HBR Open Innovation The New Imperative for Creating and Profiting from Technology 2003 ISBN1578518377.pdf
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HBR Open Innovation The New Imperative for Creating and Profiting from Technology 2003 ISBN1578518377.pdf
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16PMPageiiOpenInnovationTheNewImperativeforCreatingandProfitingfromTechnologyHenryW.ChesbroughharvardbusinessschoolpressBoston,Massachusettsi-xviChesbroughFM3rd1/28/033:
16PMPageiiiCopyright2003HarvardBusinessSchoolPublishingCorporationAllrightsreservedPrintedintheUnitedStatesofAmerica070605040354321Nopartofthispublicationmaybereproduced,storedinorintroducedintoaretrievalsystem,ortransmitted,inanyform,orbyanymeans(electronic,mechanical,photocopying,recording,orotherwise),withoutthepriorpermissionofthepublisher.Requestsforpermissionshouldbedirectedtopermissionshbsp.harvard.edu,ormailedtoPermissions,HarvardBusinessSchoolPublishing,60HarvardWay,Boston,Massachusetts02163.LibraryofCongressCataloging-in-PublicationDataChesbrough,HenryWilliam.Openinnovation:
thenewimperativeforcreatingandprofitingfromtechnology/HenryW.Chesbrough.p.cm.Includesindex.isbn1-57851-837-71.TechnologicalinnovationsManagement.2.Research,IndustrialManagement.3.Diffusionofinnovations.4.HightechnologyindustriesTechnologicalinnovationsUnitedStatesCasestudies.I.Title.hd45.c4692003658.514dc212002151060ThepaperusedinthispublicationmeetstherequirementsoftheAmericanNationalStandardforPermanenceofPaperforPublicationsandDocumentsinLibrariesandArchivesz39.48-1992.i-xviChesbroughFM3rd1/28/033:
16PMPageivForKatherinei-xviChesbroughFM3rd1/28/033:
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16PMPageviContentsForewordixAcknowledgmentsxiiiIntroductionxvii1.XeroxPARC1TheAchievementsandLimitsofClosedInnovation2.TheClosedInnovationParadigm213.TheOpenInnovationParadigm434.TheBusinessModel63ConnectingInternalandExternalInnovation5.FromClosedtoOpenInnovation93TheTransformationoftheIBMCorporation6.OpenInnovationIntel1137.CreatingNewVenturesoutofInternalTechnologies135LucentsNewVenturesGroup8.BusinessModelsandManagingIntellectualProperty1559.MakingtheTransition177OpenInnovationStrategiesandTacticsNotes197Index217AbouttheAuthor227i-xviChesbroughFM3rd1/28/033:
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16PMPageviiiixForewordInnovatingInnovationAsastudentofinnovationformorethantwentyyears,Istillfinditamazingjusthowdifficultinnovationcontinuestobe.Buttodaywearefacedwiththeextraproblemthatourideasofinnovationhavegonestale.Soweneedtobeinnovativeintheareaofinnovationitself,whichiswhatthisbookwillhelpustodoandwhatImeanbycallingthisforeword“InnovatingInnovation.”ByinnovationImeansomethingquitedifferentfrominvention.Tome,innovationmeansinventionim-plementedandtakentomarket.Andbeyondinnovationliesdisruptiveinnovation,whichactuallychangessocialpracticesthewaywelive,work,andlearn.Reallysubstantiveinnovationthetelephone,thecopier,theautomobile,thepersonalcomputer,ortheInternetisquitedisruptive,drasticallyalteringsocialpractices.Disruptiveinnovationpresentssomemajorchallenges.First,al-thoughitmayberelativelyeasytopredictthepotentialcapabilitiesofatechnologicalbreakthroughintermsoftheproductsitenables,itisnearlyimpossibletopredictthewaythattheseproductsorofferingswillshapesocialpractices.Thesurprisingriseofe-mailisbutoneexample.Itisnottechnologypersethatmatters,buttechnology-in-use,andthatispreciselywhatissohardtopredictaheadoftime.Nevertheless,tech-nologicalbreakthroughsthatdoendupshapingoursocialpracticescanproducehugepayoffs,bothtotheinnovatorandtosociety.1Asecondmajorchallengeisthatasuccessfulinnovationoftendemandsaninnovativebusinessmodelatleastasmuchasitrequiresaninnovativeproductoffering.Thisisahardlessonforresearchdepartmentsoflargecorporationstolearn.Itisalsowhysomanygreat-soundinginnovationsintheresearchlabfailtoseethelightofday.Inthelab,wehavedevisedmanywaystorapidlyprototypeanidea,exploreitscapabilities,andeveni-xviChesbroughFM3rd1/28/033:
16PMPageixtestleadcustomersreactionstoit.Butinnovationsthatintriguethecus-tomerdontnecessarilysupportseriousbusinessmodelsasthedot-comboomandbustshowedagainandagainandeventhosethatdomaysupportamodelthatthreatenstocannibalizethesponsoringcorpora-tionsexistingbusinessmodels.So,asoneaspectofinnovatinginnova-tion,weneedtofindwaystoexperimentnotonlywiththeproductin-novationitself,butalsowithnovelbusinessmodels.Rapidbusinessmodelprototypingisthereforecriticallyimportanttothefutureoftech-nologicalinnovation,andHenryChesbroughmakesitacenterpieceofthe“openinnovation”schemeofthisbook.Thereareadditionalreasonstoinnovateinnovation.Mostpriormod-elsturnedonthecreativitywithinthefirm;intodaysworldwearefacedwithtwonewrealities.Thefirstisthattherearenowpowerfulwaystoreachbeyondtheconventionalboundariesofthefirmandtaptheideasofcustomersandusers.Indeed,thenetworkedworldallowsusessen-tiallytobringcustomersintothelabascoproducers.Wecantapnotonlythecustomersexplicitknowledge,butalsotheirtacitknowledgemademanifestastheystarttouseaprototype.Prototypesusedbyrealcus-tomerswhoareatworkontheirownproblemsaffordakindofreflectioninpracticethathelpstoflushoutseriousflaws,misleadinginstructions,andmissingfunctionalitybeforetheproductisbroughttomarket.Thesecondrealityhastodowiththefactthattodaymostoftheworldsreallysmartpeoplearentmembersofanysingleteambutaredis-tributedallovertheplaceinmultipleinstitutions.Similarly,wearenowlookingforinnovationsintheintersticesbetweendifferentdisciplinesforexample,betweenbio-andnanotechnologies.Anynewmodelofinno-vationmustfindwaystoleveragethedisparateknowledgeassetsofpeoplewhoseetheworldquitedifferentlyandwhousetoolsandmethodsforeigntothosewerefamiliarwith.Suchpeoplearelikelytoworkbothindiffer-entdisciplinesandindifferentinstitutions.Findingsuccessfulwaystoworkwiththemwilllieattheheartofinnovatinginnovation.Newtechnologyoffersusnewtoolstohelpinthismeta-innovation.IhavealreadymentionedtheuseoftheNettobringcustomerspractices(ratherthanjustthecustomersvoice)intoshapingaprototype.Evencarsarefirstrenderedinsoftwarebeforetheyareactuallybuilt,andassuchtheycanbedirectlyexperienced(and,insomecases,driven)asasoft,highlymalleableprototypeandcanevokeacustomerstacitlyheldopin-ions.WiththepoweroftodayscomputerstosimulatemassivelycomplexxForeword:
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16PMPagexandnonlinearsystemscoupledtophenomenalvisualizationtechniques,thecustomercanbebroughteverclosertothedesignprocess.Thereisanothersetoftoolsthatcandeeplyshapethepracticesofinnovation,and,inparticular,workonthebusinessmodelsthatinnova-tionalsoneeds.Thesearefinancialtoolsthatbuildbridgesbetweentheflexibilitiesoftheventureworldandthepredictablefinancialcon-straintsofapubliccompany.Thesetoolsuserealoptionstheoryformanagingthecashflowdecisionsinaninnovationprocess.Unliketheuseofnetpresentvalue(NPV)calculations,whichinherentlyviewtheinnovationprocessasstatic,compoundrealoptionshonoritsinherentlydynamicnature.Theseoptionsprovideawaytofoldintothedecisionprocessestwosourcesoflearning,oneinvolvinglearningbydoing(whatislearnedaboutthetechnologywhiledevelopingtheproduct),theotherinvolvinglearningwhilewaiting(whatisdiscoveredfromthemarketastheproductisbeingdeveloped).Ateachstageforpotentiallyscalingorexitingtheproject,bothsourcesofinformationcomeintoplay.Furthermore,anoptionsapproachmovesusfromviewingthepur-suitofaninnovationasmakingabettoviewingitasbuyingapossibil-ityforthefuturewhilestilldelayingsubstantialcashflow.Althoughthisisacomplextopicallitsown,Imentionitherebecauseitprovidesawidevarietyoftoolsformodelingmanyoftheideasofopeninnovation,suchascapturingsomeofthebetterpropertiesoftheventurecapitalworld,onlynowitcanbedoneinsidethecorporation.TheopeninnovationmodelthatChesbroughdescribesshowsthenecessityoflettingideasbothflowoutofthecorporationinordertofindbettersitesfortheirmonetization,andflowintothecorporationasnewofferingsandnewbusinessmodels.Findingtherightbalanceandmech-anismsforthissituationtotakeplaceiscritical.Ifarisingcorporatestarbringsforthariskyinnovationthatendsupfailing,hisorhercareerisapttobedamagedconsiderablymorethanthatoftheexecutivewhosquelchesaninnovationthatcouldhavebeenawinner.Anopeninnovationmodeldiminishesboththeerrorofsquelchingawinnerandthatofbackingaloser,andmovesusclosertoaworldwhereprotectivemovesandface-savingmechanismsnolongercausepotentiallygreatinnovationstobeshelved.Innovationistooimportanttoleteithercorporatepoliticsoroutmodedassumptionscarrytheday.Letusbewaryoftheold,conser-vative,butstillverypowerfulwisdomthatcanalwaysfindreasonsorex-amplesfromthepasttoprovethatanyparticularinnovationisfoolhardy.Foreword:
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16PMPagexiLetusall,instead,engageinthevitallyimportantworkofinnovatinginnovation.OpenInnovationisatimely,carefullyresearched,andthought-fullyarticulatedefforttowardthatend.JohnSeelyBrownDirectorEmeritus,XeroxPaloAltoResearchCenter(PARC)xiiForeword:
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16PMPagexiixiiiAcknowledgmentsThisbookre
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