Henry Chesbrough, executive director of the Center for Open Innovation at the University of California at Berkeley, is the keynote speaker at the “Open Innovation Conference” on Wednesday, September 27, at 7 a.m. at Fairleigh Dickinson University’s Rothman Institute, Lenfell Hall, Madison. For full details call 973-443-8842.

Chesbrough is the author of “Open

Innovation: The New Imperative for Creating and Profiting from Technology.” In an interview with Optimize (www.optimizemag.com), an online technology magazine, he said that “developing innovative technology solely for your company’s internal use is over.” A Silicon Valley veteran whose resume includes a seven-year stint at Quantum, a disk drive development firm, he told Optimize that he realized the importance of innovation while working at that company.

“I am a recovering disk-drive industry retread,” he said. “I worked in the computer industry in the 1980s, primarily with (disk-drive vendor) Quantum.

“The second thing that happened was I saw that while IBM created so much of the fundamental technology for our industry, the company seemed to have a hard time capturing value from all the research it was doing. ”

“Innovation, by contrast, is applying knowledge to a real problem and taking an idea to market. There may not be any customer in mind during a process of discovery and invention, but a customer is critical to the process of innovation.”

“The basic idea is that in closed innovation, the model is one of discovering things yourself, then transferring them into development, production, distribution, service, and support within the four walls of your company,” he said.

“But the idea behind open innovation is that there are too many good ideas held by people who don’t work for you to ignore. Even the best companies with the most extensive internal capabilities have to take external knowledge and ideas into account when they think about innovation. ”

Closed innovation may not work well now, but that wasn’t always the case. According to Chesbrough, it “did work very well for a long time and in a number of industries.

“Many people still consider Bell Laboratories to be the pre-eminent industrial research center in the world, and certainly in its heyday it won an enormous number of Nobel Prizes and other scientific achievements.The reason that worked very well is that AT&T had a monopoly: It didn’t have any effective competition that could pilfer ideas from Bell Labs and take them to market. The competition would essentially wait until the technologies were already out of the laboratories to go into the market.

“Of course, the scientists doing this work really didn’t have many other places they could go to ply their craft. So the whole thing was a virtuous circle: As more technology came out, new products and services would be created; those would go to the market and create new revenues and new profits, which could be reinvested. So whether it was General Motors in the automotive industry, DuPont in the chemical industry, or AT&T or IBM in the computer industry, the companies that did the most research had the highest market share, the highest profits, and were able to reinvest and keep it going. It really did work very well for a long time.

“A few things changed. I’m not sure about the rank order of these, but one of the biggest ones is that people’s mobility increased a great deal. People started jumping from job to job, rather than working for one company their whole career. Venture capital became a huge deal, and that helped fuel people’s departure. Then, the university system got a lot better, in terms of the research and the relevance of the research. More and more useful ideas were coming out of universities directly, as opposed to R&D laboratories only.

These things gave rise to distributing knowledge very widely, to organizations large and small. As a result, now there is a lot of good knowledge all over the place, and no company has a monopoly on useful knowledge the way AT&T did in communications or IBM did in the computer industry.”

Chesbrough’s thesis is that research has to change. It has to become more externally focused, or, as he told Optimize, it’s “doomed.”

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