Open-Market Innovation

Darrell Rigby and Chris Zook

Harvard Business Review

October 2002, pp. 80-89

The authors of this article state that “A growing number of companies are exploring the idea of open-market innovation—an approach that uses tools such as licensing, joint ventures, and strategic alliances to bring the benefits of free trade to the flow of new ideas.”

Four distinct advantages to open-market innovation are identified:

(1) Importing new ideas is a good way to multiply the building blocks of innovation;

(2) Exporting ideas is a good way to raise cash and keep talent;

(3) Exporting ideas gives companies a way to measure an innovation’s real value and to ascertain whether further investment is warranted; and

(4) Exporting and importing ideas helps companies clarify what they do best.

Five dimensions which indicate whether a company can profit from open-market innovation are:

(a) intensity of innovation in the field;

(b) the economies of innovation in the field;

(c) the need for cumulative innovations in the field;

(d) applicability of innovations across companies or industries; and

(e) market volatility.

The article identifies the following companies as practitioners of open-market innovation: Pitney-Bowes, Tetra Pak, BellSouth, Linux, Cisco Systems, Air Products & Chemicals, and Lilly.

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