Open Innovation and Google - Case Study Example

Open Innovation and Google Introduction The appropriate theory of innovation that will be the of this essay will be open innovation. Open innovation means that companies use products and inventions of others in making their own innovative products. For instance, Google has used the operating system of Linux in developing its Android operating system, which powers many mobile phones and tablets. Products which are in the developmental stage, in turn, uses Google technology – such as driverless cars, which are being developed, will possibly partner with Google and use some of Google’s technology to develop these cars. This is contrasted, of course, with the concept of closed innovation. Closed innovation means that a company works only internally developing products. It develops the products, markets them, distributes them, etc., all internally, relying on no other company for its products. Sometimes this works – Apple is an outstanding example of a closed innovation system that works. Sometimes it does not – Xerox’s closed innovation system is what many blame for the fact that Xerox did not become the major player that it promised to be on the technological fronts. Google is one company who believes that open innovation is the only way to keep technological products going forward. It proudly states that it believes in open systems and open information, and that the only way for the Internet to keep going forward is for the Internet to be a place where ideas are exchanged, and innovations can flourish. Google is open both with its information inputs and outputs – while it relies on the technology of others, it also outsources its own technology, encouraging those who receive the Google technological advancements to tweak these innovations and make them one’s own. This is the best way for innovations to go forward. Google believes that, while a closed innovation system is a good way for a company to make quick profits, an open innovation system is the best way for technological advancements to keep going forward. The Theory of Open Innovation The theory that will be applied will be the theory of open innovation. According to Huzingh (2010), open innovation means that the process of innovation is open, so that there are inflows and outflows of knowledge, which serve to accelerate the innovation process. Open innovation also expands the markets for the external use of the innovation. The best way to understand open innovation is to contrast it with closed innovation – whereas, in closed innovation, the company who is developing the product does so without outside help, then develop, build, market, distribute, service, finance and support the products all on their own, open innovation means that the companies, in essence, work together to produce innovative products (Huzingh, 2010). Huzingh (2010) also says that open innovation is more of a continuum than a dichotomy of closed verses open – there are varying degrees of openness. Open innovation may be used in small firms or large ones (van de Vrande et al., 2009). Chesbrough (2003) states that open innovation has many advantages over closed innovation – chief among these, that the companies who practice closed innovation might let many good inventions slip through their fingers. Gassman et al. (2010) state that one company that used closed innovation, and was never able to capitalize on its own research capabilities, was Lucent technologies. Chesbrough (2003) states that Xerox is another case in point – that company managed its products through a closed innovation paradigm – the company chose to develop the products, market them, finance them, service them and distribute them all by themselves. Xerox therefore went from a position of innovation and market dominance to decline. Meanwhile, the innovations that came out of the Palo Alto research center (PARC) that Xerox used as its innovation headquarters, only took root and created real economic value, after the PARC researchers left Xerox for other companies, or started up their own new companies. The researchers who left Xerox to create their own companies or work for other companies provided the impetus for truly new technological advancements by working with a variety of companies’ products, in an effort at building a system. Some companies who profited from the researchers leaving the PARC were Apple and Microsoft (Chesbrough, 2003). Chesbrough (2003) maintains that many of the innovations that started at Xerox, and left Xerox, were “ugly ducklings” that probably would have withered and died had they stayed at Xerox – Adobe systems is one of these innovations. These innovations took root and prospered because they interacted with subsequent external events. Chesbrough (2006) states that, in contrast to Xerox, who never became the industry giant that it promised to be when the company was formed, other companies who adopted open innovation became much more profitable and realized better innovation. It is faster and cheaper to look for associated outside technology to help accelerate innovation, than it would be for companies to develop all the technology in-house. Moreover, the companies who use open innovation find that their risk is minimized, because they are able to invest in technologies that have been proven in other applications. West & Lakhani (2008) concur that open innovation is an excellent way of developing products in a risk-averse world. When companies engage in open innovation, they recognize that the communities around them are important in shaping, creating and disseminating technological and social innovations. The innovation communities to which West & Lakhani (2008) refer are those communities of users and/or manufacturers, who are members and contributors to the product. Google According to Googleblog, the search engine Google is considered to be an open system. Google states that their definition of open innovation is two-pronged – open technology and open information. For their open technology, they state that they are open source, which means that they release and actively support code which aid in the Internet’s growth. Open standards is also a part of their open innovation paradigm, which means that they adhere to accepted standards, and, if there are not a set of accepted standards, they work to create these standards to improve the entire Internet. In other words, their open standards are created for everybody, not just them. With their definition of open information, they state that they have information about users and use this information to provide the users something that is valuable to them, and give transparent information to them and give the users the control over this information. Googleblogs then goes on to state why it is that they, Google, believe that open systems win. They state that closed innovation systems can generate profits, because everything is done in-house, therefore there is not a need to share profits between different companies, but that the actual innovation that comes out of these closed innovation systems is incremental at best. The iPod and the iPhone were obvious exceptions to this rule. The problem with the closed systems is that the company becomes complacent, as they do not have to work hard at keeping their customers, and the whole point of closed systems is that the status quo is preserved. The closed innovators, according to Google, become profitable because they lock in their customers. The open innovation systems, on the other hand, according to Google, generate profits not from locking in customers, but, rather, by understanding a system better than anybody else, and using the knowledge of a system to generate more innovative products. The successful company who is part of an open innovation system, according to Google, is the company who is the fast innovator and the thought leader. Moreover, Google states that the open innovators, like itself, stays ahead of the curve by spawning industries, harnessing the intellect of the general population, and spurring businesses to compete, win and innovate because their products are the best, not because their business tactics are superior. Because Google uses the open innovation paradigm, it has been able to invest in long-term, large-scale projects. These projects include Google Earth, which photographs every street in the world, which enables everybody to check out a potential new neighborhood. They have also been able to scan in millions of books to make them widely accessible. Their e-mail system is over 7 gigs, which means that it has considerably greater storage than other e-mail services that offer storage that is the fraction of this amount. They are also able to translate any web page in 51 different languages. They are able to process search data that helps public health agencies detect flu outbreaks sooner. Their Chrome browser is faster than other browsers, its mobile operating system (Android) is better than other operating systems for mobile phones, and it has been able to build a new communications platform, called Wave, and this communications platform is open to the world, so that the people of the world may build upon it, customize it, and improve it (Googleblog.com). History of Google and Open Innovation According to a blog on submittoday.com, Google is the classic technological rags-to-riches story. Started by two men at Stanford in 1996, and getting enough backing to launch in 1998, Google started in a friend’s garage in September of 1998. They soon began handling 10,000 queries per day, and, within a year, was handling 500,000 queries per day. The company was soon receiving praise and publicity, and, by the year 2000, it replaced Yahoo’s search engine as the major provider of supplementary search results. They now have over 50% share of the total search market. Google has developed over the years by using open innovation. Their motto is that they would use existing open standards wherever possible, and, if none exist, they create them and share them. From the beginning, they were developed through the Google Data Protocol by working as a part of the IETG Atom Protocol Working Group, shaping the Atom specification (Googleblog.com). Google also indicates that its company was built by using software components, including Linux, Apache, SSH and others, and that their company uses tens of millions of lines of open source code to run their products. Meanwhile, while they have built their platform upon the innovations of others, they are also supplying the world with innovations – they state that they are the world’s largest open source contributor, and that they have contributed over 800 projects that total over 20 million lines of code, and that four of their projects (Chrome, Android, Chrome OS, and Google Web Toolkit) have over a million codes apiece. As another example of how Google has developed its innovative products using open innovation, Android is now one of the most popular operating systems in the world for powering smartphones and tablet computers. Android is a perfect example of open innovation, because the product itself was not developed by Google initially – it was developed by Android, Inc.(Elgin, 2005). The Android system was a part of what was known as the Open Handset Alliance, which is a consortium of companies, including hardware, software and telecommunication companies, who have the goal of advancing mobile device open standards (Open Handset Alliance, 2007). While the Android system is open in that the inflow of knowledge was open to Google, through the Android, Inc., and the Open Handset Alliance, the outflow is also open, because Google releases the code under the Apache License (Open Handset Alliance). This means that they license the products to others, who can modify the software, and they are free to distribute the software to wireless carriers and device manufacturers. Their inflow continues to be open, because the apps that the Android carries is developed by a community of developers who write these applications in a customized Java programming language (Shankland, 2007). Which means that Java has given a platform for the Android software, which is another example of Android benefiting from an open innovation inflow of information and technology from Sun Microsystems, which is the maker of the Java technology. Yet, Google took the existing Java technology, and improved upon it by developing its own core Java virtual machine technology, called Dalvik, which executes Java programs on the Android phone. This means that the Java programs run fast, even on the mobile phone hardware. Google has shared this innovation with others, while working with innovators, such as Motorola, who was leading the way in developing Java for mobile devices (Shankland, 2007). Future of Google and Open Innovation While Google was developed using the principles of open innovation, its future also will rely upon open innovation. The company states in its Googleblog that they are building their future apps on open source software. Mack (2012) states that there are products which are coming out of the Google pipeline that rely upon open innovation techniques. One of these is the home automation, which will run on the Android@Home platform. Since this home automation relies upon the Android system, this is another example of how open innovation will be leading the way as Google develops new products. According to Mack (2012), the home automation is an Android@Home platform that will connect light bulbs, coffee pots and more, and its open accessory development kit for Android will connect anything from small gadgets to big machines. Miller & Bilton (2011) explain this concept a little further, stating that, for instance, a person’s refrigerator would be connected to the Internet, and that, when the groceries run low, the refrigerator could order these groceries. Or one’s dinner plate could post to a social network what one is eating. Google will also be working with car manufacturers to develop another product – the driverless car (Mack, 2012). Therefore, this is another example of how Google is leading the way through open innovation, in that it is working with the companies who make cars, in a partnership to make these cars driverless. Google would also supply these cars with navigation or information technology (Miller & Bilton, 2011). Google also hopes to work with individuals who are in the space program and other organizations and individuals with a dream, and set up space elevators, which will allow for scientific experimentation and other ventures. Google’s other consortium is involved in the environment, as it hopes to develop renewable energy sources, such as wind,solar and geothermalpower. The non-profit wing of Google, Google.org, is looking towards creating solar-powered turbine engines to supply electricity, and developing mirrors that would track the sun and concentrate solar energy (Mack, 2012). Further, Google is looking to partner with drug companies to develop new drugs. It currently has a stake in Adimab, which uses yeast cells to discover antibodies. It also has a stake in iPierian, which uses cellular reprogramming that create new drugs by modifying existing drugs (Mack 2012). Thus, this is another example of open innovation, as Google is partnering with drug companies, providing outflows of technology and information to these companies, so that they may develop products jointly. Another joint project, which uses the Google Ventures wing of the company is the Climate Change Corporation, which provides climate change insurance. This would sell weather insurance to farmers, which would help them protect their businesses when there is unpredictable conditions and extreme weather (Mack, 2012). Google is also interested in using the NEST information platform, which makes climate-control systems that help keep a home comfortable, to make smart thermostats. Once again, this is open innovation, as they are using the technology developed by NEST to make their own smart thermostats. Foundation Medicine is another of Google’s joint ventures, as it has invested in the Foundation Medicine, which is on the cutting edge of cancer treatment – the Foundation Medicine uses genomic and molecular data to form an innovative approach to cancer care (Mack, 2012). Conclusion Open innovation systems are those in which a variety of different companies and platforms go into innovating products. This is opposed to a closed innovation system, such as Apple, in which the products are invented, produced, distributed, marketed and sold by one company, top to bottom. Open innovation systems are good for innovation, because different ideas can be amalgamated together to make one product. Xerox is an example of a closed innovation system, so, even though they were on the cutting edge of making personal computers, they have since fallen behind, because they did not open up their innovation paradigm. Since they didn’t open up, they were not able to take advantage of other companies who were building components that they would need to truly be a market leader. The innovative products that they did produce were mainly produced after their researchers left the firm, and were able to take the inventions that were being created, combine them with other innovations elsewhere in the community, and take an “ugly” duckling and turn it into a “beautiful swan.” If those same products were forced to stay in-house, these products probably would never have seen the light of day, and would have died in the Xerox Palo Alto research laboratory. As an example of open innovation, Google leads the way. Google is much more than a search engine, and it prides itself on the fact that it builds its products upon other innovations, and that it shares information about its own inventions with others. It believes that the Internet should be open source, which means that anybody can take the different inventions and products on the Internet and alter them so that the products may become unique. Google itself was able to branch out of the realm of being just a search engine when it partnered with the Android system. Now the Android system is the most popular system for smartphones and tablets, and the Android system will also be leading the way into the future, as different products, such as smart thermostats which will be the wave of the future. Because Google is an open innovation system, it also has the opportunity to branch out into many different areas – the environment, cars, space exploration are just a few of these areas. It also has the opportunity to develop new drugs that fight cancer, and get involved with genetic research. Its future is seemingly limitless because it has the attitude that innovations should be shared and shared alike.That there are products all over the world that are being created, and that these products should be shared with others to make their own products, just as the companies that use others technologies will share with everybody else. Google believes that this is the best way – it isn’t selfish, like a closed system is, and it isn’t strictly focused upon profits, as a closed system would be. It is slower to develop than a closed system, according to Google, and it is chaotic, where a closed system is well-defined. It is profitable, as a closed system is, but profitability isn’t the main focus – innovation is the main focus. Google believes that its commitment to open innovation is what is going to enable its company to take on large investments that lack an obvious payoff, and large projects that benefit everybody. Bibliography Chesbrough, H. (2003) Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston, MA: Harvard Business School Press. Chesbrough, H. & Crowther, A. (2006) “Beyond high tech: Early adopters of open innovation in other industries,” R&D Management, vol. 36, no. 3, pp. 229-236. Elgin, B. (2005) “Google buys Android for its mobile arsenal.” Bloomberg Businessweek. 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