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and should use external ideas as well as internal ideas, and
internal and external paths to market. . . . Open innovation
combines internal and external ideas into architectures and sys-
tems whose requirements are defined by a business model.”
The precursors to open innovation arose in the pharmaceu-
tical and biotechnology industries during the 1980s and 1990s.
New pharmaceutical products take a long time to get to mar-
ket. Companies in these industries experience exceptionally
high levels of uncertainty, so they pursue many paths at once.
Competing in this context requires a deep and wide range of
scientific knowledge and specialized capabilities from manu-
facturing to clinical trials management. Looking outside one’s
firm for partners, collaborators, or even just licensing oppor-
tunities provides a natural solution. Robert Wolcott’s doctoral
research, completed in 2002, found that large pharmaceutical
companies that are more active external collaborators perform
better than their peers over the long term with respect to both
total market return and relative valuations.
Beyond the pharmaceutical and biotech industries, P&G and
IBM were early leaders. P&G executives have written exten-
sively about the development and application of what they call
Connect + Develop, a play on research and development that
is meant to emphasize the role of connecting people, ideas, and
resources as a critical factor for innovation success. IBM invests
significant resources each year in externally focused innova-
tion programs, such as its Innovation Jams and Global Inno-
vation Outlook (GIO) programs. Each program brings
thousands of external people into the IBM fold annually to
explore new markets, emerging technologies, consumer
trends—whatever IBM and its broader community believe
might lead to opportunities. The company takes a surprisingly
open approach. Any concepts or ideas generated during GIO
sessions are considered open to anyone involved. The com-