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Enabling the silent revolution of open innovationin low-tech SMEs?

Wim VanhaverbekeHasselt University - Belgium

Esade Business School - Spain

Vlerick Leuven Gent Management School - Belgium

GES 2011, Kiel

October 6, 2011

What is Open Innovation?

“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, Vanhaverbeke, WestOpen Innovation: Researching a New Paradigm

(OUP, 2006)

CurrentMarket

InternalTechnology

Base

R D

Outside in : Filling the gaps with external technology

New Market

ExternalTechnology

Base

External research projects

Venture investing

Technology in-licensingTechnologyacquisition

Source: H. Chesbrough, Sloan Management Review, Spring 2003

CurrentMarket

InternalTechnology

Base

R D

Inside out OI: Profiting from others’ use of your technology

New Market

Technology Spin-offs

ExternalTechnology

Base

Other Firm’s Market

Licensing

Source: H. Chesbrough, Sloan Management Review, Spring 2003

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Some observations

• Open innovation is a booming research area• Main focus on:

• High-tech industries• Large manufacturing (and now also services) companies

• What do we know about open innovation in SMEs:• Few articles published so far• A few case studies or some survey based evidence• No systematic analysis yet of OI in low-tech SMEs

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Some observations

Introducing OI in low and medium tech SMEs is important:• SMEs are responsible for a large part of employment in manufacturing

and services industries• SMEs are the drivers of the employment growth• Most of them face increasing pressures of globalization and

commoditization of their products• New ways to explore differentiation of product / services, or trying out

experience based competitive advantages • SMEs usually do not have internal resources to make these changes –

OI is required • SMEs are focused on day to day operations. Learning about strategic

changes and OI should be practical and time efficient

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CURANA

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Curana: Combining innovation and industrial design

• The old situation: Steel mudguards and fenders Belgium as market (10 million inhabitants)Family owned business

• Challenge:Growing economies of scale and globalization of the industryStrategic change:

• differentiation through innovation • or price competition with low-cost import

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Curana: B"Lite : Mudguard of Curana

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• Combination of internal and external knowledge

• Curana: customers + steel bending

• external design company and polymer extrusion manufacturer

• Coordination with lead-customers (bicycle manufacturers) in exchange of an exclusive deal that is limited in time (Batavus and Sparta)

• IPR

• Progressively increasing the ecosystem of innovation partners: • Locus of innovation is in the network: viability of the network

determines the health of your company• Network as enabler: rapidly changing designs and use of new materials

– competitive advantage• Economic strength ≠ f(firm size)• Network management becomes a crucial network

• A new management mindset is necessary to realize this

Curana: innovation combined with industrial design in low-tech markets

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Curana: Impact of OI on revenues and profits

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Curana: Open BM innovation in a stepwise way

Original Design Manufacturer

• price setting• design driven• added value

OEM ODM OSM OBM

Original Equipment Manufacturer

• price pressure• technology driven• no added value

Original Strategic Management

• vision driven• proactive design solutions• Innovative

Original Brand Management

• image driven• reliability & authenticity• market pull from customers

> > >

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How to enable the silent revolution?

Speeding up the learning of good practices in low-tech SMEs?

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How do SMEs learn?

What does not work?• Explanations of academia and consultants • Most government led initiatives to stimulate entrepreneurship

FP7 programs are to slow and too bureaucratic for most SMEs

What works?• Stories of entrepreneurs that have been successful• Talking to other entrepreneurs with similar ambitions

Share experiences and learn from them

Some local innovation networks do nice work

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Problems and finding a way out

• Local innovation network initiatives• 60 km action radius• Non- or semi professional coaches• Few good local cases, few managers as speakers• Reinventing the wheel problem! • High set up costs!

• How to drastically improve the situation?• There are many excellent cases in Europe / world • Make a YouTube like movies (10-15 min) about these companies with

subtitles in English• Put these movies on the web together with a syllabus and some

(open) innovation management tools – feedback Web 2.0! Huge impact on the number of companies that learn OI practices and strong improvement in the quality of learning

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www.exnovate.org