Open Innovation and User Lead Innovation: Opposites?

Open Innovation is a term proposed by the profesor Henry Chesbrough in the University of California, Berkeley. He says that open innovation is a paradigm that assumes that firms can and should use external ideas and path to markets, as well as internal ones, as the firms look to advance their technology. The central idea is then that behind open innovation there is a world of widely distributed knowledge and companies cannot afford to rely entirely on their own research, but should also license or buy processes and inventions from other companies.

According to Chesbrough, traditionally, new business development processes and the marketing of new products took place within the firm boundaries. The following figure shows this concept which is called closed innovation. The whole process: research, development and release into the market all is done within the boundaries of the company.

However there have been evergrowing factors that are changing the effectiveness of that approach. Increased mobility, and availability of highly educated people; the  availability of venture capital has increased good and promising ideas and technologies to be further developed outside the firm; and then, other companies in the supply chain, for instance suppliers, play an increasingly important role in the innovation process.

The new way of increasing efficiency and effectiveness of the innovation process is called open innovation. The search of new technologies and ideas is done outside the firm and with the cooperation of suppliers and competitors, in order to create customer value. The following figure shows this.

The Lead User Method in innovation management is a technique that facilitates the identification and integration of lead users. These are people that are at the leading edge of important market trends or they have a strong incentive to find solutions for the needs they encounter at the leading edge. This method  has been found to result in eight times higher projected sales than other projects with traditional methods.

Dr. Chesbrough in the 2010, Sustainable Brands Conference explained that in terms of patents companies should divide their inventions in three categories: Core, Important and Other patents. He states that sharing and releasing broadly the patents in the Other category and selectively the ones in the Important category would be really beneficial to all players in the market, including that same company. This is specially important regarding sustainable development, in which shared knowledge would help a lot to approach climate change problems more efficiently and sooner.

Complementing Open Innovation strategy, we now find user lead innovation as a way or tool to execute this process.

The regular method of innovation is based on a market research, where companies go to the users and try to guess their needs, then they go back and try to invent and market a product to fulfill that need.

User innovation came from the discovery of several studies, that showed that actually the user was the ones innovating. People engaged in the activity are the ones that know what they need. It discovered that there are a lot of products that are actually initiated by users, which are the so called lead users.  This is due to the simple fact that these people are the ones who care about something. LEGO company is an example of this approach.

Therefore, I would describe open innovation as a generic strategy of a firm which main purpose is value capture, and user innovation (which use a lead user method) is one method or tool for Open Innovation. In this way, user innovation would be a part of open innovation.

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