original inventors don’t have 100% chance of creating the same result of their idea.

    Also here is a recent article on the topic:

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