Managing the Business Risks of Open Innovation

This report from McKinsey suggests that a leading factor governing whether or not open innovation will gain traction in your industry is the likelihood that open and proprietary competitors will clash over intellectual property rights.

If open-source initiatives appear to infringe upon the patents of specialized firms providing proprietary solutions, they will naturally seek to defend their IP – which will slow down or stall the adoption of open innovation in that market.

One way to sidestep this challenge is to cooperate with industry peers to form “IP-free zones,” as IBM did with a number of its patents in 2004 that conflicted with Linux, a new open-source operating system at the time. By voluntarily pledging not to enforce hundreds of IBM’s own patents so long as users of the IP were pursuing only open-source purposes, the company led the creation of an alliance of patent holders dependent on (and willing to defend) open-source software against lawsuits.

Can this type of cooperation occur in other industries? The authors of this report look at public data on an industry-by-industry basis, and offer some tips to companies thinking about expanding their business strategies to incorporate open innovation initiatives.

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