So let me explain this a little bit.
Typically speaking, the way companies have thought about innovation in the past has
been, we have a research and development group within the organization,
they come up with technological innovations,
new technological ideas those get transferred into products.
So it happens very often internally.
So what inflow and outflow of knowledge means that
companies are willing to share or look outside the R and
D, look outside the company to find new ideas, to find new knowledge.
So that's one part of the definition with one purpose,
to accelerate internal innovation.
To make sure that you can speed up the process of internal innovation,
come up with more innovations in the process by looking outside, and
expand the markets for external use of innovation, respectively.
So by doing this, by reaching outside, getting knowledge from the outside,
accelerating internal innovation with a goal to create bigger markets,
more markets for externalizing that innovation.
So that's Chesbrough's definition of open innovation, and
we'll talk about this just a bit more in terms of what are some of the conditions
that have led to this, and what are some of the advantages of open innovation.
So in order to understand open innovation,
let's quickly look at what closed innovation would mean.
Like I mentioned earlier, one of the things that happens with,
or has happened with cooperation in the past is that innovation happens
within the organization itself.
It's an internal process, it's very often handled within the research and
development group.
It's often thought of as primarily technological innovation.
That's how things had happened in the past so
just to give a quick map of how this is happen.
If you have an R and
D group within the organization, this is where some of the new work happen.
This is where you have some engineers working on technological innovations so
they come up with new ideas.
They develop those into innovations.
So initially they're technologies then they become innovations, which lead to new
products and services, these new products and services go out into the market.
When they go out into the market that, hopefully,
the goal is to create more sales and therefore more profits.
And when there are more profits,
that then feeds back into the organization to create more revenue for R and D.
So if you look at this loop, it's primarily an internal loop.
R and D to innovation to new products to more revenue, back to R and D, so
each company has a certain percentage of its profits that feeds back into the R and
D activities so that they can come up with new innovations for the future.
So this is a con with Chesbrough this has been
sort of the model that has existed for a long time.
It's a closed innovation loop that companies have been following.