B. Jospeh Pine II hold a very interesting keynote speech at the World Conference on Mass Customization & Personalization 2007 at Stata Center, MIT Boston about the topic “The Past, Present, and Future of Mass Customization”. We want to provide some outtakes out of this very interesting opening keynote because the topic correlates in very many ways as an addition to the interactive creation of value shown by Reichwald and Piller as well as a guideline for entrepreneurship in the area of individualizing mass products.

B. Joseph Pine II is the author of "Mass Customization" and "The Experience Economy".

Here the following parts of the keynote video:

Happy Birthday! Openeur has grown out of babyhood and is celebrating its first birthday. It is exactly one year now that we started this blog with our Mission Statement in order to deal with conneting Open Innovation and Entrepreneurship starting from the opening of the innovation process.

Over the course of this, we could develop our own approach of Open Entrepreneurship in regard to that we want to refer to several posts in the following, supporting a coherent understanding of our concept.

1. Reinventing a Networked Creation of Wealth
2. When Virtual Is Virtuous
3. The Paradox of Openness
4. The Analogy of Digital Networks
5. What Commons Really Have in Common
6. The One and the Many
7. The Entrepreneurial of Open Entrepreneurs
8. Distinguishing Open Entrepreneurs
9. Blowing in the Wind
10. Connecting the Creative Class
11. Paradoxes of Open Entrepreneurship
12. Networking Network Incubators
13. Jamming on Open Entreneurship
14. The Potential of Open Entrepreneurship

Starting from this, we looked for examples from practice over the last few months supporting our approach and could attend some very inspiring conferences like MCPC 2007 at the MIT in Cambridge/Boston. Through the work on the topic, we got the opportunity to functionally discuss with very many very interesting people as well as becoming friends with some of them. Here and now, we want thank again all our conversational partners for their sugestions and support. We should definite stay in dialogue!

In next few weeks and months, we will actualize our approach of Open Entrepreneurship by means of the insights we found in the last time and will continue to further develop it together with all partners of Openeur. We are looking forward to another year with Openeur!

Eric von Hippel recently hold a terrific keynote speech at the MCPC2007 at MIT about the topic User Innovation, in which he described the economic paradigm of highly efficient user-communities innovating collaboratively with the help of digital toolkits. Or in his own words:

“User have innovated historically - but the collaborative design has become so efficient that it is going to drive out manufacturer based design in certain areas.”

As a result, innovations are getting cheaper and topics like Intellectual Property or patenting will loose their importance when it comes to innovation. The reason for this is that users will collaboratively develop innovations and reveal them to others for free even if the manufacturer does not provide a toolkit. To illustrate this, von Hippel referred to examples in the sports and software industry where users built their own toolkits for interaction because of the absence of any corporate solution. Von Hippel directly adressed the manufacturers in the audience:

“No one ins preventing you from patenting things. But the point is that you are competing with people who will freely reveal. Your secret is basically hostage to the person who has least to loose.”

So, following Eric von Hippel’s thoughts, manufacturers have no choice, but to harness the enormous potential lying outside the boundaries of their organizations by developing toolkits and interfaces for user innovation. Otherwise they have to fight against their most loyal customers and loose a competitive advantage in the long run - because other competitors will collaborate with their lead users. Even companies that are successful today should keep in mind that there is always someone out there having least to loose.

Here you can watch the complete keynote speak:

Eric von Hippel MCPC2007 MIT Boston Part1

Eric von Hippel MCPC2007 MIT Boston Part2

Eric von Hippel MCPC2007 MIT Boston Part3

Eric von Hippel MCPC2007 MIT Boston Part4

This Friday, we are travelling to Boston/MA for the MCPC 2007 World Conference of Mass Customization and Personalization which is the primary event in this domain. Bridging between academic research and management practice, the conference aims to provide an interactive platform to learn about strategies and to discuss the latest technologies and enablers. We will be visiting the academic part at the Massachusetts Institute of Technology, Cambridge, from October 7-10 2007, with an interdisciplinary focus on the new advancements in the field. The second part, we won’t take part in anymore, will take place at HEC Business School in Montreal, Quebec, Canada, in the form of a business seminar.

The conference is jointly organized by MIT Media Lab, MIT Design Lab, RWTH Aachen University, Hong Kong University of Science and Technology, and HEC Montréal Business School (École des Hautes Études Commerciales). The conference shall bring together different voices and thinking on the topic from an interdisciplinary perspective. The interdisciplinary approach comprises the perspectives of management and economics, engineering, design and information technology from an academic as well as a practitioners’ perspective. The MCPC will become the largest event in the field of mass customization and personalization, with more than 150 keynotes, presentations, panels etc. on the topic. Further information is provided by Frank Piller, RWTH Aachen, who holds the function of Program Chair of the conference.

We are looking forward to meet many interesting people there, we would be glad to have lots of inspiring talks with. Hopefully, we will be also able to speak to some people at MIT Media Lab. If someone of our readers is visiting the conference as well, just give us a note and we would be glad meeting you there for discussion and social exchange.

Another extraordinary interesting example supporting our concept of Open Entrepreneurship is the platform CreateSpace by Amazon.com, a new online service for media on demand. The company is not charging setup fees for books, audio CDs, DVDs, Blue-Ray media and digital video downloads, enabling authors, filmmakers and musicians to offer their works to millions of customers worldwide and to determine the prices for their products themself. One could say, of course simplified, that CreateSpace is the Spreadshirt for media content of any kind.

The concept of CreateSpace from our point of view holds the potential to heavily jumble the publishing landscape up. Hereby it is shown once more, what fundamental consequences for the way we are understanding the economic coherences, the creation of value in networks can have. Artists had until now only the opportunity to achieve the publishing of their works by intermediaries like the big publishing companies for example with their affiliated distribution channels. A publishing within the framework of self publishers was markedly expensive and furthermore because of missing distribution channels less promising. Now, everyone can operate his own publishing house over an outstanding distribution channel like Amazon.com and is able to both publish his self created media and on behalf of third-party artists. The service seems to be useful especially for small editions, for instance the publishing of scientific work like dissertations.

With Amazon, there is opening one of the largest distribution networks worldwide for the first time, being a classic player in E-Commerce, for the creation of value in networks or, as we call it, Open Entrepreneurship. Seen from the perspective of Amazon, this makes sense in several ways. First and foremost, Amazon is ensuring exclusive access to media contents of a huge amount of media creators, massively expanding its already very far reaching Long Tail. Secondly, Amazon enlarges as a producer of record carriers for media its margins compared to its function as a distributor enourmously. Through a sale over Amazon.com, the company earns for instance with a single DVD 45 percent of the purchase price and through a sale over the CreateSpace E-Store anyhow 15 percent, each time plus a fixed charge per unit of 4,95 dollar. For instance, the Open Publisher earns through the sale of a DVD for the purchase price of 20 dollars via Amazon.com in the end just 6 dollars. On the other hand, this can be clearly overcompensated by the scalability of the distribution channel. It is very clever by the way, that Amazon reserved the right to give discounts on the products, only eating into Amazon’s margin leaving the earnings of the seller the same.

Especially because of the distribution model, the service of CreateSpace seems to be extremely interesting on the whole. Almost the complete infrastructure of Amazon.com is accessible and shipping is possible within 24 hours after receiving the order. All on demand books are automatically eligible for Search Inside!, Amazon Prime, Super Saver Shipping and other Amazon.com programs as well. Just by the interplay with the Amazon.com community, true creation of value in networks will become possible and we can wait eagerly for the upcoming developments. Welcome, Open Publishing!

The guys over at openinnovators.net describe the exemplary scientific engagement of Philips Research - willing to invest over 50 Million Dollar for a new Campus in Shanghai:

Philips’ aim is double. First, they want to increase efficiency and internal collaboration by bringing different R&D centers together on one campus. Second, they want to open up the campus to external parties, facilitating R&D cooperation and open innvation (via openinnovators.net)

This would be the second Open Innovation Campus supported by Philips. They already launched the High-Tech Campus Eindhoven (HTCE) in 1999 - the prototype for their new project in Shanghai. HTCE is some kind of a scientifically backed Innovation Incubator, for companies and students. Open Innovation at HTCE:

Open innovation is all about collaboration. With the current state of technology, a one-firm solution is a thing of the past. Specialist companies, knowledge institutes and governments increasingly join forces. This has its benefits. Using each other’s strengths, knowledge, experience and expensive research equipment will result in efficient and effective technology developments. Combining views and visions will create synergy. The success rate of new initiatives that emerge from open innovation is substantially higher than the success rate of closed research centres. Open innovation also creates space for specialist companies to develop their core business at a high level and to market new products effectively. High Tech Campus Eindhoven has created an ecosystem that focuses on open innovation – with a network that extends way beyond Eindhoven. (via hightechcampus.nl)

Openinnovators on HTCE:

Built on the site of Philips Research in Eindhoven, HTCE houses over 40 (external) technology-based companies and institutes employing several thousand people in developing ground-breaking technologies and products through the open innovation model. Philips tries to create an environment and structures which promote interactions, networking and knowledge-sharing, leading to joint projects and joint ventures among the HTCE companies. For Philips this means that the company can spin in ideas and innovations from outside, enriching the services it can offer Philips’ business divisions. It can also spin out technologies from its own extensive IPR portfolio to high-tech companies in the HTCE, which can bring innovations to market more quickly. (via openinnovators.net)

The June issue of Harvard Business Review included several interesting article examining new approaches of understanding and managing the innovation process especially when sources of innovation are located outside of the company`s borders.

The first approach we would like to summarize („The Sophisticated Innovator“), is some kind of a framework to organize and structure the innovation process inspired by Porter`s „Value Chain“. This is how the authors Morter T. Hansen and Julian Birkinshaw are describing their concept:

The innovation value chain view presents innovation as a sequential, three-phase process that involves idea generation, idea development, and the diffusion of developed concepts (…) Each is a link in the chain.
(Hansen/Birkinshaw 2007)

The first of the three phases in the chain is to generate ideas; this can happen inside a unit, across units in a company or outside the firm. The second phase is to convert ideas, or, more specifically select ideas for funding and developing them into products or practices. The third is to diffuse those products and practices. (Hansen/Birkinshaw 2007)

As a result of this model, the innovation manager gets an impression of the strength and weaknesses of the company’s innovation process. On the basis of this information he is enabled to identify the weakest element of the chain and start to optimize the process and therefore increase the efficiency and the output.

Innovation Value Chain (Hansen/Birkinshaw 2007)

The first phase of the “Innovation Value Chain” also includes elements of Open Innovation

Companies also need to assess whether they are sourcing enough good ideas from outside the company and even outside the industry – that is, tapping into the insights and knowledge of customers, end users, competitors, universities, independent entrepreneurs, investors, inventors, scientists, and suppliers. Many companies do this poorly, resulting in missed opportunities and lower innovation productivity (Hansen/Birkinshaw 2007)

Their overall advice to harness the potential of Open Innovation is to establish innovation-networks in- and outside of the company, making different people collaborate in a similar way like the success model “Connect & Develop” of Procter & Gamble. Another mentioned best-practice solution is an enduring business-plan contest, where the best business models get the opportunity to raise seed-money. The oil-company Shell has created such a venture wing in 1996, which is called gamechanger:

The flow of proposals is constant, and the unit has built up a track record of success: forty percent of all development projects in the exploration and production business started out as GameChanger ventures. (Hansen/Birkinshaw 2007)

As the mentioned concepts made clear, there is a distinctive need for innovation controlling in practice today, especially in the strategic context of internal and external innovation.

On the other hand, too much discipline could counteract creativity which is the breeding ground for new ideas and innovations. However, innovation controlling can accomplish an important contribution to this probably most promising task of a company. The challenge is that controlling has to support innovation management and future orientation and that controllers have to act as reliable innovators and pilots for the future of an organization by giving orientation instead of building hurdles, and by providing relevant information in order to make good decision-making possible because:

“Innovation Controlling is more than competitive advantage – it’s survival!” (Enkel/Perez-Freije 2007)

Reichwald/Piller have emphasized within their concept of interactive value creation that systems for innovation controlling are necessary to make the contribution of customers and network partners visible and controllable for a company.  Rautenstrauch/Generotzky/Bigalke furthermore identified the goals for the controlling of networked cooperation as the protection of potential and value contributions by implementing and continuously developing appropriate instruments. The difficulty lies in the coordination and monitoring of networked contributors to the specific cooperation and in the necessary trust between all partners. Therefore the provision of a long-term information management is another task of controlling in cooperation. Especially the interdependency between trust and information is a challenge for innovation controlling because the transfer of knowledge and relevant information is important to any form of cooperation.

Besides the necessary infrastructure for communication, an internal reporting and order management system is essential for any networked cooperation. With every new order, the network has to coordinate acquisition, configuration, realization and closure by splitting up to subtasks. The collected information is needed to control and steer the processes throughout the cooperation, what is however only conditionally possible because of the autonomous character of any company. As Keuper/Brösel pronounce companies and networks face a dilemma between effectiveness and efficiency that further-more limits the benefits of cooperation.

The main thought behind the concept of Open Innovation, mainly shaped by Henry Chesbrough, is that companies in a world of diversified information and talent cannot entirely rely on their own research in order to be innovative, but are increasingly reliant on the integration and application of external information and competencies.  Understood in this way, Open Innovation constitutes a further development of the lead user concept by Eric von Hippel (1988, 2005) advocating the integration of competent customers into the innovation process. The potential of externally generated innovation lies in the competence to aggregate decentralized information and resources within an open process to decisions out of that innovations more likely can arise. This is not only true for the integration of lead users, but also for cooperative networks of companies forming a virtual organization. 

Within the concept of virtual organizations Littmann/Jansen distinguish between intra-organizational, extra-organizational, inter-organizational as well as customer- and product-orientated virtualization. This approach may provide a sharper distinction in the virtualization of organizations. Recent literature pro-nounces the potential with respect to innovation that is possible to achieve for networked companies. Miles/Miles/Snow developed an exemplary model of “Collaborative Entrepreneurship”, describing how a fictional community of networked firms uses continuous innovation to create economic wealth.

Chesbrough/Teece have examined the virtuosity of virtuality in terms of the innovativeness of a company being one of its major competencies in order to create value.  They argue that while autonomous innovations can be handled by virtualization, systemic innovations need to be developed internally in order to prevent a company from loosing its core competencies. Otherwise being open to others could be a reckless risk and lead not to the desired results of such cooperation.