The open business model and inside-out thinking

Henry Chesbrough, a strong proponent of “open innovation,” is touting a new concept: open business models. In his current book, “Open Business Models: How to Thrive in the New Innovation Landscape,” Chesbrough cites case studies from IBM and Procter & Gamble that illustrate how major corporations can successfully remake closed business models into more open ones that rely on outside networks and crowdsourcing. One way to open up involves capitalizing on R&D efforts that fall outside a company’s core business, a strategy Chesbrough dubs “inside-out”: “There are usually lots of products within most large companies that are stuck, bottled up, or on the shelf. Some of those ideas can become more viable if licensed or sold to an outside company. Another tactic for companies who want to try new, open business models is to create experimental or spinoff brands that, if they fail, won’t damage the main brand. For instance, Google has a separate Web page, mashedup.com, where it can try things out under another name and see how customers react. What they want is indicators of success in a lower-volume environment before going big and without doing any damage to the brand.”

Source
Business Week 28 Nov 2006