Economic Progress

The benefits of open innovation

Elie Chachoua
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Economic Progress

In a more connected world, open innovation offers opportunities to reduce research costs, spread risks and bring innovations to market more quickly. Coined by Berkeley professor Henry Chesbrough, the term “open innovation” refers to the collaboration between companies, individuals and public agencies to create innovative products and services and, in the process, share its risks and rewards. The idea is premised on the belief that in a world of distributed knowledge, companies can’t rely only on internal research and can benefit immensely from innovating with partners. This approach has yielded significant benefits in many fields, including healthcare, IT business models and public policy.

As part of the “Open access malaria box” project, for example, the Medicine Malaria Venture provides free and open access to 400 compounds with anti-malarial properties. In exchange, those who use the compounds to design new drugs or identify new properties must share their results and make any new compounds accessible to the community. The box, now used in nearly 30 countries, has helped develop new anti-malaria drugs as well as drugs to treat skin sores and sleeping sickness.

In the IT and software industries, open innovation has meant that companies license one another’s software to build new types of products. This saves licensee companies, and their end users, substantial infrastructure development costs. The Android and Apple platforms are two highly successful examples of this model and have spawned large numbers of innovative services that were built upon them. Cisco’s Common Big Data Platform is an example of a new type of platform specifically for building big data applications. Developers can access Cisco’s data analytics engines and massive parallel processing capabilities through a set of APIs (application programming interfaces) and build services on top of that infrastructure.

Governments are also embracing the open innovation paradigm. In the UK, the non-profit Open Data Institute (ODI) secured £10m from the government in 2012 to encourage companies to innovate using open public data. By examining the publicly available prescription data provided by the country’s National Health Service (NHS), Mastodon C, a start-up incubated at ODI, was able to show that physicians spent £27m a month on prescribing proprietary medicine instead of using cheaper and equally effective generics. Addressing this issue could potentially save £200m annually.

Open innovation can lead to thorny disagreements, as evidenced by the disputes between Apple and Samsung over patent violations. So far, its benefits seem to have outweighed any drawbacks.

This article is published in collaboration with GE Look Ahead. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Elie Chachoua writes for GE Look Ahead

Image: Twendy-One, a robot designed to help elderly and disabled people around the house, demonstrates serving toast at Waseda University in Tokyo January 8, 2009. REUTERS/Issei Kato.

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