Innovation and Open Innovation

Damian Gordon
Innovation and Open Innovation

Invention and Innovation
Technology
Idea

Product
Technology
Idea

Business
Product
Technology
Idea

Sustainable Business
Business
Product
Technology
Idea

Diffusion of Innovations
 Developed by Everett Rogers
 Diffusion is the process by which an
innovation is communicated through certain
channels over time among the members of a
social system.

2º 3º 4º 5º
RANKING MUNDIAL DE USUÁRIOS DE INTERNET
1º 6º
Knowledge
Person becomes aware of an innovation and has
some idea of how it functions
Persuasion
Person forms a favorable or unfavorable attitude
toward the innovation
Decision
Person engages in activities that lead to a choice to
adopt or reject the innovation
Implementation Person puts an innovation into use
Confirmation
Person evaluates the results of an innovation-
decision already made
Adoption of Innovation Step Process

Adoption of Innovation over time

2º 3º 4º 5º
RANKING MUNDIAL DE USUÁRIOS DE INTERNET
1º 6º
Relative advantage
Compatibility
Complexity of transition
Possibility of testing
Visibility of benefits
Adoption probability grows if innovation has clear
advantages for product, service or current behavior
The more innovation is consistent with pre-existing
higher the adoption probability
Complex changes involved in innovation, reduce
adoption likelihood
A chance to try an innovation before making a final
decision increase adoption likelihood
The more obvious innovation benefits the greater
adoption likelihood
5 Critical Factors Influencing
Innovation Diffusion

Innovation
 Following Joseph Schumpeter’s 1934 book
“The Theory of Economic Development: An
Inquiry into Profits, Capital, Credit, Interest,
and the Business Cycle” innovation is
distinguished from invention by the fact that
innovation is usually applied successfully in
practice.

Innovation - Diffusion
 When innovation occurs, innovations may be
spread from the innovator to other individuals
and groups.
 This process has been proposed that the life
cycle of innovations can be described using
the 's-curve' or diffusion curve. The s-curve
maps growth of revenue or productivity
against time.

 In the early stage of a particular innovation, growth is
relatively slow as the new product establishes itself.
 At some point customers begin to demand and the
product growth increases more rapidly.
 New incremental innovations or changes to the
product allow growth to continue.
 Towards the end of its life cycle growth slows and
may even begin to decline. In the later stages, no
amount of new investment in that product will yield a
normal rate of return.

 The s-curve derives from an assumption that
new products are likely to have "product
Life". i.e. a start-up phase, a rapid increase in
revenue and eventual decline.
 But in fact the great majority of innovations
never get off the bottom of the curve, and
never produce normal returns.

 Innovative companies will typically be working on
new innovations that will eventually replace older
ones. Successive s-curves will come along to
replace older ones and continue to drive growth
upwards. In the figure above the first curve shows a
current technology. The second shows an emerging
technology that current yields lower growth but will
eventually overtake current technology and lead to
even greater levels of growth. The length of life will
depend on many factors.

Open Innovation
 Open innovation is a paradigm that assumes that
firms can and should use external ideas as well as
internal ideas, and internal and external paths to
market, as the firms look to advance their
technology”.
 The boundaries between a firm and its environment
have become more permeable; innovations can
easily transfer inward and outward.

Open Innovation
 The central idea behind open innovation is that in a
world of widely distributed knowledge, companies
cannot afford to rely entirely on their own research,
but should instead buy or license processes or
inventions (e.g. patents) from other companies. In
addition, internal inventions not being used in a firm's
business should be taken outside the company (e.g.,
through licensing, joint ventures, spin-offs)

Open Innovation
Idea Generation Selection Execution Commercialization

Open Innovation
Develop
New ideas

Open Innovation
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Develop
New ideas

Open Innovation
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Develop
New ideas

Open Innovation
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Develop
New ideas
Technology
Licensing
IN

Open Innovation
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Prototypes
and
Production
Develop
New ideas
Technology
Licensing
IN

Open Innovation
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Prototypes
and
Production
IP
Licensing
IN
IP
Licensing
OUT
Develop
New ideas
Technology
Licensing
IN

Open Innovation
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Prototypes
and
Production
IP
Licensing
IN
IP
Licensing
OUT
Product
brought
to market
Develop
New ideas
Technology
Licensing
IN

Open Innovation
Ideas and
innovations
from inside the
organisation
patents and
innovations
from outside the
organisation
Select
Successful
Ideas
Prototypes
and
Production
IP
Licensing
IN
IP
Licensing
OUT
Product
brought
to market
Technology
Spin-offs
Develop
New ideas
Technology
Licensing
IN

The Status Quo
 Venture capital difficult to find for smaller
requirements
 Debt finance hard to come by
 Business angels – limited investments
– Typically a syndicate each investing £10k - £100k
 What if there was a way to have say 5000 angels
each investing £10?
 What if anyone could become a business angel?

• Crowdfunding is an approach to raising the capital
required for a new project or enterprise by appealing
to large numbers of people for small donations
• Crowdfunding examples
• Kiva.org - $325m funding raised, >777,000 lenders,
~800,000 entrepreneurs
• Kickstarter.com – >24,000 projects funded, >
$250m pledged to-date, 2m people have pledged
Crowdfunding

Three Types of Crowdfunding
1. Donations, Philanthropy and Sponsorship
where there is no expected financial return
– Kickstarter, IndieGoGo, RocketHub, Faithfunder,
CharitySub, ChipIn, Catchafire
1. Lending/Borrowing
– KIVA, RateSetter, Funding Circle
1. Investment in exchange for equity, profit or
revenue sharing
– Profounder, AppBackr, PeerBackers, Quirky,
GrowVC

Fast Growing Retail Business
 Funding Circle is a UK
clearinghouse for semi-
anonymous lenders and
borrowers (bank)
 Primarily for expanding existing
small businesses
 Variable loan rates/term
 Average return 8.3%
 Funding Circle does the credit
check, rates risk
 Lender amounts small
 $40 million in transactions to
date

Common Crowdfunding Mistakes
1. Asking for Too Much… or Too Little
2. A Bad Promo Video: too long, not clear on the
benefits, no humour, no excitement
3. No Clear Itemized Budget
4. Poor or Overpriced Perks
5. Failing to Promote Your Project to Your Social
Media Network
6. Failing to Inspire - No Good Story or Hook
7. Giving Up Too Early

Innovation and Open Innovation

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