Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal value creation, and expand the markets for external use of innovation. The paradigm assumes that for invention and scientific advancement, firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology. Dr. Henry Chesborough provides a look at the idea of open innovation as a backdrop to this year's launch of GreenXChange, an open sustainable intellectual property platform and coalition launched at Davos in January.

1. Open Innovation:
An Apropos Paradigm
Shift for Sustainable
Brand Pioneers
Dr. Henry Chesbrough
Center for Open Innovation, UC Berkeley

2. Open Innovation:
A Sustainable Paradigm for
Industrial Innovation
Henry Chesbrough
Center for Open Innovation
UC Berkeley
June 8, 2010

3. The Current Paradigm:
A Closed Innovation System
Science
&
Technology
The
Base
Market
Research Development New Products &
Investigations /Services
R D
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4. The Invention Perspective
“The key [to success] is to find a man of genius,
give him money, and leave him alone.”
James Conant, former President, Harvard
Univ.
“The best way to predict the future is to invent
it.”
Alan Kay, computer scientist
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5. 5

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7. Diminishing Economies of Scale:
US Industrial R&D
by Size of Enterprise
Company Size 1981 1989 1999 2007
< 1000 employees 4.4 % 9.2% 22.5% 24.0%
1,000 – 4,999 6.1 % 7.6% 13.6% 15.3%
5,000 – 9,999 5.8 % 5.5% 9.0% 8.4%
10,000 – 24,999 13.1% 10.0% 13.6% 17.1%
25,000 + 70.7% 67.7% 41.3% 35.2%
Sources: National Science Foundation, Science Resource Studies,
Survey of Industrial Research Development, 1991, 1999, 2001,
2007.
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8. Merck’s Conclusion
“Merck accounts for about 1% of the world’s
biomedical research. To tap into the other
99%, we must actively reach out….”
“The cascade of human knowledge flowing
from biotechnology and the unraveling of
the human genome… is far too complex for
any one company to handle alone.”
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9. The Open Innovation
Perspective
“Not all the smart people work for you.”
Bill Joy, founder of Sun, currently VC
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10. Open Innovation
Other firm´s
market
License, spin Our new
out, divest market
Internal
technology base
Internal/external Our current
venture handling market
External technology
insourcing
External technology base

11. Is the internal R&D
department now obsolete?
• No – open innovation can leverage internal
R&D
• But…..
• New focus: must look outside as well as inside
• New role: connecting to and collaborating with
the outside
• New skill: integrating internal and external
together
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12. The Climate Change Crisis
• Copenhagen intended to be successor to Kyoto
protocol
• Disputes over emissions targets…
• …. and over access to the IP and technology to
achieve them!
• Proposals of $100 billion + in tech transfer
funds are ill-suited to the times
• Can Open Innovation help?
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14. 2 years. 95 patents.

16. Sustainability
Patents
Greentech / Sustainability patents represent a
small portion of the overall portfolio of the
average company.
And most companies have little skill or
experience in licensing or sharing them

17. All Patents are not Equal
Core
Patents Important
Patents
Other Patents

18. Guard Closely
Share Selectively
Core
Patents Important
Patents
Other Patents
Share Broadly

20. Businesses Control the Use of
Their Green IP
• Retain the essential rights inside the core
business
• Use a standard offer to license the rights via
automated transactions
• Determine exceptions to licensing requirements
– research
– geography
– field of use
– etc….

21. The Business Benefits of
Sharing or Exchanging
Green IP
• Greater usage of technology to lower costs
• Establish a technical standard to influence the
future development path
• Incremental revenues from licensing outside
of your business
• Stimulate greater research activity in areas of
value to your business

22. Open Innovation and Green
Exchange
• Private reasons to share or exchange Green IP
– Good business, not just good publicity
• No government action required
– Though policy can help stimulate the process…
• Developing nations need not pay for all IP
rights
– Exchange, share, or license just those they need
• Developing nations innovate too
– And these can be shared with other developing
countries

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24. Photo Credits
Flickr: Chess/Fox, Tuesday Night Poker/Rambis, Ryan
Air/ezreenphotography, Ryan Air New Boeing 787
Colours/macrodebs, 332/265/Digg Pirate, The bus
shelter at the edge of the ocean/goddess_spiral, Flickr
treo ad/Steve Rhodes, Technology - "Future
Vision“/$ydney
iStockphoto: 000003004014, 000003062424, 000004293861,
000007135639, 000005589058, 000000718722
iPod photo: http://www.apple.com/ipodclassic/
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