Chiaroni, D. V. Chiesa & F. Frattini, 2010, Unravelling The Process From Closed To Open Innovation Evidence From Mature

Unravelling the process from Closed to Open Innovation: evidence from mature, asset-intensive industries
Davide Chiaroni, Vittorio Chiesa and Federico Frattini

Politecnico di Milano, Department of Management, Economics and Industrial Engineering, Piazza L. da Vinci 32, 20133 Milano, Italy. davide.chiaroni@polimi.it; vittorio.chiesa@polimi.it; federico.frattini@polimi.it
Open Innovation has been one of the most-debated topics in management research in the last decade. Although our understanding of this management paradigm has signicantly improved over the last few years, a number of important questions are still unanswered. In particular, an issue that deserves further attention is the anatomy of the organizational change process through which a rm evolves from being a Closed to an Open Innovator. The paper represents a rst step in overcoming this limitation. In particular, adopting a longitudinal, rm-level perspective, it addresses the following question: which changes in a rms organizational structures and management systems does the shift from Closed to Open Innovation entail? In answering this question, the paper uses established concepts in organizational change research to look into a rich empirical basis that documents the adoption of Open Innovation by four Italian rms operating in mature, asset-intensive industries. The results show that the journey from Closed to Open Innovation involves four main dimensions of the rms organization, i.e. inter-organizational networks, organizational structures, evaluation processes and knowledge management systems, along which change could be managed and stimulated.
1. Introduction
pen Innovation has been one of the mostdebated topics in management research in the last decade (Chesbrough, 2003; Christensen et al., 2005; Gassmann, 2006; Vanhaverbeke, 2006; West and Gallagher, 2006). It is an emerging innovation management paradigm comprised of two dimensions: (i) inbound Open Innovation, which is the practice of establishing relationships with external organizations or individuals with the purpose of accessing their technical and scientic competences for improving internal innovation performance and (ii) out-
bound Open Innovation, which is the practice of establishing relationships with external organizations with the purpose of commercially exploiting technological knowledge. Although our understanding of Open Innovation has signicantly improved over the last few years, a number of important questions are still unanswered (Gassmann, 2006). In particular, an issue that deserves further attention is the anatomy of the organizational change process through which a rm evolves from being a Closed to an Open Innovator. The literature has acknowledged the pervasiveness of Open Innovation, which permeates several dimensions of a
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R&D Management 40, 3, 2010. r 2010 The Authors. Journal compilation r 2010 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Unravelling the process from Closed to Open Innovation rms organization and management systems (Chesbrough, 2003). Nevertheless, a systematic and longitudinal analysis of the process through which these dimensions are transformed by the adoption of Open Innovation is lacking. The paper represents a rst step in overcoming this limitation. In particular, adopting a rm-level perspective, it addresses the following main question: which changes in a rms organizational structures and management systems does the shift from Closed to Open Innovation entail? In answering this question, the paper reports and comments on a rich empirical basis that documents the adoption of Open Innovation by four Italian rms operating in mature, asset-intensive industries. These data represent a source of valuable insights for research and development (R&D) managers who are interested in understanding and weighting the implications that a shift towards a more open approach to innovation implies, as well as the organizational and managerial solutions that might streamline this pervasive transformation process. Change from Closed to Open Innovation is a rather unexplored topic in both high-technology and asset-intensive industries. However, our empirical and theoretical knowledge of the characteristics of Open Innovation in low-tech environments remains very limited in comparison with high-tech environments (Chesbrough and Crowther, 2006; Vanhaverbeke, 2006; van de Meer, 2007). Our decision to focus on rms belonging to mature, asset-intensive industries is believed therefore to make a stronger contribution to the debate on the use and diffusion of Open Innovation. The paper is structured as follows: Section 2 reviews the relevant literature on the implementation of Open Innovation, with a focus on mature, asset-intensive industries. Section 3 develops a theoretical framework that was used as a lens to gather and interpret the data on the process of implementation of Open Innovation. Section 4 motivates the design of the research and describes how the case studies have been conducted. Section 5 presents and discusses the results of the empirical analysis, whereas conclusions and future avenues for research are described in Section 6. earlier paradigms (Kuhn, 1962), and it must explain evidence beyond its initial area of inquiry to prove external validity (Yin, 2003). The search for providing evidence to Kuhnian anomalies informed in particular the recent work of Henry Chesbrough (Chesbrough and Crowther, 2006; Chesbrough et al., 2006) and other authors (e.g., Maula et al., 2006; West and Gallagher, 2006; Perkmann and Walsh, 2007), who have mostly reected on the theoretical implications of Open Innovation. This focus of recent research has left the issue of how Open Innovation is implemented in practice rather under-researched. Only scattered anecdotic evidence is indeed available about the process through which rms shift their organizational and managerial systems from a Closed to an Open Innovation paradigm. For instance, Huston and Sakkab (2006) describe the different types of networks, either developed specically to facilitate innovation activities or already existing and joined by the rm (e.g., InnoCentive) and the strategic planning processes that are at the heart of Procter & Gambles (P&G) model of Open Innovation. Dodgson et al. (2006) further elaborate on the case of P&G by discussing the role played by information technologies (data mining and searching, simulation and modelling, virtual and rapid prototyping) in supporting the adoption of Open Innovation. Haour (2004) and Dittrich and Duyster (2007) focus on the way in which networks for innovation are created and managed, analysing the cases of the distributed innovation system at Generics and the development of new-generation mobile phones at Nokia. Finally, Gassmann and Enkel (2004) identify three core innovation processes (outside-in, inside-out and coupled processes) that explain the adoption of Open Innovation in practice. As far as the issue of external validity of Open Innovation is concerned, it remains an open question whether its underlying concepts apply to lower technology or more mature industries. Only very recently have a few attempts been undertaken to study Open Innovation in lowtech, mature industries. Chesbrough and Crowther (2006) survey 12 rms in the United States, identied as early adopters of Open Innovation, in the aerospace, chemicals, inks&coatings and consumer packaged goods industries. The authors nd that, even if Open Innovation concepts are not widespread in use, the rms in the sample clearly increased their leverage on external sources of innovation to complement their internal R&D activities. Vanhaverbeke (2006) and van de Meer
R&D Management 40, 3, 2010
2. Literature review
In order to be recognized as a new paradigm for industrial innovation, Open Innovation must account for anomalies that are not fully explained in
r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd
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Davide Chiaroni, Vittorio Chiesa and Federico Frattini (2007) study Dutch innovative SMEs operating in different mature industries (e.g., food and beverage, chemicals, machinery and equipments) and nd that the use of importing mechanisms for accessing external sources of innovation is rather diffused, whereas serious barriers are still perceived in the adoption of exporting mechanisms, through which technologies are externally exploited. Taken together, these contributions clearly indicate the prevalence of the inbound over the outbound dimension of Open Innovation in mature industries. This article addresses both these limitations of the extant literature, studying the process of implementation of Open Innovation in rms belonging to mature and asset-intensive industries. In particular, its focus is on inbound Open Innovation, because previous research has shown that it is the prevailing dimension in these companies. zational change involves variation in both current modes of action and cognition, in order to enable the organization to take advantage of internal and external opportunities (Gioia and Chittipeddi, 1991); (ii) overcoming the Not-InventedHere and Not-Sold-Here syndromes is key in successfully introducing Open Innovation (Chesbrough, 2003). Similarly, research has shown that inertia is the most challenging barrier towards effective organizational change (e.g., Sastry, 1997; Armenakis and Bedeian, 1999); (iii) both the adoption of Open Innovation and successful organizational change require the development of new organizational routines, e.g., evaluation procedures and metrics of performance (Marshak, 1993; Chesbrough, 2006); (iv) rms implementing Open Innovation have to undergo a continuous process of experimentation, adaptation and learning to pro-actively dene their business environment, as it occurs in organizational change initiatives (Burnes, 1992). Therefore, it is reasonable to conceive the journey from Closed to Open Innovation as an organizational change process and hence to use the approaches and instruments developed by organizational change research to unravel its characteristics. The way in which companies change their organization is a central topic in organizational studies. Van de Ven and Poole (2005) attempt to organize different approaches used by scholars, tracing them to different ontological views about organizations (i.e. whether they are viewed as consisting of things or of processes) and different epistemologies about the methods for studying change (i.e. through variance theory, where change is represented as a dependent variable and statistically explained by a set of independent variables, or through process theory, where change is explained as a temporal order and sequence of events). Their analysis clearly indicates that approaches conceiving of the organization as made of things (which are dominant in empirically grounded organizational and social science research) and explaining change as a temporal order and sequence of events (which are better suited to understand how the process of change takes place) are more appropriate for the purpose of our multiple case-study analysis (Tsouskas and Chia, 2002). An established research stream on process methods conceptualizes the process of change as a sequence of interconnected phases or stages (Fisher, 1970), which allows for encapsulating the essentials of the richness of processes in a simpler account of stepwise development or
3. Reference framework
In this section, we describe the reference framework that was used as a guide to gather and interpret the empirical evidence collected through the case studies. This framework has been developed by looking into both organizational change and Open Innovation research.
3.1. Process of implementation of Open Innovation

Implementing Open Innovation has a deep impact on the organization and management systems of the innovating rm. As noted by Christensen (2006, p. 35), Open Innovation can be considered an organizational innovation. Similarly, the barriers that IBM, P&G and Air Products had to overcome in their journey from Closed to Open Innovation (Chesbrough, 2006) closely resemble the dynamics underlying organizational change, as noted also by Deck (2008). Differently put, an interesting parallel can be drawn between the characteristics of organizational change processes and the challenges that rms are confronted with in their journey towards Open Innovation: (i) Open Innovation does not merely require a rm to intensify its relationships with external organizations throughout its innovation processes. Rather, it involves the use of the business model as the cognitive device through which decisions about innovation are evaluated and taken (Chesbrough, 2006). Similarly, organi224
Unravelling the process from Closed to Open Innovation typical activities (Van de Ven and Poole, 2005). A number of phase models have been developed over time (e.g., Kotter, 1995; Galpin, 1996). Armenakis and Bedeian (1999), in their review of theory and research on organizational change, show that all these models have originated from the early work of Lewin (1947), who conceptualized the change process as progressing through three main phases, namely unfreezing, moving and institutionalizing. The rst phase is concerned with the establishment of a sense of urgency for change, the establishment of a guiding coalition (Kotter, 1995) for championing it and the creation and communication of the new vision to both internal and external stakeholders. The second phase concerns the actual implementation of change, through the establishment of new procedures and patterns of behaviour consistent with the new vision, eventually acting on budget constraints, targets, schedules and reward systems. This phase is usually characterized by an experimental approach, through which the solutions that are best suited to the rms endeavour are identied. Finally, the third phase involves the institutionalization of the new order, through consolidating improvements achieved to prevent a slip back to the antecedent status quo. Armenakis and Bedeian (1999) go further by suggesting that the Lewins model should be used as an integrated and simplied framework to support further research into organizational change. Consistent with Armenakis and Bedeian (1999), we decided to adopt Lewins model as an instrument to examine the journey from Closed to Open Innovation undertaken by the rms in our sample. This choice was suggested especially by the parsimony of the model, which divides the organizational change process into only three phases, thus improving the reliability of our empirically grounded research (Yin, 2003). They could also indeed be conceived as managerial levers on which a company can intervene to streamline its journey towards Open Innovation. 3.2.1. Networks Empirical evidence clearly shows that rms implementing Open Innovation require the establishment of extensive networks of inter-organizational relationships with a number of external actors, in particular universities and research institutions (Perkmann and Walsh, 2007), suppliers (EmdenGrand et al., 2006) and users (von Hippel, 2005; Simard and West, 2006). Laursen and Salter (2006) identify two variables that describe the characteristics of a network for innovation, namely its search breadth, which is dened as the number of external sources or search channels that rms rely on, and its search depth, which is dened as the extent to which rms draw from the different external sources or search channels. Working on these variables, increasing both search breadth and depth, rms are able to implement inbound Open Innovation. 3.2.2. Organizational structures Effectively managing externally acquired knowledge requires the development of complementary internal networks (Hansen and Nohria, 2004), i.e. organizational systems focused on accessing and integrating the acquired knowledge into the rms innovation processes. Evidence shows that this internal reorganization might concern: (i) organizational structures, e.g., the establishment of independent Open Innovation business units (Kirschbaum, 2005), or task forces and dedicated cross-functional teams (Huston and Sakkab, 2006). (ii) Organizational roles, e.g., champions who lead the process of transition from Closed to Open Innovation (Chesbrough and Crowther, 2006), or gatekeepers who manage the interface between the rm and its external environment (Tushman, 1977). (iii) Rewarding and incentive systems, which should include more open-oriented goals and metrics (Chesbrough, 2003). 3.2.3. Evaluation processes Another key dimension where change entailed by Open Innovation becomes manifest is the process adopted to evaluate innovation opportunities and projects. The openness of the innovation system complicates this evaluation, because it determines higher levels of technical and market uncertainty. Under these circumstances, rms should learn to play poker as well as chess (Chesbrough et al., 2007), i.e. they need to use new evaluation criteria
3.2. Managerial levers for Open Innovation

Understanding the anatomy of the process from Closed to Open Innovation requires identication of the dimensions along which change occurs, in the three phases of the organizational change process. Our framework identies four dimensions (namely networks, organizational structures, evaluation processes and knowledge management systems) along which the change required to become an Open Innovator takes place and, most importantly, can be stimulated.
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Davide Chiaroni, Vittorio Chiesa and Federico Frattini to focus more on external sources of innovation. As far as inbound Open Innovation is concerned, the evaluation process should be designed to manage the higher uncertainty that analysing technologies and opportunities developed outside the rms boundaries entails. In this respect, systems to systematically scan and continuously monitor the range of technologies available in the external environment (van de Vrande et al., 2006), as well as new forms for the involvement of external sources of innovation through the strategic use of corporate venturing (Keil, 2002), appear to have increasing importance. 3.2.4. Knowledge management systems Finally, knowledge management systems represent another area where Open Innovation impacts. Open Innovation is in fact all about leveraging and exploiting knowledge generated inside and even outside the rm, to develop and exploit innovation opportunities. Implementing Open Innovation requires therefore the use of knowledge management systems able to support the diffusion, sharing and transfer of knowledge within the rm and with the external environment. For the purpose of this paper, we consider both the use of Information and Communication Technology platforms and Intellectual Property (IP) management systems. The role of ICT in supporting a shift towards Open Innovation has been widely acknowledged in the literature (Huston and Sakkab, 2006; Piller and Walcher, 2006). The largest part of these technology platforms is used with the main purpose of facilitating the inow of knowledge from outside sources. This is the case, e.g., of the IT infrastructure used by P&G to collect ideas throughout its suppliers network (Huston and Sakkab, 2006). Similarly,
INBOUND OPEN INNOVATION Unfreezing Moving Institutionalizing
the use of IP protection systems enables inbound Open Innovation, as it prevents the opportunistic behaviours of the actors with which the rm collaborates (Chesbrough, 2003). The elements of the reference framework that have been discussed in the last paragraphs are integrated and represented in Figure 1. It is important to note that changes occurring along one of the four managerial levers that lie at the heart of our framework necessarily have an impact along the other levers. Although it is beyond the scope of this paper to systematically assess how each dimension is connected to each other, it is important to comment on the nature of their linkages and provide some examples of them that are grounded in the existing literature. With the growth in the scope and size of the network of external organizations or individuals from which to in-source knowledge and technologies, a rm needs to develop dedicated ICT and, more broadly, knowledge management systems to support its operation (link between networks and knowledge management systems). This is exemplied by the cases of P&G with its Connect & Develop innovation management model (Dodgson et al., 2006) and the development of The Sims computer game (Prugl and Shreier, 2006). Similarly, a timely and accurate evaluation of a high volume of technological opportunities and innovation projects generated in an Open Innovation environment requires the development and use of dedicated ICT and knowledge management systems (link between evaluation processes and knowledge management systems). For instance, both P&G (Huston and Sakkab, 2006) and BMW (Stahl and Bergfeld, 2008) had designed centralized databases (respectively named Eureka and Technis) and automated ICT ow systems for
Networks Evaluation processes Knowledge mgmt. systems Evaluation processes
Networks
Networks Evaluation processes
Knowledge mgmt. systems
Knowledge mgmt. systems
Organizational structures
Figure 1. Theoretical framework.
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Unravelling the process from Closed to Open Innovation rapidly collecting, processing and evaluating innovation ideas and technologies emerging from different sources both inside and especially outside the rm. Putting into practice these processes for the evaluation of technologies and innovation opportunities emerging from external and heterogeneous sources increases the need for a rm to establish dedicated organizational roles such as technology gatekeepers and innovation champions (Gemunden et al., 2007). Similarly, new organizational units are often created or re-congured with the aim of concentrating heterogeneous competencies and decisional authority (link between evaluation processes and organizational structures). This is clear for instance in the case of the Dutch multinational company DSM reported in Kirschbaum (2005) and in the case of Generics discussed by Haour (2004). Similar changes at the organizational level are also needed if a rm wishes to reduce the costs involved in the operation of a broad and heterogeneous network of external technology sources and to maximize its capability to capitalize on it (link between organizational structures and networks). In this respect, Gassmann and Enkel (2004) describe how the re-conguration of the IBM R&D laboratory in Ruschlikon was needed to improve the integration in the innovation process of a broad network of customers and suppliers. Finally, improving IP management capabilities and developing an IP-enabled business model require a rm to establish both organizational roles that oversee the generation and deployment of its IP and dedicated units that facilitate the achievement of a critical mass in this activity (link between organizational structures and knowledge management systems). This linkage is the subject of an entire chapter of the most recent book by Henry Chesbrough (2006), where the cases of Qualcomm, UTEK and Intellectual Ventures are described.
4. Research methodology
We decided to use case-study research as an overall methodological approach for our empirical investigation. As suggested by a number of scholars, this is in fact a very powerful method for building a rich understanding of complex phenomena (Eisenhardt and Graebner, 2007) that requires the capability to answer to how and why questions (Yin, 2003). In particular, we used a multiple case-study design, which was chosen as it allows both an in-depth examination of each case and the identication of contingency variables that distinguish each case from the other (Eisenhardt, 1989). The study involved four Italian rms from different industries (cement, concrete and steel pipes, chemicals, automotive brake systems) that were studied during the last year (see Table 1, where real names have been blinded for condentiality reasons). In the beginning, a preliminary screening of Italian newspapers (see Chesbrough and Crowther, 2006), carried out using a professional database (see http://www.lexisnexis.com), allowed us to identify 10 rms from mature, asset-
Table 1. Preliminary information about the studied rms Firm Industry Annual sales (2007) h6.0 bn Employees Annual investments in R&D (% sales) 0.5 Number of employees in R&D 250 Role of interviewed people
Company A
Cement and concrete Steel pipes
23,700
Company B
h10.0 bn
21,700
0.6
300
Company C
Adhesives and sealant for buildings
h1.2 bn
4,700
6.7
170
Company D
Automotive h0.9 bn brake systems
4,300
400
Former head of corporate R&D Head of the IP ofce Head of corporate R&D Head of corporate R&D Coordinator of R&D and technological innovation projects Divisional product development manager Head of corporate R&D Head of technical assistance Coordinator of network innovation projects Head of corporate R&D Head of the IP ofce
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Davide Chiaroni, Vittorio Chiesa and Federico Frattini intensive industries, which could be considered as early adopters of Open Innovation in Italy. Managers from these companies were invited to take part in a workshop, where they could illustrate their approach to innovation. For the empirical analysis, we selected the four rms that have in fact initiated and carried out an evolutionary process towards Open Innovation. As we suspected, it emerged that these rms had in fact implemented only the inbound dimension of Open Innovation. In this respect, the choice to focus only on this dimension in the paper is consistent with our empirical setting. We gathered information mainly through direct interviews; in particular, we followed these steps: At the outset of each case, a relationship was established with the manager who took part in the workshop. He or she was informed about the research project through a written summary and a telephone meeting. During this meeting, we identied the most adequate respondents for our analysis. Our rst key informant was the head of corporate R&D, but we also interviewed people with different roles and responsibilities in innovation (see Table 1), to reduce the risk of retrospective and personal interpretation biases. Then we personally interviewed the selected informants; we undertook two semi-structured interviews for each of them (each interview lasted on average one and a half hour) in order to gather the information required to pursue the objectives of the research. Direct interviews followed a semi-structured replicable guide, which comprised a set of open questions for each of the relevant constructs in our reference framework (e.g., organizational structures, inter-organizational networks). Secondary information was collected in the form of company reports and project documentation. These secondary information sources were integrated, in a triangulation process, with data drawn from the direct interviews, in order to avoid post hoc rationalization and to ensure construct validity (Yin, 2003). All interviews were tape-recorded and transcribed; generally, at this stage, a telephone follow-up with the respondents was conducted in order to gather some important missing data. The following section reports and discusses the empirical evidence we gathered for the four companies. It is used to illustrate the anatomy of the organizational change process through which they have transformed from Closed to Open Innovators. 228
5. Results and discussion

Evidence collected through the case studies is mapped along the dimensions of our reference framework in Table 2. The rms that we studied, at the beginning of the change process described in Table 2, were characterized by a Closed approach to innovation and by: A strong but very narrow scientic and technical body of competencies, in their own area of interest. R&D carried out, in a very unstructured fashion, inside organizational units devoted to technical assistance activities. A focus on markets where customers are relatively low demanding in terms of product innovation and where competition is rather weak. This indicates the magnitude of the change required by the implementation of Open Innovation in these rms. In the following, a detailed discussion of the anatomy of the organizational change process the studied rms have undergone to adopt Open Innovation is provided, distinguishing between the three phases of unfreezing, moving and institutionalizing.
5.1. Unfreezing
This phase of the organizational change process is characterized by the following aspects: The key role of top management in triggering change, i.e. in contributing to overcome the rms organizational inertia. This enabling role is well established in the literature on radical organizational change (see, e.g., Goodman and Dean, 1982; Kaplan et al., 2003). In all the four cases, the critical role of top management is clearly evident, even if the discontinuities to be faced were rather different in nature: the sudden increase of competition caused by the blurring of boundaries between geographical markets for company A, a corporate restructuring process following relevant corporate acquisitions for companies B and C and nally the access to large international markets for company D. The re-design of the organizational structure, which represents the rst managerial dimension interested by the implementation of Open Innovation and leads to the establishment of an independent unit devoted to R&D activr 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd
Table 2. Summary of the case studies Unfreezing (19911994) Moving (19952005) Institutionalizing (2006)
Company A
Background information
Networks
The wave of globalization hit the cement industry at the beginning of 1991, when also the evolution of norms ruling the European Union lowered the barriers of entry for foreign players in national markets.
At the beginning of the 1990s, the company retained a limited number of formal relationships with key suppliers, not related to innovation activities. Customers, who were characterized by a relatively low demand of innovation, were not involved in research and development project. The only network that seems to play a role since the beginning is not the one at the rm level, but the social network of the new head of R&D, involving on an individual basis a number of Italian university professors.
The participation of the company to EU-funded research projects allowed to involve a European network of universities, thus enlarging the original relationships with Italian academic professors. A formal system and a set of procedures and templates have been created for managing these collaborations.
Unravelling the process from Closed to Open Innovation
Top management of company A was aware of the fact that in order to remain competitive in a more geographically open contest the rm needed to signicantly increase its scale and its presence in other markets. As these objectives had to be Organizational achieved rather quickly, the structures company started the process of acquisition of another large player of the industry at European level. At the time of acquisition, the target company had nearly three times the productive capacity of the acquirer and a wider presence in other European countries. The acquisition had been nalized in April 1992. The company still in 1990 held no patents even if it was also active in basic (academic) research. The head of the technical support centre, employing nearly 100 people, was a university professor, and together with the other three graduate people of the centre, published a number of papers in academic journals and conferences. At the beginning of the 1990s, the CEO (also a member of the companys founding family) used to say in internal meetings: We have been so far leader on the Italian market leveraging the undoubted reliability of our products, but in order to be a leader in the future globalized market we need to nd a new way to nurture our innovation, looking more and more outside the boundaries of our company. In 1992, once the acquisition was completed, a new Group Technical Center (CTG) was established merging the previous technical services of both rms. Within the CTG, a separate R&D function was established, for the rst time in the history of the rm setting a distinction between technical assistance and R&D activities.
Leveraging on the social network of the head of R&D, the company started to establish formal relationships with a number of Italian universities and research centres (among others, Politecnico di Torino, Politecnico di Milano, CNR). The creation of this network followed the starting of a pilot project based on the idea to use cement to reduce pollution by introducing photocatalytic elements. Indeed, although the idea was generated within the company, it clearly lacked knowledge of photocatalysis, which is, as a chemical process, quite distant from those adopted in the cement industry. The role and competences of the internal project managers grew signicantly, together with the number of personnel with a technical or a scientic degree: the normal turnover of retirees was indeed used to hire higher skilled people, maintaining the overall number close to 100. The head of R&D then decided to open a small research centre in South Italy with nearly 10 people. The aim of the centre was to promote research projects, involving Italian and foreign universities, to be funded by the European Commission under the Framework Programmes. In 2001, a new small research team of three people was established for developing new additives to be used especially for the cement produced by the company. Additives are used, e.g.,
The R&D function had been restructured by establishing the so-called sector heads. Seven sector heads, who were chosen among the most experienced project managers, have the role to coordinate innovation projects belonging to certain areas (e.g., cement, additive, concrete), to identify the right project manager to be entitled with the responsibility of each project, to support the head of R&D in the evaluation process of innovative projects, to manage the relationships between the different functions within the rm (also ensuring the involvement of commercial units) and nally to nurture and expand the innovation network of the company.
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230
Unfreezing (19911994) As head of R&D a new manager was appointed purposively hired in 1991 with 30 years of previous business experience in other industries and also bringing a strong social network of researchers and scientists in Italian universities. In 1993, an Intellectual Property Ofce was created within the R&D function. The head of the Intellectual Property Ofce, with previous experience in the pharmaceutical industry, was also hired in 1993 together with other ve professionals belonging to the existing social network of the head of R&D. to increase the speed of the process of cement consolidation or to make it more resistant to particular environmental conditions (e.g., heat, moisture). Before 2001, additives had been simply acquired from external suppliers. Moving (19952005) Institutionalizing (2006) In 2007, to further support the work of sector heads, a new organizational unit called Competitors Group was set up with two people under the supervision of the Intellectual Property Ofce. The Competitors Group constantly monitors the activities of competitors regarding the introduction of new products and has also the role of scouting most promising technological advances done in universities in the relevant areas for the company. A new small research centre has been established in a scientic park named Kilometro Rosso with the aim to exploit crossfertilisation between research labs of rms in different industries (e.g., automotive, aerospace, biotechnology). A new organizational structure, independent from R&D and employing 10 people, has been established and called Innovation Directorate, with the aim of favouring strengthening the link between R&D and the other companys function. In 1992, the rst project managers In the period 19952005, the number The relevance of the new approach of innovation projects implemented to innovation has been formalized were appointed and crossfunctional teams even if limited to each year more than doubled, from in the development of an ad hoc nearly seven to eight per year in 1995 indicator, called innovation rate, R&D, technical assistance and measuring the percentage production were created to follow to more than 20 in 2004 and 2005. As a consequence, explicit evaluation contribution to the overall the development of the rst revenues of innovative products procedures had been introduced to innovation projects. that reach the market every year. In 1993, a scientic committee was assess the potential for accessing A target value of 5% is set for the external sources of knowledge, created with six Italian academic
Table 2. (Contd.)
Company A
Evaluation processes
Table 2. (Contd.) Unfreezing (19911994) professors. The role of the scientic committee was to revise in two meetings during the year the progress of innovation projects and to validate their scientic basis. Regular meetings were also held with the heads of R&D and of the Intellectual Property Ofce to discuss practical problems and to evaluate the potential for ling a patent. year 2013 and additional measures and targets have been derived for project managers and the other personnel of R&D. The Innovation Directorate became an active player of the process of project evaluation, in most cases representing a key gono go gate for those projects involving the development of products intended for widespread use within the company and even beyond. Moving (19952005) Institutionalizing (2006)
Company A
Knowledge management systems
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particularly within the existing network. These procedures have been initially tested in the pilot project on photo-catalytic cement. The culture of project management was well diffused at that time within the company and also the personnel in R&D started being evaluated, even if still informally, on project performance. In particular, the ability of creating a network of contacts outside the company was regarded as critical for the appointment and subsequent evaluation of a project manager. It was like creating an incentive for them to stay at the conference venue talking with other people instead of going around in the city said the former head of R&D. The use of information technologies The increase in the number of in supporting innovation activities projects also led to the adoption of ICT systems for project planning, and was rather limited. particularly for managing crossIn the years 19921994, a few patents were led, mostly based on functional teams across different countries (e.g., videoconference technical knowledge previously devices), and for database searching developed in the company. on scientic publications and patents. Recalling this period, the head of the Intellectual Property Ofces said: for long time the rm competed with universities in publishing works in journals and conferences . . . so we were not used to cooperating with external organizations. However, we then needed to protect our knowledge to start relationships and to manage contractual stuff . . . nally project managers fully understood the role of the IP Ofce and began to work more closely with it.
Table 2. (Contd.) Unfreezing (20022003) Once appointed head of the newly created R&D unit, the new manager started involving in innovation activities a number of university professors and researchers he had previously met during his education and his long career in the company (when he was in charge of managing basic research activities). Moving (20042005) Institutionalizing (2006)
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In 2006, the company started a programme for creating a more established network with its key suppliers, making the transition from an ad hoc project-by-project involvement towards a more structured involvement based on potential for knowledge transfer in given scientic and technological areas. Despite the efforts made in this programme, there are still several problems mainly due to the fact that most of the key suppliers are small companies rather reluctant to the formalization of long-term relationships. At the end of 2007, nearly 30 companies have been involved in the programme. Based on the social network of the head of R&D, the company started a number of formal relationships with main universities and research centres. In Italy, this network rapidly grew in the years 20042005 to include nearly 50 universities and public research labs and consortia. Relationships were also established at an international level with top US technological universities and other research centres closed to the subsidiaries of the company in Argentina, Mexico and Japan. However, all the relationships were managed directly by the Italian R&D central unit. In 2005, a dedicated organizational structure was created to manage these relationships. Interestingly, other than developing joint research programmes, the company nanced a number of PhD programmes with the aim of both achieving research results of interest in the area of steel making and establishing further relationships with top scientists (and universities) in the eld. In 2004, the R&D unit further The decision to concentrate all activities on steel pipes in a single concentrated on innovation activities, company was strongly supported by also after quality control procedures (that were previously in charge of the top management at the R&D) were allocated to the technical corporate level. The next step assistance centre. envisioned in this restructuring In the same year, a small independent process concerned the increase in organizational unit was established to the innovation potential of the company. Managers were used to manage relationships with claim that now that we can really universities. The unit, other than monitoring the development of joint exert a clear control over all activities, we must prove we are able research project, focused on the to leverage our assets for becoming development of PhD programmes In 2006, a formal role (customer representative) was created within the R&D unit with the aim of bringing the vision of key customers into project teams. Customer representatives periodically visit key customers together with people of the marketing unit for directly translating into technical requirements major needs of the customers. In 2007, a small team of
Company B
Networks
In the year 2002, recognizing an increase in global competition, top corporate management decided to reorganize and concentrate all the activities related to steel pipes, which were previously distributed in a number of loosely coupled local companies. As a result, a specialized company (company B in our case) was created within a much diversied corporation. In 2002, the company still held no patents even if it was active in basic research.
Table 2. (Contd.) Unfreezing (20022003) (and associated grants) in the main scientic areas of interest for the company. technicians (gatekeepers) within the technical assistance centre was created to constantly monitor new products developed by competitors. The results of this scouting activity are periodically reported to project managers in the R&D unit. Moving (20042005) Institutionalizing (2006)
Company B
the most innovative company in this eld In the year 2002, a new independent R&D unit was split from the technical assistance centre and entitled of all product innovation activities. The head of R&D was chosen among the most experienced managers of the company. His appointment was particularly supported by top management, given the fact that for the rst time in the history of the company a key managerial position was taken by a non-member of the companys founding family. In the following year, an Intellectual Property Ofce was created within the company and under the direct control of the head of R&D. The Intellectual Property Ofce established since its beginning tight relationships with a network of professionals in the eld. At the beginning of 2002, the evaluation process used by the company for assessing innovation projects was still rather informal and mostly based on the periodical interaction between the head of the technical assistance centre and the head of the marketing unit. The head of R&D since his appointment started holding regular meetings involving people from different units and the head of the Intellectual Property Ofce. In the period 20022004, crossfunctional teams increased in number, also involving people belonging to subsidiaries other than to the Italian headquarters. Quarterly review meetings were established to review the progress of innovation projects. A key role in these meetings was played by the head of the Intellectual Property Ofce, whose task was to evaluate the potential for ling patents out of project results.
The evaluation process was strengthened by explicitly introducing the assessment of accessing external sources in innovation activities. To this end, the Intellectual Property Ofce developed a number of procedures and standard formats that quickly became a day-by-day tool for project managers. One of our interviewees pointed out that: I never even think to contact someone in a company or in a university for proposing a collaboration of any type without
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Unfreezing (20022003) Moving (20042005) Institutionalizing (2006)
Table 2. (Contd.)
Company B
having in my bag the right format for signing the agreement. A number of indicators (e.g., number of new patents, number of new projects, a number of new products) are currently under development to measure innovation activities within the company. The coordinator of the R&D and technological innovation projects said: even if we are still far from having a reward scheme for our researchers based on innovation performance, we all know this will be the case in the next two or three years. The company consolidated its Knowledge The company started in these years The increase in the number of projects led also to the adoption of patenting activity by ling nearly management systems ling a few patents leveraging 50 patents per year. existing knowledge, particularly in ICT systems for project planning. the eld of steel pipes connections. Moreover, the company invested in A system of collection of project ideas from all employees (called gaining the access to scientic databases (e.g., Cilea, Science Direct) long list) was developed on the companys Intranet. Ideas and patent databanks, made available to all employees through the collected are then screened once a year by a pool of project managers companys Intranet. and the resulting short list is inserted into the normal evaluation process for innovation projects. The heads of R&D said: we know Ibm does the same, and even much better than us, but we are still young in using such tools.
Table 2. (Contd.) Unfreezing (19951997) The network with universities was further enlarged by including CNR National Centre for ` Research, Universita Federico II ` in Naples, Universita di Torino. A number of contractual agreements have been formalized for facilitating the development of joint research projects. Training programmes for undergraduate and postgraduate students have also been developed. Moving (19982005) Institutionalizing (2006)
Company C
Networks
In the year 1994, the company reshaped signicantly its business model by acquiring one of its larger suppliers (and also the largest European producer) of polymers for the building industry. The integration towards the supply of basic materials was considered the rst step for starting the development of truly innovative products, allowing the company to expand its products range and to address new markets. Despite having subsidiaries in more than 10 countries and being renowned for its ability to adapt the main features of its products to local environments, the company in 1994 held no patents.
The new head of R&D started its activities in the company with a clear programme in mind: Without accessing fresh knowledge from the outside, having (as we do) up-todate facilities and skilled personnel is not enough. We are a large company in our industry, but if we talk of research we are still a small chemical company and we lack the critical mass for pursuing innovation by ourselves. He started a collaboration with a leading university professor in the eld of rheology whom he met during his previous career in the research centre of Eni (the largest Italian oil&gas company). Moreover, existing contacts had been activated at Politecnico di Milano and Scuola Normale di Pisa, thus creating the rst bulk of the companys innovation network.
In the year 1995, the Technical Assistance unit, which had been, till then, centralized at the corporate level, was drastically re-organized. First of all, an R&D unit was created by collecting top technicians and researchers within the company with the aim of increasing its innovation potential. The CEO of the company used to say We are growing rapidly. We do not have to miss the opportunity of this growth for investing in our future. And our future is more products and more
In 1998, a formal programme was started with Politecnico di Milano and Scuola Normale di Pisa to offer two PhD grants per year on research areas of interest for the company. The aim was to further strengthen relationships with the faculty of the two universities and to gain access to highly skilled personnel to be later employed in the company. Even if the latter goal was not completely achieved (with only a few PhDs currently working for the company) the programme allowed to deepen the companys knowledge on key research areas. Starting from the year 2000, the network of universities involved in innovation process grew in number and also from a geographical point of ` view, by including Universita di Padova (Italy), Miami university and Penn State university (US). In the year 2005 the network counted more than 10 universities in ve countries. In 1998, the R&D unit was entitled to carry out a project aimed at introducing nanotechnologies into companys products. The need for accessing external knowledge was then clear to the head of R&D This is not such a battle we can win alone. The head of R&D appointed himself responsible for the management of the network, while the most experienced researcher in the company was appointed project manager. Starting from 2002, a new
In 2006, the son of the CEO, and member of the companys founding family was appointed head of R&D, thus further signalling the commitment of top management towards the innovation. The previous head of R&D was nominated coordinator of network projects. His main task is to consolidate and further develop the relationships with universities and research centres to be involved in the companys
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Unfreezing (19951997) organizational role was dened within the Technical Assistance units, particularly those in foreign subsidiaries. Named technology scout, it has the objective to report to the R&D unit information on how customers used in practice the companys products (e.g., if they use a particular mixture of products, if they follow the instruction for use). innovation projects. A new organizational role, named technology promoter, was establish with the aim of ensuring an efcient and effective knowledge transfer from and towards R&D and the other companys units. A small group of researchers has been established in 2007 working in the eld of organic chemistry and serving as internal reference point for most of basic innovation projects. Moving (19982005) Institutionalizing (2006) innovative products. We need a best-in-class R&D The remaining part of the Technical Assistance was further organized by product line (at that time, three lines of products were marketed) and small technical centres had been created in each foreign subsidiary, with the aim of keeping them close to the nal customer. The head of the newly created R&D unit was entrusted to an experienced R&D manager belonging to the R&D centre of Eni. The manager was purposively hired to create a discontinuity with the tradition of technical assistance and to introduce a truly R&D approach. In the year 1997 a long-term agreement was signed with a Patent Ofce of patent professionals and attorneys based in Milan. The agreement allowed the company to access on a demand basis the services of the Patent Ofce to manage its IP. The evaluation process used by the company to asses innovation projects was based in practice on the interaction between the head of R&D and the CEO about the directions where to pursue the research effort of the company. In the period 19982005, the company implemented a completely new evaluation process. First of all, it increased the cross-functionality of the process by involving, other than R&D, also Technical Assistance and Marketing units, under the direct supervision of the CEO. Moreover, a two-step evaluation was introduced. In the rst step, projects are evaluated on a very general basis looking at their main goal (e.g., introducing new products in a given product line, opening up a new product line) and The evaluation process was further strengthened and a great effort was expended in convincing researchers that external and internally generated projects have to be considered in the same way. Evaluation metrics for researchers have been established explicitly including the number of new contacts established during the year and the degree of participation to external projects. The current head of R&D said: A few years ago, external projects
Table 2. (Contd.)
Company C
Table 2. (Contd.) Unfreezing (19951997) assessing their strategic t. In the second step, projects are evaluated on their technical and economical feasibility. In this step of the evaluation, key peers of the network are also involved. Periodically review meetings were established to review the progress of innovation projects. The interaction with universities on basic research projects forced the company to adopt IP management procedures, with the help of the external Patent Ofce (with which it signed an agreement in 1997). The rst patents were led in 1998. In the years 19982000, the company completely renewed its IT infrastructure, creating an Internet website (with condential sections for employees only), and acquiring video-conferences and instant messaging systems for connecting its subsidiaries with the corporate centres. were considered as potentially dangerous as they might have drained nancial resources for internal projects. Now our researchers know that we are willing to reward them as much as they are able to deal with these project. They started to understand the real value of external projects for the company. The company strengthened its patenting activity by ling nearly 10 patents per year. Moving (19982005) Institutionalizing (2006)
Company C
Knowledge The company had no patents and management systems also the use of ICT systems was rather limited.
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Unfreezing (20002002) The network was further strengthened by increasing the number of collaborations with universities (University of Munich, ` Universita degli Studi di Milano). Key customers, particularly high-end automotive manufacturers, started becoming involved in innovation projects. In 2007, a cross-industries consortium, named Intellimech, was established by the company involving 18 industrial partners. The aim of the consortium was to develop mechatronics solutions for a number of potential applications, even outside the automotive industry. Moving (20032005) Institutionalizing (2006) The company had a strong network including key players in the automotive industry. However, with the partial exception of racing teams, the involvement of customers in the innovation process was rather limited. In 2002, the new head of R&D started creating an innovation network by initially involving universities (Politecnico di Milano, ` Universita di Bergamo) in basic materials and mechanical research projects, leveraging his personal contacts. The involvement of universities also was of help for the new head of R&D in gaining acceptance among companys researchers, who felt proud of collaborating with wellrespected academics. In the year 2000, the CEO (member of the companys founding family) promoted a strong re-organization of internal R&D activities: A company that still in 2000 operates like in the 1990s is doomed to fail. We need new approaches both on the market side and on the research side. A new corporate R&D unit was created with the aim of concentrating innovation efforts and forcing the development of radical rather than marginal innovations. The best researchers and technicians from product development team were selected as personnel of the R&D unit, whereas the remaining members of the In 2003, the company started a project involving a top German automaker and a number of universities with the aim to develop a new product line of high-performance ceramic brake systems. The project was chosen by the head of R&D as a pilot testing eld for implementing a new approach towards innovation. The research team working on the project was located in a fully equipped facility separated from the company, in a scientic park named Kilometro Rosso near Bergamo. The aim of the project, other than obviously developing a new product line, was to gather as much external knowledge as possible, even looking outside automotive and components In 2006, a new organizational role, named focal point, was established within the R&D unit. The head of R&D said: The ultimate goal of focal points is to continuously scout ideas from the external environment and particularly from research labs and universities and to benchmark our marketed products. Every time they see something that appears better than what we do, an alert is sent to R&D.
Table 2. (Contd.)
Company D
Networks
Starting from the year 2000, in response to an increase in global competition in the automotive components market, the company decided to strengthen its presence in foreign markets. The company acquired manufacturing plants in Brazil, established a joint venture in South Africa for the production of brake disks, acquired a small UK company with a long tradition in the production of brake systems for motorcycles and nally established a joint venture with a Chinese manufacturer of automotive brake systems to access the fast growing market of Far East. The company was organized by Organizational product lines and, despite being recognized as one of the leading structures companies in the industry, R&D activities were rather limited. Only the business unit dedicated to auto races (started in 1975) had a research team of about 50 people, clearly separated from the rest of the company, focused on the development of innovative brake solutions. The current head of R&D described the situation of the other business units at that time: Every BU has its own product development team. The aim of these teams was to adapt the products to the need of customers, eventually by introducing small
Table 2. (Contd.) Unfreezing (20002002) industries. In the following year, an independent R&D sub-unit, named Advanced Research Development, was created to leverage external knowledge for sustaining basic research projects. Whereas the remaining R&D activities were further concentrated on applied research. In the year 2005 a small Intellectual Property Ofce with four people was created to manage the growing companys IP. Moving (20032005) Institutionalizing (2006)
Company D
improvements. We were far, however, from talking of an innovation process.
existing product development teams had been devoted to technical assistance activities. The head of the new R&D unit was chosen within company managers. However, in contrast with the companys tradition, he was not selected among managers of product development teams, but in the manufacturing function. The head of R&D was therefore confronted with two main challenges: (i) to implement new procedures and processes for increasing the innovation potential of the company, and (ii) to set his leadership over companys researchers. The evaluation process for new projects was rather informal and mostly in charge of the head of R&D. In most cases, initial innovation projects addressed basic research issues of resistance of materials and interaction of mechanical parts. They were used more to test the potential of the company in radical innovations rather than for pursuing real products innovations. Innovation projects increased in number and in cross-functionality, also involving people belonging to other subsidiaries other than the Italian headquarters. Starting from the year 2005, evaluation meetings had been held on a regular basis also with the participation of members of the Intellectual Property Ofce.
Knowledge The head of R&D said: We looked management systems at our competitors and found that their IP portfolio was growing . . . in several cases with solutions that we also developed for our products . . . but that we never thought before to
The evaluation process was further formalized by introducing a stage-gate model, where the potential marketability of the project results is rst evaluated and then, for those projects that pass the gate, technical feasibility issues are assessed. The head of the Intellectual Property Ofce said: Our researchers now feel that they are working in an open, international and challenging research environment, very far from the provincial environment they experienced a few years ago. A knowledge database (with data on The company consolidated its patenting activity by ling nearly contacts and project results) was 20 patents per year. created and made accessible to companys employees through a dedicated intranet system.
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Davide Chiaroni, Vittorio Chiesa and Federico Frattini ities (which is separated from technical assistance) and of an IP Ofce, aimed at managing the existing and new knowledge basis. This is fairly evident in all the four cases. These changes at the organizational structure level were effective in triggering the change process because: (i) they made the change immediately visible to everyone within the rm, i.e. they represented a strong sign that the status quo had been unfrozen to enable change; (ii) they did not interfere with the basic processes and routines of the rm, i.e. they did not conict directly with the status quo. Moreover, the rst small projects formally launched within the R&D unit and the rst patents led by leveraging existing knowledge represented the early wins (Kotter, 1995), very often needed to signal the company that implementing change can lead to tangible results. The adoption of a jump-in approach (Kotter, 1995; Clark et al., 1997) for identifying managers in charge of the newly created R&D unit and IP Ofce, with the aim of creating the sense of urgency and the right environment of excitement and energy to nurture the change (Chesbrough, 2006). This goal can be achieved either by hiring new managers with a strong professional experience in more open-oriented companies or by creating a discontinuity in traditional internal career paths for managerial positions. The rst solution is well exemplied in the cases of companies A and C, where the new heads of R&D had both previously worked in the research labs of the largest Italian industrial company. The creation of a discontinuity in the career paths is clear, on the contrary, in the cases of companies B and D, where the direction of R&D (i.e. a key managerial position) was entitled for the rst time since the creation of the company to a non-member of the founding family (company B) and to a corporate manager never involved before in R&D activities, thus breaking the tradition of selecting R&D managers only within divisional research units (company D). The discontinuity caused by the jump-in approach in companies A and D is also reinforced by the introduction of a new cultivation management style (Orlikowski and Hofman, 1997). The marginal role played by the rms established network of customers and suppliers in shaping the initial phases of adoption of Open Innovation. This aspect is rather new in the Open Innovation literature that, on the conr 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd
Moving (20032005) Table 2. (Contd.)
Institutionalizing (2006)
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Company D
Unfreezing (20002002)
protect by ling a patent. A few patents were led with the help of a patent attorney in the year 2002. The ICT infrastructure was strengthened. Video conferencing systems and we-based communication systems had been developed also to favour the connections between companys headquarters and its various subsidiaries and joint ventures.
Unravelling the process from Closed to Open Innovation trary, has almost always stressed the pivotal role of the rms network as a key enabler of the adoption of the new paradigm. In our cases, it emerges that initially, it is the social networks of the managers in charge of R&D activities that allowed the rm to access important sources of technologies and innovation rather than the rm-level one. This social network comprises mostly relationships with scientists at universities. Consistent with the perspective suggested by Perkmann and Walsh (2007), these inter-personal networks acted as antecedents to rm-level relationships. In this unfreezing phase, it emerges that acting on the rms knowledge management system to improve IP management capabilities requires a rm to establish an independent organizational unit and dedicated organizational roles, which is an example of the link between the organizational structures and the knowledge management systems dimensions of our framework. adoption of nanotechnology to improve the resistance of outdoor adhesives in company C. The establishment of a rm-level inter-organizational network, by leveraging the personal social networks of R&D managers. This network is mainly explorative in nature (March, 1991), as companies need to explore new areas of knowledge, different from the ones they have traditionally mastered. This implies that: (i) the depth of the network (Laursen and Salter, 2006) clearly prevails on its breadth, as rms need to establish long-term formal relationships to maximize learning effects (March, 1991); (ii) the preferred partners are universities. Relationships with universities, indeed, are less risky in terms of potential spillovers than others involving suppliers, customers or even competitors. Focusing on universities as external sources of technical knowledge is therefore consistent with the low attitude of the companies towards IP protection. In some cases (namely in companies B and C), even an ad hoc organizational structure has been created with the aim of managing research collaborations with universities in the relevant scientic areas. The introduction of a more formalized evaluation process for innovation projects designed to challenge the traditional belief in the superiority of the rm as the central locus of innovation (Chesbrough, 2006), through explicitly establishing procedures to assess the potential and the opportunity to access external sources of technology, even beyond the existing exploration network. In this evaluation process, a relevant role is played by the IP Ofce, which denes mechanisms for facilitating knowledge transfer and for protecting companies from opportunistic behaviours (Chesbrough, 2006). The introduction and empowerment of information technologies (Dodgson et al., 2006) for supporting both project management activities (e.g., videoconference devices, companys intranet, virtual project workspaces) and innovation scouting activities (e.g., scientic databanks, prior art and patent databanks). The analysis shows how managing a growing network of relationships with an external actor requires the establishment of a dedicated organizational unit to which the responsibilities for this activity are concentrated. This exemplies the close link between the networks and organizational structures dimensions in our framework.
5.2. Moving
In the moving phase of the transformation process, after the need for a new approach to innovation has been fully established and communicated, Open Innovation is put into practice. This step of the process is characterized by the following aspects: The establishment of an experimental eld, i.e. a pilot project, for testing the practical implementation of Open Innovation. Around this project, the rst bulk of the rms innovation network is created, mainly leveraging on the existing social network of the Open Innovation champion, and the solutions most adequate to the characteristics of the rm are identied. The pilot project needs both to have the characteristics (in terms of the degree of innovativeness and requirements for accessing external sources of competences) that make it a trustable testing eld for the new approach to innovation and to be as clearly separated from the rest of the innovation activities of the company as to allow an independent measure of its success or failure (Galpin, 1996; Armenakis and Bedeian, 1999). This is the case for instance of the project on the development of cement with photo-catalytic elements to be used for reducing cities pollution undertaken by company A, or the project about the
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5.3. Institutionalizing
The results achieved in the implementation of the inbound dimension of Open Innovation are consolidated and institutionalized in a last distinct phase of the change process, which is characterized by: The partial re-design of the organizational structure. More specically, in this phase, new organizational roles (instead of new structures) are introduced. In particular, gatekeepers (Tushman, 1977), who are given the responsibility over innovation scouting activities, and innovation champions (Chakrabarti, 1974), who administer and streamline the evaluation and development of innovation projects in a given scientic or product area, are established. In other words, the change agents (Galpin, 1996) who as individuals in the previous phases of the implementation process contributed to pilot testing and rolling out recommendations about how to adopt the inbound dimension of Open Innovation, are now consolidated into well-dened organizational roles (and therefore made independent from individuals). The introduction of these roles is clear in all our cases even if they go under very different names: sector heads in company A, customer representatives and gatekeepers in company B, coordinators of network innovation projects and promoters in company C and focal points in company D. The adoption of performance measures explicitly aimed at evaluating the results of the company and its innovation activities, under an Open Innovation perspective. Early cases of rms implementing Open Innovation outside high-tech industries (Chesbrough and Crowther, 2006) show that companies using Open Innovation to extend their enterprise do not create new processes and metrics; instead they layer an Open Innovation perspective onto existing processes. On the contrary, and therefore more interestingly, at least for companies A and C, there is evidence that the rms have undergone a profound change in terms of the evaluation metrics that are used to inform the management activities and resource allocation in R&D. Furthermore, for all the studied rms, a clear willingness to move forward in this direction emerged. It emerges that, in order to avoid a quick slip back to the traditional, Closed Innovation approach, it is useful to establish new organizational 242
roles in charge of managing the evaluation and development processes of innovation opportunities generated in an Open Innovation environment. This exemplies the need to contemporarily intervene on both the organizational structures and the evaluation processes dimension to institutionalize the transition from Closed to Open Innovation. Table 3 synthesizes the commonalities in the implementation of the inbound dimension of Open Innovation in the studied cases, hence drawing a tentative anatomy of the organizational change process through which a rm in a mature, asset-intensive industry moves from being a Closed to an Open Innovator.
6. Conclusions
This paper adopts a longitudinal, rm-level perspective, to analyse the changes in a rms organizational structures and management systems that the shift from Closed to Open Innovation entails. In particular, it uses established concepts in organizational change research to look into a rich empirical basis that documents the adoption of Open Innovation by four Italian rms operating in mature, asset-intensive industries. The analysis shows that the journey from Closed to Open Innovation involves four main dimensions of the rms organization, i.e. inter-organizational networks, organizational structures, evaluation processes and knowledge management systems. The changes occurring along each of these dimensions in the three phases into which the organizational change process can be divided are synthesized in Table 3. Although the paper should be better conceived in an exploratory fashion, we believe it holds interesting implications for both scholars and practitioners. As far as research implications are concerned, our article is one of the rst contributions, to the best of the authors knowledge, to adopt a longitudinal perspective to comprehensively look into the implications that the adoption of the Open Innovation paradigm has over the organization and management systems of the innovating rm. The model that is put forward in the paper can be used hopefully as a reference framework to gather and interpret further empirical evidence on the topic. Second, the paper also contributes to organizational change research, as it applies the established Lewins model to study the characteristics of a particular change process, namely the journey from Closed to Open

Table 3. Anatomy of the organizational change process from Closed to Open Innovation in mature, asset-intensive industries Inbound dimension Unfreezing Networks Exploitation of individual social networks, particularly for developing relationships with universities and research centres. Achievement of a strong commitment from the rms top management. Separation of R&D activities from existing technical assistance. Creation of an independent Intellectual Property Ofce within the rm Identication, eventually through a jump inapproach, of an Open Innovation champion. Establishment of regular meetings for validating and monitoring innovation projects developed within the rm. Start to le patents leveraging knowledge already existing within the rm. Moving Creation of an exploration network, through a switch of existing individual social networks to the rm level. Establishment of a dedicated organizational unit for managing collaborations with universities. Identication of a pilot project (well dened and separate from the rest of the rms innovation activities) to serve as experimental eld for the implementation of Open Innovation. Introduction of explicit evaluation procedures to assess the potential for accessing external sources of knowledge, particularly within the existing exploration network. Adoption of ICT systems (videoconference, project management tools) for increasing project team interoperability. Institutionalizing Establishment of longterm forms of collaboration with universities and research centres. Creation of the role of gatekeepers for monitoring the development of technologies and scientic advances in the areas of interest for the rm. Identication of the main areas of research and establishment of innovation champions for each of them. Adoption of general indicators and eventually of derived innovation performance measures for project managers. Assessment of patenting activities, eventually explicitly included into the rms strategic plan.
Knowledge management systems
Innovation, that has specic characteristics (e.g., the need to coordinate change at the level of both the rms internal and external organization), which make it an interesting avenue of research. As far as managerial implications are concerned, the model developed in the paper, and especially the rich empirical basis that it discusses, provides R&D managers with a number of insights that are useful to properly assess the implications (and the costs) that a shift towards a more open approach to innovation implies. Furthermore, they are provided several clues about how to design and put into practice organizational and managerial solutions able to streamline the pervasive transformation process towards Open Innovation. In this respect, the main points that deserve attention appear to be: (i) the fact that the journey towards Open Innovation is triggered by a change in the organizational structure of the innovating rm. The creation of independent organizational units der 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd
voted to the management of innovation projects seems to be a strong signal that the status quo has been unfrozen, although they do not interfere with established organizational processes and routines; (ii) the pivotal role of the social network of the Open Innovation champion, which appears to act as an antecedent and enabler of rm-level inter-organizational relationships; and (iii) the importance of identifying a pilot project that serves as a eld test for the Open Innovation procedures and practices to be ne tuned, become accepted and extended later on to the whole organization. Obviously, the paper has a number of limitations that call for future research. First of all, because of the methodology that it uses, the results cannot be statistically generalized to other rms with characteristics different from the ones that we studied. Future research is therefore needed to investigate, through either extensive surveys or, better, comparative multiple case
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Davide Chiaroni, Vittorio Chiesa and Federico Frattini studies, whether and how the model developed in this paper can be applied to companies operating in technology-intensive industries, and in other countries different from Italy or, more interestingly, outside Europe. A fascinating aspect to investigate could also be the role played by the rms governance system. In particular, it could be interesting to answer the following question: does the fact of being a private held (or even a family-owned) or a publicly traded company affect the propensity of a rm to initiate the transition towards Open Innovation or top managements commitment in the change process?
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Davide Chiaroni is Assistant Professor at the Department of Management, Economics and industrial Engineering of Politecnico di Milano. His main research areas are Open Innovation and strategic management in high-tech industries. He is the author of two books and of more than 40 papers, including articles in R&D Management, Technovation, International Journal of Technology Management and International Journal of Entrepreneurship and Innovation Management. Vittorio Chiesa is Full Professor of R&D Strategy and Organisation at Politecnico di Milano. He is a member of the Faculty of MIP the Business School of Politecnico di Milano, where he is responsible for the Technology Strategy area. His main research interests are in R&D management and organization, technology strategy and international R&D. He has published six books and more than 100 papers, including 40 articles in leading international journals such as the Journal of Product Innovation Management, IEEE Transactions on Engineering Management and International Journal of Operations and Production Management. Federico Frattini is Assistant Professor at the Department of Management, Economics and industrial Engineering of Politecnico di Milano. His research interests are in R&D performance measurement, the organization of R&D activities and the commercialization of innovation in hightech markets. He has published more than 50 papers, including articles in the Journal of Product Innovation Management, R&D Management, Journal of Engineering and Technology Management and International Journal of Technology Management.
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Unravelling the process from Closed to Open Innovation: evidence from mature, asset-intensive industries

Davide Chiaroni, Vittorio Chiesa and Federico Frattini

3.1. Process of implementation of Open Innovation

3.2. Managerial levers for Open Innovation

Networks Evaluation processes Knowledge mgmt. systems Evaluation processes

Networks Evaluation processes

Knowledge mgmt. systems

Knowledge mgmt. systems

Figure 1. Theoretical framework.

R&D Management 40, 3, 2010

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Cement and concrete Steel pipes

Adhesives and sealant for buildings

Automotive h0.9 bn brake systems

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R&D Management 40, 3, 2010

5. Results and discussion

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

Unravelling the process from Closed to Open Innovation

R&D Management 40, 3, 2010

Davide Chiaroni, Vittorio Chiesa and Federico Frattini

R&D Management 40, 3, 2010

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

Knowledge management systems

Unravelling the process from Closed to Open Innovation

R&D Management 40, 3, 2010

Davide Chiaroni, Vittorio Chiesa and Federico Frattini

R&D Management 40, 3, 2010

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

Unravelling the process from Closed to Open Innovation

R&D Management 40, 3, 2010

Davide Chiaroni, Vittorio Chiesa and Federico Frattini

R&D Management 40, 3, 2010

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

Unravelling the process from Closed to Open Innovation

R&D Management 40, 3, 2010

Davide Chiaroni, Vittorio Chiesa and Federico Frattini

R&D Management 40, 3, 2010

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

Unravelling the process from Closed to Open Innovation

R&D Management 40, 3, 2010

Davide Chiaroni, Vittorio Chiesa and Federico Frattini

R&D Management 40, 3, 2010

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

improvements. We were far, however, from talking of an innovation process.

Unravelling the process from Closed to Open Innovation

R&D Management 40, 3, 2010

Moving (20032005) Table 2. (Contd.)

Davide Chiaroni, Vittorio Chiesa and Federico Frattini

Unravelling the process from Closed to Open Innovation

Knowledge management systems

R&D Management 40, 3, 2010

Unravelling the process from Closed to Open Innovation

r 2010 The Authors Journal compilation r 2010 Blackwell Publishing Ltd

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