Innovation | Open innovation: Philips´ approach to improve people’s lives
The term of Open Innovation was created and hosted by Henry Chesbrough, Executive Director of the Center for Open Innovation at the Haas School of Business, this forum builds on a site intended to be a digital community where theory is put into practice.
Open innovation is an idea that encourages companies to make greater use of external creation of ideas and technologies in their own business, and in the other way allows also new internal ideas to flow out to other bussinesses.
This concept is presented as the opposite to the closed innovation process which relies on internal R&D and deep vertical integration. The strategy of close innovation is to profit from R&D we must discovery it, develop it and ship it ourselves to be the first in the market.
And a more formal meaning for open innovation is “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively” ( Chesbrough, H.; Vanhaverbeke, W. et al, 2006, p.1).
Traditionally, business development processes and the creation of new products took place within the company´s boundaries. Nevertheless several factors have led to the debilitation of closed innovation . In one hand, the availability of highly educated people has increased over the years, in addition to higher mobility of these ones across the World. As a result, companies have greater access to large amounts of knowledge existing outside the boundaries of the companies.
It is important also to take into account increasing knowledge flows when employees move from one firm to another, they take their knowledge with them, resulting in knowledge that flows among bussinesses.
Secondly, the availability of venture capital to early-stage, high-potential companies has increased significantly , this gives opportunities to good and promising ideas and technologies to be further developed outside the firm.In addition other companies in the supply chain, for instance suppliers, play an increasingly important role in the innovation process.
As a result, companies have started to look for other ways to increase the efficiency and effectiveness of their innovation processes.
For instance through active search for new technologies and ideas outside of the firm, but also through cooperation with suppliers and competitors, in order to create customer value. Another important aspect is the further development or out-licensing of ideas and technologies that do not fit the strategy of the company.
PHILIPS CASE: OPEN INNOVATION APPROACH
Philips Group Corporation is the largest electronics company in the Europe. In 2010, it revenue was €25.42 billion, it employs around 114,500 people across more than 60 countries.
Philips has operated was founded in 1891. It is concentrating on three main areas: healthcare, lifestyle and technology. The mission of the company is to improve people’s everyday life through meaningful innovations and its strategy is also based on innovation, where key characteristics are the re-allocation of resources, the leverage of brands and core competences, partnerships with key customers and suppliers, strong intellectual property position, business transformation and operational excellence.
Philips has divided its businesses into six categories: Domestic Appliances and Personal care, Domestic Appliances & Personal Care (7 % from total sales), Lighting (16 %), Semiconductors (15 %), Medical systems (21 %), Consumer Electronics (28 %) and other activities (7 %). Because of this wide range of business areas synergies are important to Philips.
Philips spent € 2.6 billion to research and development in 2005. It has research laboratories in the Netherlands, Germany, the United Kingdom, USA, China and India. In the last years, Philips has moved towards product-oriented R&D and directed resources to projects with short-term commercial prospects. (Philips, 2006a, 46)
Philips Corporation is an example of approach to open innovation through collaboration. It has had co- operation projects with other companies since 70s’ and nowadays it offers academic partnerships and co-operation to companies in many ways. It favours joint ventures as a collaboration form .
The most clear effort of openness is perhaps Philips’ research centre, High Tech Campus in Eindhoven. This is one of the world’s major private research organizations that creates breakthrough innovations in seven laboratories over three continents: Europe, North America and East Asia. It offers a highly innovative infrastructure, active engineering support as well as opportunities to work with Philips’ researchers to the other companies and institutes. Philips Research delivers: 1) roadmap innovations to support the existing businesses in the field of Healthcare, Lighting and Consumer Lifestyle, 2) innovations adjacent to existing businesses, 3) break away innovations to address new markets in line with the strategic direction of Philips.
Another case of Philips´ openness is the great effort the company does to encourage its workers to found ventures. Technology Incubator was designed for Philips’ technologies and Philips’ own employees to create new ventures from promising research projects and technologies that are not suitable for core businesses. The abovementioned incubator offers funding, facilities, business planning and partnerships to new start-ups.
Philips’ really tries to implement this open innovation thinking to the whole company. Vice president of Philips research, Jan van den Biesen (2004) sees that Philips is moving towards open innovation by replacing the outdated linear innovation model to a more open process allowing aid for open innovation by large firms, facilitating public-private partnerships, stimulating the public private mobility of researchers, redirecting state aid to research and innovation, allow innovation aid for SME and large firm alike and ensuring level playing field worldwide.
Do you want to know more about Open Innovation at High Tech Campus Eindhoven?
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12 feb 2012
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Tatiana Casquero Rodriguez
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