What’s all the hype about Open Innovation? From Obama to the United Nations, from small to large organizations, from universities to research centers, it recently raised the interest of a large number of professionals and organizations. Let´s try to explain the hype. Open Innovation is quite a broad concept ranging from cooperation between firms and universities or formal intellectual property exchanges to crowdsourcing. However, it seems that Open Innovation is not new. Universities and firms have been cooperating for decades, crowdsourcing has always existed and mountain bikes are the proof of it, firms have alwalys exchanged knowledge. So, what’s new? Open innovation is based on the funnel innovation concept. According to Open Innovation theorists, innovation will be quicker and easier if firms use external knowledge and return to investment on knowledge capital will be higher if firms share their knowledge with others. The “Open innovation movement” finds its origins in both the current convergence of different scientific fields and the inefficiencies of the present structures of markets for knowledge. Knowledge is an important input almost for every firm. Firms do not own all the knowledge they need to develop new products or improve the processes. This problem is increasingly noticeable in those firms operating in industries where scientific theories are merging. These firms need to search for external knowledge in markets where supply and demand are not easily visible.

Open innovation aims at increasing the visibility of both the supply and the demand for knowledge. There are two differences comparing to the old times of closed innovation. First, some firms are defining a strategy to sell or buy knowledge: an open innovation strategy. Second, new means of knowledge exchange recently appeared, such as intermediaries that connect the supply and demand for knowledge.

   And a last question, so far, what is open innovation for? We have commented that open innovation is a broad term, however a quick review of different cases of open innovation reveals that it proved to be useful for firms such as Telnor or Orange involved in the creation of communities of external innovators (more useful to identify long term technological trends than to find solutions for the daily and pucntual problems of the firm), for deploying long tail based innovation strategies where firms such as Philips or IBM start a large amount of R&D projects which have a low likelihood of being successful, for facilitating spin offs and patent sale in these firms with long tail innovation strategies, or even for creating or revamping innovation culture in organization such as the US Administration, for firms such as Merck and Roche driving and trying to prevent or control disruptive innovation in the industry, for competitors such as Trek or Giant facing unprecedented technological challenges. Finally, we must be aware of the limits of Open Innovation related to the low quality of the knowledge available in the market, the lost of control on our knowledge (poor value capture) and the coordination costs derived of large number of relationships and knowledge exchanges.