What Xerox PARC Learned About Executing on Open Innovation

When PARC became a for-profit subsidiary of Xerox to practice open innovation in 2002, Henry Chesbrough had not yet published his book Open Innovation and the concept was not well understood. Companies knew how to engage a design firm, license IP, and form joint ventures, but few knew how to truly co-develop innovations with external partners, such as PARC. Since then, it has learned much about how to turn open innovation into a repeatable business model. Here are 5 key strategies that work, according to PARC’s VP of strategy, Lawrence Lee.

At that time it was hard for PARC to understand how much we needed to invest in a new technology before approaching partners to work together in commercialization. We always wanted to get a partner sooner rather than later, in order to share risk and learn more quickly. However, we learned the difficult lesson that unless we could clearly articulate the maturity level and value proposition for a new technology within the context of our partners’ other choices, there was little or no value in the technology — regardless of how much money we had invested in it. PARC has since learned many more lessons — and is now an industry leader — in how to turn open innovation into a repeatable business model.

As an industry, Lee believes we are still realizing only a small fraction of the full potential of open innovation. How can we realize this potential? Here are some key strategies he has observed from PARC’s experiences:

  • Go beyond just the ideas. Know the risks and the costs.
  • Don’t think only about what you have to offer. Think about what your partner needs.
  • Don’t just create prototypes for feedback. Use them to create an ecosystem.
  • It’s not all or nothing. You can invest iteratively.
  • Don’t worry about competing agendas.

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