Open innovation: P&G – Essay Example

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For example, apart from establishing own channels of distribution, the company can also create innovative projects by the way of out-licensing or spin-off ventures. Hence, summarising it, open innovation employs both external and internal sources for optimising as well as exploiting all possible opportunities. The purpose of this essay is to describe innovation strategy of P &G. The focus of the paper will be to evaluate past and present innovation strategies, which have been implemented by the firm. The essay will then continue to analyse benefits and risks associated with the innovation model.

Literature review will focus on concepts of open and closed innovation, similarities and differences as well assessment of open innovation approach. Open Innovation: Basic assumptions In an open innovation theory, firms should use internal as well as external concepts and ideas. These ideas are combined with the firm’s system and architecture in order to achieve technological and strategic competitive advantage. In the process of open innovation, business models are utilised to firstly define these systems and architecture and then form internal mechanisms for utilisation of resources (Cohen and Levinthal, 1990).

External resources include market contributors as well as associated parties, which help in generating extra value for the company. In an open innovation, development and research is treated as an open system. According to this approach, valuable ideas and creativity can come from outside or inside the firm as well as can be transferred from company to outside market. Here similar importance is given to external strategic paths and external ideas as internal research and development strategies. Apart from the above, intellectual property in open innovation is considered as a new category of assets, adding efficiency to the present business model.

It also helps in examining strategies for new market entries and new business development. Open innovation has successfully established a rationale according to which firms should be both active buyers and sellers of IP (Mowery, Oxley and Silverman, 1996). The open innovation paradigm is based on the fact that essential knowledge is distributed widely and in order to enhance potential and capability of research, firms should be ready to identify, establish connection as well as leverage these external ideas in their core innovation process.

Scholars argue that ideas and concepts that once evolved only in big firms are now surfacing in various new settings, such as small, but technically equipped start-ups, individual entrepreneurs and inventors.

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