Innovation, Technology, and Knowledge Management

Martin Curley
Bror Salmelin

Open
Innovation
2.0
The New Mode of Digital Innovation for
Prosperity and Sustainability
Martin Curley • Bror Salmelin

Open Innovation 2.0

The New Mode of Digital Innovation
for Prosperity and Sustainability
Foreword

Two key words during my Presidency of the European Committee of the Regions
(CoR) have been innovation and digitalization. The world around us and our con-
ception of it are changing with accelerating speed. The new major success factor not
only for industry but also for cities and regions is speed or better said velocity.
Dramatic changes are posing both practical and exceptional theoretical and sys-
temic challenges. The paradigms are changing from industrial society through
information society to knowledge and innovation society so profoundly and quickly
that it is hard to keep pace with them and make sense of the unparalleled
transformations.
This changing landscape forms an excellent frame and reasoning to read this
book, written by Professor Martin Curley and Bror Salmelin. Europe needs renewal
through a new entrepreneurial mind-set and digitalization.
I am convinced that a Digital Europe based on in-depth bench learning and part-
nerships between cities and regions is becoming a reality. The CoR has challenged
all the cities and regions in Europe to take stronger actions in becoming forerunners,
especially in tackling societal challenges and in creating sustainable growth and
new jobs. Let us learn what recent industrial and public sector practice has to offer
for the European renewal.
Let us speed up the digital transformation by integrating the industrial experi-
ences with the evidence-based knowledge, i.e., best practices and concepts, to oper-
ate via European digitalized open innovation platforms and thus getting new
European innovations faster to the global markets.
The learnings can be extended beyond Europe, and in a new VUCA (volatility,
uncertainty, complexity, and ambiguity) world, extraordinary leadership is called
for to help guide us all to a better place. Digital technologies form the essential
foundation for inventing the future. This book sheds light on the path to how we can
collectively both simultaneously drive economic growth and improve society in a
sustainable way.
Creating an understanding of the nature of disruptive change is the driver for
providing sustainable benefits for society and global businesses. Let me encourage
you to read and learn from what Martin Curley and Bror Salmelin have written. This

v
vi Foreword

book can be a strong push forward in your personal knowledge sharing and
­co-­creation process.

European Committee of the Regions Markku Markkula

Bruxelles, Belgium
Series Foreword

The Springer book series Innovation, Technology, and Knowledge Management was
launched in March 2008 as a forum and intellectual, scholarly “podium” for global/
local, transdisciplinary, trans-sectoral, public–private, and leading/“bleeding”-edge
ideas, theories, and perspectives on these topics.
The book series is accompanied by the Springer Journal of the Knowledge
Economy, which was launched in 2009 with the same editorial leadership.
The series showcases provocative views that diverge from the current “conven-
tional wisdom,” that are properly grounded in theory and practice, and that consider
the concepts of robust competitiveness,1 sustainable entrepreneurship,2 and demo-
cratic capitalism,3 central to its philosophy and objectives. More specifically, the
aim of this series is to highlight emerging research and practice at the dynamic
intersection of these fields, where individuals, organizations, industries, regions,
and nations are harnessing creativity and invention to achieve and sustain growth.

1
We define sustainable entrepreneurship as the creation of viable, profitable, and scalable firms.
Such firms engender the formation of self-replicating and mutually enhancing innovation networks
and knowledge clusters (innovation ecosystems), leading toward robust competitiveness
(E.G. Carayannis, International Journal of Innovation and Regional Development 1(3). 235–254,
2009).
2
We understand robust competitiveness to be a state of economic being and becoming that avails
systematic and defensible “unfair advantages” to the entities that are part of the economy. Such
competitiveness is built on mutually complementary and reinforcing low-, medium-, and high-­
technology and public and private sector entities (government agencies, private firms, universities,
and nongovernmental organizations) (E.G. Carayannis. International Journal of Innovation and
Regional Development 1(3). 235–254. 2009).
3
The concepts of robust competitiveness and sustainable entrepreneurship are pillars of a regime
that we call “democratic capitalism” (as opposed to “popular or casino capitalism”), in which real
opportunities for education and economic prosperity are available to all, especially—but not
only—younger people. These are the direct derivative of a collection of top-down policies as well
as bottom-up initiatives (including strong research and development policies and funding, but
going beyond these to include the development of innovation networks and knowledge clusters
across regions and sectors) (E.G. Carayannis and A. Kaloudis. Japan Economic Currents. p. 6–10
January 2009).

ix
x Series Foreword

Books that are part of the series explore the impact of innovation at the “macro”
(economies, markets), “meso” (industries, firms), and “micro” levels (teams, indi-
viduals), drawing from related disciplines such as finance, organizational psychol-
ogy, research and development, science policy, information systems, and strategy,
with the underlying theme that for innovation to be useful it must involve the shar-
ing and application of knowledge.
Some of the key anchoring concepts of the series are outlined in the figure below
and the definitions that follow (all definitions are from E.G. Carayannis and
D.F.J. Campbell, International Journal of Technology Management, 46, 3–4, 2009).
Conceptual profile of the series Innovation, Technology, and Knowledge Management

Global
Systemic Mode 3 Quadruple Democracy Democratic
macro level helix of capitalism
knowledge

Structural and
organizational Knowledge Innovation Entrepreneurial Academic
meso level clusters networks university firm Global/local

Sustainable
entrepreneurship

Individual Creative Entrepreneur/

micro level milieus employee
matrix
Local

• The “Mode 3” Systems Approach for Knowledge Creation, Diffusion, and Use:
“Mode 3” is a multilateral, multinodal, multimodal, and multilevel systems
approach to the conceptualization, design, and management of real and virtual,
“knowledge-stock” and “knowledge-flow,” modalities that catalyze, accelerate,
and support the creation, diffusion, sharing, absorption, and use of cospecialized
knowledge assets. “Mode 3” is based on a system-theoretic perspective of socio-
economic, political, technological, and cultural trends and conditions that shape
the coevolution of knowledge with the “knowledge-based and knowledge-driven,
global/local economy and society.”
• Quadruple Helix: Quadruple helix, in this context, means to add to the triple
helix of government, university, and industry a “fourth helix” that we identify as
the “media-based and culture-based public.” This fourth helix associates with
“media,” “creative industries,” “culture,” “values,” “lifestyles,” “art,” and per-
haps also the notion of the “creative class.”
Series Foreword xi

• Innovation Networks: Innovation networks are real and virtual infrastructures

and infratechnologies that serve to nurture creativity, trigger invention, and cata-
lyze innovation in a public and/or private domain context (for instance, govern-
ment–university–industry public–private research and technology development
coopetitive partnerships).
• Knowledge Clusters: Knowledge clusters are agglomerations of cospecialized,
mutually complementary, and reinforcing knowledge assets in the form of
“knowledge stocks” and “knowledge flows” that exhibit self-organizing,
learning-­driven, dynamically adaptive competences and trends in the context of
an open systems perspective.
• Twenty-First Century Innovation Ecosystem: A twenty-first century innovation
ecosystem is a multilevel, multimodal, multinodal, and multiagent system of sys-
tems. The constituent systems consist of innovation metanetworks (networks of
innovation networks and knowledge clusters) and knowledge metaclusters (clus-
ters of innovation networks and knowledge clusters) as building blocks and orga-
nized in a self-referential or chaotic fractal knowledge and innovation architecture
(Carayannis 2001), which in turn constitute agglomerations of human, social,
intellectual, and financial capital stocks and flows as well as cultural and techno-
logical artifacts and modalities, continually coevolving, cospecializing, and
cooperating. These innovation networks and knowledge clusters also form,
reform, and dissolve within diverse institutional, political, technological, and
socioeconomic domains, including government, university, industry, and non-
governmental organizations and involving information and communication tech-
nologies, biotechnologies, advanced materials, nanotechnologies, and
nextgeneration energy technologies.
Who is this book series published for? The book series addresses a diversity of
audiences in different settings:
1. Academic communities: Academic communities worldwide represent a core
group of readers. This follows from the theoretical/conceptual interest of the
book series to influence academic discourses in the fields of knowledge, also
carried by the claim of a certain saturation of academia with the current concepts
and the postulate of a window of opportunity for new or at least additional con-
cepts. Thus, it represents a key challenge for the series to exercise a certain
impact on discourses in academia. In principle, all academic communities that
are interested in knowledge (knowledge and innovation) could be tackled by the
book series. The interdisciplinary (transdisciplinary) nature of the book series
underscores that the scope of the book series is not limited a priori to a specific
basket of disciplines. From a radical viewpoint, one could create the hypothesis
that there is no discipline where knowledge is of no importance.
2. Decision makers—private/academic entrepreneurs and public (governmental,
subgovernmental) actors: Two different groups of decision makers are being
addressed simultaneously: (I) private entrepreneurs (firms, commercial firms,
and academic firms) and academic entrepreneurs (universities), interested in
optimizing knowledge management and in developing heterogeneously
xii Series Foreword

c­ omposed knowledge-based research networks; and (2) public (governmental,

subgovernmental) actors that are interested in optimizing and further developing
their policies and policy strategies that target knowledge and innovation. One
purpose of public knowledge and innovation policy is to enhance the perfor-
mance and competitiveness of advanced economies.
3. Decision makers in general: Decision makers are systematically being supplied
with crucial information, for how to optimize knowledge-referring and
knowledge-­enhancing decision-making. The nature of this “crucial information”
is conceptual as well as empirical (case study-based). Empirical information
highlights practical examples and points toward practical solutions (perhaps
remedies); conceptual information offers the advantage of further-driving and
further-carrying tools of understanding. Different groups of addressed decision
makers could be decision makers in private firms and multinational corporations,
responsible for the knowledge portfolio of companies; knowledge and knowl-
edge management consultants; globalization experts, focusing on the interna-
tionalization of research and development, science and technology, and
innovation; experts in university/business research networks; and political scien-
tists, economists, and business professionals.
4. Interested global readership: Finally, the Springer book series addresses a whole
global readership, composed of members who are generally interested in knowl-
edge and innovation. The global readership could partially coincide with the
communities as described above (“academic communities,” “decision makers”)
but could also refer to other constituencies and groups.

Elias G. Carayannis
Preface

The way is long if one follows precepts (rules); the way is short if one follows patterns.
Seneca.
We are at a unique point in time where we have multiple disruptive technologies
all showing up at the same time, creating a chain reaction of disruptive change. In
this perfect storm, organizations and indeed ecosystems have a choice to react and
let change happen or to proactively try to invent and innovate better outcomes. Open
Innovation 2.0 (OI2) is the new paradigm and methodology for Digital Innovation.
A new primordial soup exists which is bound by digital, enabled by digital, and
fueled by digital where all actors in business and society have the opportunity to
quickly create transformation solutions using agile methods. Based on our research
and practice, we share the first version of an OI2 pattern language including core
patterns to help innovators across the spectrum to increase the probability of success
using a Digital platform and ecosystem approach. We have distilled these first pat-
terns as we have observed the signals emerge from the noise in the rapidly explod-
ing field of digital innovation. We present these initial patterns as a minimum viable
platform (MVP) for OI2-led digital innovation, knowing instantly that almost before
the ink is dry upon printing some of these will need to change as we learn and as
dynamics change. We present the MVP OI2 pattern language to provide a rudimen-
tary taxonomy and vocabulary to allow practitioners experiment and test these pat-
terns with real-life projects and to give a base platform for researchers and
practitioners to help expand and more fully describe the OI2 pattern language.
Using the agile and rapid experimentation approach, we hope and expect that the
OI2 pattern language will be iterated and improved quickly providing transforma-
tional value to governments, industry, academics, and citizens/users alike. Again
using OI2 principles, we provide a “good enough” first version of the core patterns
knowing already that there are omissions/errors rather than waiting for a much more
polished version delivered later. We welcome your feedback and hope the book and
associated body of knowledge are helpful to you.

Maynooth, Ireland Martin Curley

Brussels, Belgium  Bror Salmelin
15 June 2017
xiii
Contents

1 Introduction����������������������������������������������������������������������������������������������    1
1.1 Simultaneous Arrival of Multiple Disruptive Technologies����������   2
1.2 Evolution or Revolution? A New Paradigm����������������������������������   2
1.3 Enabling Forces: A Perfect Storm������������������������������������������������   4
1.3.1 Moore’s Law/Digital�����������������������������������������������������   4
1.3.2 Mass Collaboration��������������������������������������������������������   5
1.3.3 Sustainability ����������������������������������������������������������������   6
1.4 Innovation Modes��������������������������������������������������������������������������   6
1.4.1 Dependency > Independency > Interdependency����������   7
1.4.2 Subcontracting > Cross-Licensing >
Cross-Fertilization ��������������������������������������������������������   7
1.4.3 Solo > Cluster > Ecosystem������������������������������������������   8
1.4.4 Linear > Linear, Leaking > Nonlinear Mash-Up����������   8
1.4.5 Control > Leadership/Management > Orchestration����   8
1.4.6 Planning > Validation > Experimentation ��������������������   9
1.4.7 Win-Lose > Win-Win > Win-More: Win-More������������   9
1.4.8 Box Thinking > Out of the Box > No Boxes����������������   9
1.4.9 Single Entity > Single Discipline > Interdisciplinary��� 10
1.4.10 Value Chain > Value Network > Value Constellation �� 10
1.5 Three Laws of Knowledge Dynamics������������������������������������������ 10
1.6 The Importance of Innovation������������������������������������������������������ 11
1.7 Basic Versus Applied Research and Innovation���������������������������� 12
1.8 OI2: A New Mode of Technical and Societal Innovation
and an Emerging Pattern Language���������������������������������������������� 13
2 Digital Disruption������������������������������������������������������������������������������������   15
2.1 Pathways to the Digital Revolution���������������������������������������������� 15
2.2 Disintermediation�������������������������������������������������������������������������� 17
2.3 Distribution ���������������������������������������������������������������������������������� 17
2.4 Democratization���������������������������������������������������������������������������� 17
2.5 Dematerialization�������������������������������������������������������������������������� 18

xv
xvi Contents

2.6 Demonetization ���������������������������������������������������������������������������� 19

2.7 Deceptive Displacement������������������������������������������������������������������ 19
2.8 Attributes of Digital������������������������������������������������������������������������ 19
2.8.1 Malleable ������������������������������������������������������������������������ 20
2.8.2 Programmable������������������������������������������������������������������ 20
2.8.3 Thinking�������������������������������������������������������������������������� 21
2.8.4 Exponential���������������������������������������������������������������������� 21
2.8.5 Interactive������������������������������������������������������������������������ 21
2.8.6 Ubiquitous ���������������������������������������������������������������������� 21
2.9 IT-CMF (Information Technology Capability
Maturity Framework)���������������������������������������������������������������������� 22
2.9.1 IT-CMF Rationale and Summary������������������������������������ 22
2.9.2 Framework Description �������������������������������������������������� 24
3 Sustainable Intelligent Living ����������������������������������������������������������������   27
3.1 Sustainable Innovation������������������������������������������������������������������   27
3.2 Sustainable Intelligent Living ������������������������������������������������������   28
3.2.1 Sharing Economy and Collaborative Consumption������   29
3.3 Sustainable Development��������������������������������������������������������������   29
3.4 Digital/Moore’s Law and Resource Decoupling��������������������������   30
3.4.1 Substitution, Automation, Dematerialization����������������   32
3.5 Servitization����������������������������������������������������������������������������������   32
3.6 Digital and Sustainability��������������������������������������������������������������   33
3.7 Plan C: Decoupling Natural Resource Use
and Environmental Impacts from Economic Growth��������������������   33
3.7.1 Cities as a Focal Point for Sustainable
Intelligent Living ����������������������������������������������������������   34
3.8 Designing for Sustainability����������������������������������������������������������   37
3.8.1 High Frequency, High Precision Control
Systems for Societal Level Systems������������������������������   37
4 The Evolution of Innovation ������������������������������������������������������������������   39
4.1 Defining Innovation����������������������������������������������������������������������   41
4.2 Creative Disruption ����������������������������������������������������������������������   42
4.2.1 Innovation and Growth��������������������������������������������������   42
4.3 Ten Types of Innovations: Full Spectrum Innovation ������������������   43
4.4 The Extended Innovation Value Chain������������������������������������������   43
5 Framing OI2 ��������������������������������������������������������������������������������������������   47
5.1 Design Patterns������������������������������������������������������������������������������   48
5.2 OI2 Core Patterns��������������������������������������������������������������������������   49
6 Shared Purpose����������������������������������������������������������������������������������������   53
6.1 Shared Purpose������������������������������������������������������������������������������   53
6.1.1 Shared Vision����������������������������������������������������������������   55
6.1.2 Shared Value������������������������������������������������������������������   55
6.1.3 Shared Values����������������������������������������������������������������   56
Contents xvii

6.1.4 Stored Value������������������������������������������������������������������   58

6.1.5 Shareholder Value����������������������������������������������������������   58
6.1.6 Shared Value at Risk������������������������������������������������������   59
7 Platforms��������������������������������������������������������������������������������������������������   61
7.1 Architecture��������������������������������������������������������������������������������������   62
7.2 Application Programming Interface ������������������������������������������������   63
7.3 Governance ��������������������������������������������������������������������������������������   63
7.4 Networking and the Network Effect ������������������������������������������������   64
7.5 Ease, Emergence, and Incentives������������������������������������������������������   66
7.6 Industrial Mash-ups��������������������������������������������������������������������������   66
7.7 Multi-Sided Platforms����������������������������������������������������������������������   67
8 Ecosystem Orchestration and Management������������������������������������������   69
8.1 Partnering: Triple/Quadruple Helix Innovation����������������������������   69
8.2 Citizens as Innovators ������������������������������������������������������������������   71
8.3 From Clusters to Open Innovation Ecosystems����������������������������   73
8.3.1 Living Labs��������������������������������������������������������������������   74
8.4 Collaborative Architecture������������������������������������������������������������   77
8.5 Participative Architecture and Governance ����������������������������������   78
8.6 Business Model Innovation����������������������������������������������������������   78
8.6.1 Business Model Experimentation����������������������������������   80
8.7 Ecosystem Development and Evolution����������������������������������������   80
8.8 European Innovation Ecosystem and Scoreboard������������������������   81
8.9 The Entrepreneurial State��������������������������������������������������������������   83
8.10 Policy: National Innovation Strategy��������������������������������������������   84
8.11 Co-creation������������������������������������������������������������������������������������   85
8.12 Visualizing Innovation Ecosystems����������������������������������������������   86
8.13 Intel Labs Europe Ecosystem Management����������������������������������   86
8.14 Makers and a New Innovation Ecosystem������������������������������������   87
8.15 Innovation Ecosystems Orchestration������������������������������������������   88
9 Designing for Adoption����������������������������������������������������������������������������   91
9.1 Utility��������������������������������������������������������������������������������������������   92
9.2 Uniqueness������������������������������������������������������������������������������������   93
9.3 Usability����������������������������������������������������������������������������������������   93
9.4 User Experience����������������������������������������������������������������������������   93
9.5 Ubiquity����������������������������������������������������������������������������������������   94
9.6 User-Driven Innovation and the Reverse Innovation Pyramid������   94
9.7 Reverse Innovation Pyramid ��������������������������������������������������������   95
9.8 The Power of Crowds��������������������������������������������������������������������   96
9.9 Crowdfunding�������������������������������������������������������������������������������   97
9.10 Social or Peer Production��������������������������������������������������������������   97
9.11 Adoption Pattern Analysis������������������������������������������������������������   98
9.11.1 API Adoption����������������������������������������������������������������   98
9.12 Adoption Focus: Crossing the Chasm������������������������������������������   99
xviii Contents

10 Agile Development and Production�������������������������������������������������������� 101

10.1 Agile Methods������������������������������������������������������������������������������ 101
10.2 Design Science Research and Digital Assembly Lines���������������� 103
10.3 Prototyping������������������������������������������������������������������������������������ 104
10.4 Minimum Viable Product�������������������������������������������������������������� 104
10.5 Living Labs ���������������������������������������������������������������������������������� 106
10.5.1 Living Labs in a European Context ������������������������������ 106
10.5.2 Open Innovation as Part of Living Labs Thinking�������� 108
10.6 Privacy by Design ������������������������������������������������������������������������ 109
10.7 Productization and Proliferation �������������������������������������������������� 110
10.7.1 DevOPs�������������������������������������������������������������������������� 110
10.8 Servitization���������������������������������������������������������������������������������� 110
11 Industrial Innovation������������������������������������������������������������������������������ 113
11.1 Visioning �������������������������������������������������������������������������������������� 113
11.2 Strategic Innovation���������������������������������������������������������������������� 113
11.3 InVenting �������������������������������������������������������������������������������������� 115
11.4 Validating�������������������������������������������������������������������������������������� 116
11.5 Venturing �������������������������������������������������������������������������������������� 116
11.6 Velocity ���������������������������������������������������������������������������������������� 117
11.7 Value���������������������������������������������������������������������������������������������� 117
11.8 New Innovation Value Constellations ������������������������������������������ 118
11.9 Industrializing Innovation: Innovation
Capability Management���������������������������������������������������������������� 119
11.10 Innovation Systems ���������������������������������������������������������������������� 119
11.10.1 Innovation Strategy and Innovation Capacity��������������� 119
11.11 Industry 4.0 ������������������������������������������������������������������������������������ 121
12 Data-Driven Innovation�������������������������������������������������������������������������� 123
12.1 Generating Insights from Data������������������������������������������������������ 124
12.2 Augmenting Products/Services Using Data from Objects�������������� 125
12.3 Digitizing Assets �������������������������������������������������������������������������� 125
12.4 Increase Information Intensity������������������������������������������������������ 126
12.5 Data Mining, Combining, and Refining���������������������������������������� 126
12.6 Trading and Monetizing Data ������������������������������������������������������ 127
12.7 Closed Loop Control �������������������������������������������������������������������� 127
13 Openness to Innovation and Innovation Culture���������������������������������� 129
13.1 Technology Metabolism Index������������������������������������������������������ 130
13.2 Operational Excellence Versus Innovation Excellence ���������������� 130
13.3 High Expectation Entrepreneurship���������������������������������������������� 131
13.3.1 Openness to Innovation: Managing Six
Vectors of Innovation���������������������������������������������������� 132
13.4 Culture and Absorptive Capacity�������������������������������������������������� 133
13.4.1 Social Innovation ���������������������������������������������������������� 134
13.5 Interdisciplinary Innovation���������������������������������������������������������� 134
Contents xix

13.6 Competitiveness of New Types of Organizations

in Open Ecosystems���������������������������������������������������������������������� 136
13.7 OI2 Outputs���������������������������������������������������������������������������������� 139
13.8 Payback–Return on Innovation ���������������������������������������������������� 139
13.9 OI2 Outcomes ������������������������������������������������������������������������������ 140
13.10 Fast and Slow Innovation Cycles�������������������������������������������������� 141
14 Looking Forward ������������������������������������������������������������������������������������ 143

References �������������������������������������������������������������������������������������������������������� 145

About the Authors

Martin Curley is Professor of Innovation at Maynooth University, Ireland. He is

co-founder of the Innovation Value Institute, an industry-academic open innovation
consortium that strives to research and promote structural change in the way com-
panies and governments achieve value through information technology. He chairs
the European Union Open Innovation Strategy and Policy group (OISPG), an indus-
try-led group advising on strategic priorities for open and service innovation and is
a member of the EU Connect Advisory Forum and the EU Horizon 2020 Advisory
Group on international Cooperation. Martin is also Senior Vice President and Group
Head for Global Digital Practice at MasterCard providing digital thought and prac-
tice leadership to MasterCard customers. Previously he was vice president at Intel
Corporation and director of Intel Labs Europe, the company’s network of more than
40 research labs, development centers and open innovation collaborations spanning
the European region. He also served as a senior principal engineer at Intel Labs
Europe and lead Intel’s research and innovation engagement with the European
Commission and the broader European Union research ecosystem.
Before assuming his current position in 2009, Curley was global director of IT
innovation at Intel. Earlier in his Intel career, he held a number of senior IT manage-
ment and automation positions for Intel in the United States and Europe. Before
joining Intel in 1992, he held management and research positions at General Electric
in Ireland and at Philips Electronics in the Netherlands. Curley is the author or co-
author of five books and dozens of papers on technology management for value,
innovation and entrepreneurship. He is a Member of the Royal Irish Academy, fel-
low of the Institution of Engineers of Ireland, the British Computer Society, the
Irish Computer Society and the Irish Academy of Engineering. Martin was previ-
ously a visiting scholar at MIT Sloan Centre for Information Systems Research and
was awarded joint European Chief Technology Officer of the year for 2015/2016.

xxi
xxii About the Authors

Bror Salmelin is Advisor for Innovation Systems, DG Communications Networks,

Contents and Technology at the European Commission. He was the deputy of the IT
department of the Finnish Technology and Innovation Agency in 1984-97. In this
capacity he represented Finland in the EU ESPRIT and ICT research programmes.
He was the EFTA chair and co-designer of the global Intelligent Manufacturing
Systems initiative since 1990. He was representing Finland in the Consulate of Los
Angeles as Vice Consul in 1997-98 with the responsibility to build bridges between
the Finnish and Californian innovation systems and moved in 1998 to European
Commission to lead the units of Integration in Manufacturing, later eCommerce and
Collaborative work before becoming advisor to the DG. He is the initiator of the
European Network of Living Labs which now has more than 350 sites worldwide,
and also the initiator of the Open Innovation activities in the European Commission.
He is member of the New Club of Paris, IVI advisory board and founder of the EU
OISPG.
Chapter 1
Introduction

‘The dogmas of the quiet past are inadequate to the stormy

present’.
Abraham Lincoln

Many people recognize that innovation is not just an imperative for economic and
social progress but that it is an art and skill, which underpins progress and survival
of the human species. We have all seen how industries such as the music and book
industry, which existed relatively unchanged for decades, have been transformed
through digital technologies. These changes have exemplified Schumpeter’s ‘cre-
ative disruption’ and Christensen’s ‘disruptive technologies’ where new players
such as Amazon and Spotify have replaced incumbents such as HMV and Borders
stores. As a global society, we are ready for the next stage of disruptive change as
societal level systems such as those for smart cities, agriculture, energy, health, and
transportation systems are set for digital disruption. Equally, many industries are
ripe for digital disruption. The potential benefits are enormous and so also are the
challenges. The innovations and changes which will be required to drive these trans-
formations will require much collaboration and alignment across ecosystems and
indeed society. The emerging paradigm of Open Innovation 2.0 (OI2) (Curley
and Salmelin 2013/2014; Curley and Formica 2013; Curley 2016; Madelin 2016)
offers a series of design patterns to help innovators move efficiently and grasp this
new opportunity of digital.
OI2 is a paradigm based on principles of integrated collaboration, co-created
shared value, cultivated innovation ecosystems, unleashed exponential technolo-
gies, and rapid adoption due to network effects. We believe that innovation can be a
discipline practised by many, rather than an art mastered by few. In addition, OI2
asserts that the probability of breakthrough improvements increases as a function of
diverse multidisciplinary experimentation.
OI2 is both enabled by and fuelled by Digital, so that a virtuous cycle of innova-
tion is enabled with each digital innovation providing value and becoming an infra-
structure for future innovations to leverage.

© Springer International Publishing Switzerland 2018 1

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_1
2 1 Introduction

1.1  imultaneous Arrival of Multiple Disruptive

S
Technologies

We are potentially witnessing the biggest change in the history of the planet and its
population. In the past, one disruptive technology such as the internal combustion
engine or Tesla’s system of alternating current generators, motors, and transformers
enabled systematic electrification, which drove a wave of industry, economic, and soci-
etal change. Today, we have multiple disruptive technologies all arriving at the same
time, which is resulting in the opportunity and inevitability of exponential change.
Cloud computing has changed the face of computing, making anytime, any-
where, on-demand computing available so that a small start-up in Malaysia or
Sweden has access to the same kind of computing resources that previously only a
General Electric or SAP could afford. This phenomenon is dramatically lowering
the barriers and cost of entry to global opportunity, with an example 40× cost differ-
ence between procuring the service from a public cloud on a Microsoft Azure plat-
form compared to provisioning one’s own system. There are already examples of
whereby the use of Digital enables a reduction of 95% of cost for a financial transac-
tion conducted online compared to in a bank branch.
Similarly, big data and data-driven innovation is creating significant information
monetization opportunities. Former European Research Commissioner, Maire
Geogeghan Quinn, coined the phrase ‘Knowledge is the crude oil of the 21st cen-
tury’ and it aptly describes the opportunity. For many individuals, organizations and
ecosystems the emergence of big data, with ever more powerful machines and data
mining and machine learning algorithms will present an opportunity of a lifetime.
However, the opportunity of a lifetime has to be taken in the lifetime of the
opportunity.
The Internet of Things (IOT) is poised to be the largest industry in the history of
electronics and yet this impact will be dwarfed by the impact IOT will have in trans-
forming many industries and societal systems. Autonomous driving is but one
example of widespread adoption and impact of IOT.

1.2 Evolution or Revolution? A New Paradigm

‘All truth passes through three stages, first it is ridiculed, and second it is violently opposed.
Third, it is accepted as self-evident’. Schopenhauer

Several streams of evolutionary thinking are brought together to the Open

Innovation 2.0 paradigm for Digital Innovation. However, the shift from the old
paradigms to OI2 requires a radical transformation of culture, organizations, and the
innovation environments.
As stated in the report by OISPG (Open Innovation Strategy and Policy Group)
in the publication ‘Societal Impact of Open Service Innovation’ the emergence of
the reverse innovation pyramid means that the fundamentals of the innovation pro-
1.2 Evolution or Revolution? A New Paradigm 3

cess have changed. The user has moved from being an adopter of innovations to
often being a key contributor to the innovation process. We will elaborate on the
consequences a bit later.
Using the definition of Science Historian Thomas Kuhn, a paradigm refers to a
set of practices that define a scientific discipline at a particular point in time. Another
definition of paradigm refers to a paradigm as a ‘pattern or model, an exemplar’.
According to Kuhn, the sciences alternate between two states ‘normal science’ and
‘revolution’. We believe that the discipline of innovation is passing through a strate-
gic inflection point to the paradigm of Innovation 2.0.
Important background thinking for open innovation comes from the theories of
dynamic capabilities and holonic/fractal enterprises, as the dynamic configurability
of resources and organizations becomes ever more important. How to make organi-
zations and ecosystems at the same time agile, robust, and effective by sharing and
multiplying the competencies and capacities. Emergence is a crucial concept for
dynamic ecosystems and is the appearance of patterns or systems at the macro-level,
which emerge or evolve from the interactions amongst elements in an ecosystem.
Last decade, Henry Chesbrough (2003) eloquently conceptualized the idea of
open innovation where ideas can pass to and from different organizations and travel
on different exploitations vectors for value creation. Unlike hype cycles around
solutions such as Second Life it appears that, the term open innovation is not subject
to the typical hype cycle associated with new concepts or technologies.
In this decade, we are witnessing a new level of open innovation and an increasing
sophistication and complexity associated with innovation. However, still the thinking
and theory about innovation lagged the practise with much of the dialogue and publi-
cations concern organizations cross-licensing and collaborating. Indeed also, the
­funnel described by Chesbrough was based on the linear innovation model, while we
observe in practice that innovation today is very much an iterative, non-­linear model.
In this context, we observe that a new mode of technical and societal innovation
is emerging, with blurred lines between universities, industry, governments, and
featuring users and indeed communities as innovators. For example in Brixton, UK
a broad set of stakeholders including Lambeth Council, Transport for London, com-
panies, and most importantly schools and children fused participatory design, data,
and play to co-design urban services that approach sustainability through commu-
nity sensing, data visualization, behaviour change, and ambient technology.
OI2 is a new mode of innovation based on principles of integrated collaboration,
co-created shared value, cultivated innovation ecosystems, unleashed exponential
technologies, experimentation and focus on adoption and sustainability. OI2 is
rooted in a vision of sustainable intelligent living where smart solutions are devel-
oped and diffused meeting needs while being resource and environmentally effi-
cient. OI2 also promises significant improvements in the pace, productivity,
predictability, and profitability of our collective innovation efforts.
Figure 1.1 conceptualizes OI2 as a new primordial soup, which is bound, enabled,
fuelled, and connected by advanced computing and communications infrastructure
and other digital technologies. In this new milieu, everyone can choose to be an
innovator as exemplified by the hundreds of thousands of app developers who now
4 1 Introduction

Fig. 1.1 Open Innovation 2.0—a new milieu

exist and contribute to various different ecosystems. In this new environment, the
unit of competition has changed from the organization to the ecosystem and from
the product to the platform.

1.3 Enabling Forces: A Perfect Storm

The collision of three mega trends Moore’s law, mass collaboration, and sustain-
ability, each of which are mutually reinforcing is creating a unique opportunity for
us to leverage our collective intelligence and energies. Here, the nature of innova-
tion from changes from a linear to non-linear process to drive innovation and deliver
structural outcomes far beyond the scope of what anyone organization or individual
could achieve on their own.

1.3.1 Moore’s Law/Digital

We can define ‘Digital’ as innovation with and the use of information and technology
to improve human, organization, and ecosystem performance and sustainability.
Digital is the synthesis and synergy of information, silicon, network and software
capabilities, and economics. Moore’s law has become a proxy for the exponential
advancement of capabilities in various information and communication-related
domains. Moore’s law was an observation that transistor density on integrated circuits
would double every 2 years or so and that this would be delivered at less or equal cost.
Moore’s law became a competitive challenge, indeed an innovation strategy for the
entire semiconductor industry to work together to ensure that the prediction was met.
The resultant impact was that Moore’s law became a driver of technological and
social change, dramatically improving productivity and driving economic growth.
1.3 Enabling Forces: A Perfect Storm 5

Significant technological innovation has ensured that Moore’s law continues to

hold true to essentially deliver the doubling of compute performance delivered at
less or equal cost every two years or so. The innovation revolution is enabled by
increasing levels of connectivity and catalysed by the emergence of exponential
technologies such as Internet of Things, clouds, and open data. Thus, ordinary
things such as dishwashers to cars become smart, connected, and collaborative.
When smart things and indeed people are connected the intrinsic intelligence and
our collective execution capability is multiplied exponentially.
Not only is there great opportunity to create and extract value particularly when
data is shared, aggregated, and analysed across domains, a transformation opportu-
nity exists to create new high frequency, high precision management control circuits
in societal level systems, where previously only open loop control was possible. A
simple example is a gully signalling to a city management system that it is blocked
whereas a more complex example is a dynamic congestion-based charging system
which automatically adjusts, changes traffic flow, and offers park and ride incen-
tives based on parameters such levels of traffic and air quality in a city.

1.3.2 Mass Collaboration

The European Internet Foundation (EIF) have proposed for the next decades a para-
digm of a world driven by mass collaboration, enabled by the ubiquitous availability
of high speed, high capacity digital networks and services. EIF predicts the inexo-
rable spread of purpose-driven online collaboration as the role of networks evolves
from not just enabling communication and transactions but value creation through
collaboration. We have all witnessed the phenomenon of social production, whereby
people contribute to generate economic value, where there are little of no monetary
incentives involved with the ongoing evolution of Wikipedia and the development
of Linux being primary examples.
We will see mass people-to-people, machine-to-machine, and machine-to-­people
collaboration. Sometimes, this collaboration will be proactive creative collaboration
where individuals as part of a community or as a part of a more formal innovation
configurations will co-design and co-create solutions such as a new city services or
transformation of an electrical grid. Other times, we will give permission to our
devices to collaborate together to figure out an optimum solution to a given sce-
nario, for example, real-time car-to-car communication and collaboration to deter-
mine the best sequencing of traffic at an upcoming junction to minimize transit
times. The EU FP7 project TEAM (Total Elastic Adaptive Mobility) is focused on
developing cooperative systems for energy efficient and sustainable mobility, with
drivers, travellers, and infrastructure acting as a TEAM—adapting to each other and
to the situation, creating optimized mobility conditions. The TEAM solutions were
piloted in several European cities including Athens and Turin with players such as
BMW, FIAT, Volvo, and Intel involved as well as naturally the municipalities and
citizens.
6 1 Introduction

1.3.3 Sustainability

With the adoption of the new UN Sustainable Development goals, the recent
Paris COP 21 agreement and the increasing trend of extreme weather events,
individuals, and communities are becoming more sustainability focused. In par-
allel, there is a slow but growing recognition of the need to move from the ‘take,
make, dispose’ mode of today’s linear economy to a circular economy that pre-
serves and enhances natural capital. The nirvana of sustainability is the ability to
decouple growth from resource consumption and environmental impact and
knowledge-driven entrepreneurship provides a potential pathway to achieve this.
Former EU Research Commissioner Maire Geogeghan Quinn’s statement that
‘knowledge is the crude oil of the 21st century’ aptly describes the opportunity.
By leveraging the astonishing possibilities enabled by Moore’s law, harnessing
the collective intelligence and energy of people and machines worldwide through
mass collaboration, focused on new solutions which are intrinsically sustainable
we may be about to witness something akin to a pre-Cambrian explosion of
impactful innovations.
Similar to the Gutenberg’s invention of the printing press, the invention and
evolution of modern computing and communications technology is a fundamen-
tal disruptor to the fabric and nature of society. We have all witnessed how
industries such as the music and book selling industries have been transformed
through ICT led by companies such as Apple and Amazon, respectively. This is
Schumpeter’s ‘creative destruction’ at work or this could alternatively be termed
‘Digital Darwinism’. However, the next phase of Digital transformations will
deliver significantly more value, will be orders of magnitude more difficult, and
will require significant citizen involvement to maximize the chances of success.
Transformation of our cities, energy grids, and healthcare systems will ulti-
mately evolve through a process of emergence; however, the opportunity exists
to proactively take charge and move much more quickly to the benefits prom-
ised by these transformations. OI2 is an emerging innovation mode, which is
based on an evolving set of design patterns, i.e. general reusable solutions to
commonly occurring problems, which can accelerate the delivery of innovation
benefits.

1.4 Innovation Modes

These three driving forces have enabled a new mode of innovation and the following
table describes key characteristics of the new mode compared to previous modes of
innovation (Fig. 1.2).
The innovation landscape is changed; we have moved from the linear innovation
model to something much more complex; a parallel and even mash-up type of inno-
vation models where collisions of disciplines and ideas ignite innovation.
1.4 Innovation Modes 7

Fig. 1.2 Innovation modes

1.4.1 Dependency > Independency > Interdependency

In linear enterprise behaviour, the dependencies are very dominant when we, e.g.
think about supply chains where designs and processes form a controlled, well-­
defined sequence of operations. If some stage goes wrong, the whole process is
halted until the very same problem is solved. This leads also to long planning times
for modifications as the system has no redundancy. Independency often means that
the company or cluster has increased internal redundancy for its operations. In Open
Innovation 2.0, the ecosystem builds strong interdependencies while also, the enti-
ties become autonomous and processes diversified towards many supplies and ven-
dors. This is important also in all phases of the innovation where ideas flow freely,
ignite new ones and are elaborated further in co-creative manned due to issues being
rather complex.

1.4.2 Subcontracting > Cross-Licensing > Cross-Fertilization

1.4.2.1 Linear Subcontracts > Bilateral > Triple or Quadruple Helix

This links also to the previous dimension; in Intellectual Property Rights (IPR) the
ownership in the closed innovation approach is clearly defined within the company,
which subcontracts. In the open innovation, IPRs are opened for external companies
to be used with cross-licensing channels and in other companies IPR is bought in for
certain product or process development needs. In clusters, wide cross-licensing is
essential to foster common cluster objectives. In Open Innovation 2.0, the opening is
8 1 Introduction

between not only organizations, but also goes much further. Companies see them-
selves as part of ecosystems, and reflect and harvest ideas from communities and
end-users who become co-creators of the new products and especially markets. It is
proven by several studies that diversity is the key success factor for breakthrough
innovations. The people component is essential in the OI2 paradigm as we target
towards new markets with new behavioural boundaries enabled by the techno-social
development.

1.4.3 Solo > Cluster > Ecosystem

Due to complexity in combining a wide variety of technologies in rapidly changing

environments, often even the largest companies do not manage the knowledge and
experience they need to perform well. Clusters, i.e. groupings of companies in same
sector may give flexibility in capacity issues, but it does not necessarily provide the
needed knowledge base outside the core business. Ecosystems include also the
users in quadruple helix settings. This is extremely important when creating new
markets, products, or services, as only in strong interaction we can at early stage see
which inventions are growing to innovations. Co-creativity within ecosystems, shar-
ing engagement platforms and environments are extremely important.

1.4.4 Linear > Linear, Leaking > Nonlinear Mash-Up

We have seen the change from linear innovation models, which are strictly
sequential, and monodisciplinary to the open innovation model presented by
Henry Chesbrough. In these approaches, we have anyway the sequential innova-
tion in our minds and give little space to serendipity. Serendipity is essential to
embed into the innovation process by project design. That requires agility of both
project structures and mindset for the actions. We see projects moving from con-
straints given by organizational boundaries to something, which we describe as
purpose-oriented actions, often happening between organizations towards a com-
mon goal.

1.4.5 Control > Leadership/Management > Orchestration

The cultural change is a key when moving towards successful implementation of

OI2. Ideas emerge from not only the company or its close collaborators but also
increasingly from the crowd, i.e. the ecosystem the company is operating in.
The challenge for enterprises is how to position themselves in the ecosystem as
attractive and fair players, keeping the momentum of the company offering
1.4 Innovation Modes 9

interesting ideas and co-creation structures. This is very much also related to group
psychology: Schwarz Universal Values are a good context to this; successful uni-
corns rarely have the traditional control mentality, more often they are based on
strong leadership driving the company idea forward. Most of the well-known fast-
growing companies are based on strong leadership rather than shorter term manage-
ment. Leadership is a good step towards orchestration of innovation. The orchestrator
makes the competencies in the palette to play together, gives the talent visibility, and
brings his/her own vision to the final play of the orchestra. The orchestrator is a
catalyser, an educator, and a visionary. This kind of resource is a rarity in the output
of current management schools.

1.4.6 Planning > Validation > Experimentation

We are good to make perfect plans—for yesterday! With the complexity and
dynamics we are now working on means that instead of planning we can only make
qualified guesses. Implementing AI into decision and planning processes may help
planning more into detail, but fundamentally we operate in a rapidly changing
environment where validation of products in real world is not good enough.
Experimenting in real-world settings, in quadruple helix enables us to see at much
earlier stage what scales and what fails. Hence, in experimentation the user’s role
is critical. The Reverse Innovation Pyramid suggests that the users are the source
of ideas together with other stakeholders and must be fully involved from the first
beginning of the innovation process.

1.4.7 Win-Lose > Win-Win > Win-More: Win-More

Closed innovation often targets to better products but in lesser degree to disruptions
and entirely new products and services. Open Innovation 2.0 works at its best when
creating new. Hence, OI2 moves the enterprise with the ecosystem into entirely new
game to markets where there are no competitors or value offerings yet. Win-more in
quadruple helix!

1.4.8 Box Thinking > Out of the Box > No Boxes

This change is simple and it involves moving from constrained thinking within a
box through out of the box thinking to a world to where there are no boxes. This idea
in a sense references Piero Formica’s idea of creative ignorance and Frans
Johansson’s De Medici effect where breakthroughs occur at the intersections of
disciplines.
10 1 Introduction

1.4.9 Single Entity > Single Discipline > Interdisciplinary

Several studies have proven that diversity correlates strongly with probability of
breakthrough innovations; the richer the competencies in the team the better.
Cohesion comes from the orchestration and diversity becomes an innovation engine
when disciplines, ideas, and stakeholders mingle in a fluid but tolerant manner.
Clusters represent single discipline approach, and enrichment both in stakeholder
and topical dimension can only happen in ecosystems with fluid interactions, i.e.
breaking boxes is not enough, as the new mentality requires openness and curiosity
beyond boundaries. Hence, also the role of the orchestration for common purpose
raises in importance for successful innovation.

1.4.10 Value Chain > Value Network > Value Constellation

Mental models are changing from something linear to networked to mash-up where
serendipity has a possibility. The value chain represents the linear innovation and
operational model; networking is bringing more redundancy, more connections
between the competencies/entities in the system. However in most cases, networked
operational models do not deal optimally in changing conditions where uncertainty
and serendipity needs to be one of the innovation design characteristics. Value constel-
lations, where we have a cloud of different competencies and organizations allow
using only those, which are needed, in a highly context-sensitive manner. Like we see
stellar constellations depending on who we are, where we are, and what is the time,
too. The stars remain but the imaginary connections are changing all the time based
on the purpose. A similar kind of virtual organizational behaviour is needed in innova-
tion. A good word for a modern organization could be OrganiCzation combining the
organization with the organic nature of development over time.

1.5 Three Laws of Knowledge Dynamics

Newton’s laws of motion are three physical laws that laid the foundation for classi-
cal mechanics. Similarly, we believe there are some emerging laws of knowledge
dynamics that underpin the shift to OI2. These have been postulated by Amidon
et al. (2004) and expanded upon by Andersson et al. (2009). We will discuss these
laws briefly.
1. Knowledge multiplies when it is shared
This implies that a knowledge-based economy, which relies more on intel-
lectual capital than environmental or financial capital can lead to a more sustain-
able way to satisfy human’s wants and needs.
2. Value is created when knowledge moves from its point of origin to the point of
need or opportunity.
This means the primary benefit of knowledge lies in action, i.e. when knowl-
edge is actually used.
1.6 The Importance of Innovation 11

3. Mutual leverage provides the optimal utilization of resources both tangible and
intangible.
This law asserts that leveraging the collective knowledge and collaboration cre-
ates greater wealth and sustainability for us all.
Information and knowledge are two of the least understood phenomena in our
modern world but we believe as science develops we will become better able to
understand and harness these compelling resources. The three laws of knowledge
dynamics underpin and propel the OI2 paradigm forward.
Also in the work of New Club of Paris by Prof. Lin and Prof. Edvinsson the con-
nectivity and dynamic interaction of knowledge is highlighted. On national studies,
competitiveness is extremely strongly correlated to the structural intellectual capi-
tal, i.e. the interaction processes. Work is now going on to extend the theory also to
innovation ecosystems.

1.6 The Importance of Innovation

It is easy to see why many people are drawn to technical innovation, as according to
the OECD it is the leading contributor to growth in developed countries. In the USA,
75% of US GDP growth since World War 2 has come from technological based inno-
vation, according to the US Department of Commerce. In the last century often, it
was a brilliant scientist at a Bell Lab or IBM lab, which drove new inventions and
subsequent innovations. Then along came Open Innovation, which is about a system-
atic process where ideas can pass to and from different organizations and travel on
different exploitations vectors for value creation. Open Innovation was based on the
idea that not all of the smart people in the world can work for your company or orga-
nization and that you have to also look outside the organization for ideas. Procter and
Gamble are frequently referenced as a role model for practising open innovation and
their ‘connect and develop’ open innovation strategy has resulted in almost 50% of
their new products emanating from ideas and innovations which started outside of
the company. Conventional open innovation is now mainstream with even jewellery
companies like Swarovski having more than 100 open innovation partners.
Innovation is very easy to talk about, but much harder to do. Innovation is at the
core of Europe 2020 vision equally in the USA the importance of innovation was
underscored in President Obama’s 2013 State of the Union address he stated,
‘Innovation just doesn’t change our lives, it is how we make a living’. According to
the OECD1 Innovation is the leading contributor to growth in the leading economies
of the world. According to the US Department of Commerce, 75% of US growth
since the Second World War came from technological innovation.
We often confuse innovation and invention. Innovation is beyond invention and
ideation. Innovation is about making things to happen; the offer meeting the needs.
Setting that into the modern dynamic societal, technical, and economic environment
means that inherently the speed and dynamics has changed; we also need to have a

1
OECD 2010 Innovation report.
12 1 Introduction

new look at the roles of the stakeholders creating the new markets, i.e. the new value
propositions based on common values in a different way than previously. Innovation
has changed from the traditional science-based linear models to more complex ones
involving stakeholders, different disciplines, and serendipity.
According to the OECD, 80% of all value comes from innovation adoption with
just 20% from the production of innovation. It seems that there is an innovation
paradox with most innovation efforts, investment, and dialogue focused on the front
end of innovation. The front end of innovation is of course important but the big
yield comes from adoption of the innovations.

1.7 Basic Versus Applied Research and Innovation

It is interesting to contrast the investment focus in different geographies on the port-

folio of basic and applied research. According to the European High Level Group on
key enabling technologies, the USA, Japan, China, and South Korea all focus at
least 70% of their total public R&D budget in applied and experimental develop-
ment activities with the remainder in basic research. In complete contrast, the
European Commission prior to Horizon 2020 allocated 77% of the total budget to
basic research. Arguably, this is one factor in the relatively sluggish growth of the
European region compared to China, Korea, and the USA. The case of Japan is
interesting; Prof. Clayton Christensen argued at the 2014 Drucker forum in Vienna
that the reason for Japan’s sluggish growth was an overwhelming focus on ‘effi-
ciency improving’ innovations (which actually eliminate jobs) rather than ‘market
creating’ innovations which fuel growth.
We claim that OI2 is extremely powerful especially when creating “new” in the
quadruple helix setting, be it markets, services. or products (Fig. 1.3).
According to Erik Brynjolfsson of MIT. if all IT innovation stopped there would
still be decades of organizational innovation that could take place with existing
technologies. Large research programs such as the EU FP7 have potentially placed
undue emphasis on increasing the rate of invention and idea generation while the
paradox is that the value from innovation comes from the adoption of innovation.
The discipline of innovation is constantly evolving and now the combination of
exponential technologies together with participation of actors from across value
chains is creating a new primordial soup, which creates an environment to yield ever
more complex and compelling innovations. Indeed, the unit of competition is chang-
ing in that it is no longer how good an individual company or organization is but the
strength of the ecosystem in which they participate in is often the differentiating
factor for great success, mediocrity, or even failure. Witness the decline of once
leading mobile phone handset companies like Nokia and Blackberry, and the
unprecedented success of the Apple iPhone and various Android-based handsets. A
key differentiator has been the strength, incentivizing and nurturing of the ecosys-
tem developing and using the products. Organizations can no longer afford to do it
all on their own as innovations are so interconnected and are often composed of
1.8 OI2: A New Mode of Technical and Societal Innovation and an Emerging Pattern… 13

Fig. 1.3 Strategic focus on applied versus basis research (source OECD)

intelligent combinations of emerging and existing solutions and building blocks.

Much of future progress will be driven by collaborative and open innovation—how
to execute and govern this is a key question?

1.8  I2: A New Mode of Technical and Societal Innovation

O
and an Emerging Pattern Language

OI2 is a new mode of technical and societal innovation. The notion of a community
or ecosystem co-innovating together is central to the new mode of Innovation.
Increasingly, we are seeing exemplars of great results from collective ecosystem or
community innovation. The Society for Worldwide Interbank Financial
Telecommunications (SWIFT) is one of the earliest examples of OI2 at work with
the Innovation Value Institute at Maynooth University and the Alcatel Lucent led
Green Touch consortium are two more recent examples where a global community
innovating together have driven strong results. The metaphor of linear momentum
applies well here, being the product of mass by velocity, so the ecosystem with the
greatest number of participants and co-innovating the fastest will ultimately likely
be the most successful. Implicit within is the recognition of the power of the crowd
and the growth of both crowdsourcing and crowdfunding is a leading indicator for
the future importance of mass collaboration.
14 1 Introduction

Given the array of opportunities that is available, how can these opportunities be
most efficiently and effectively harnessed? Innovation itself is a risky business with
high failure rates; however, the application of innovation design patterns can
­substantially improve the productivity of collective innovation efforts. We in the EU
Open Innovation Strategy and Policy group have been studying, practising, and
publishing an annual open innovation summary for over 5 years and are attempting
to codify this new mode of innovation into a new pattern language, i.e. a series of
design patterns. Design patterns are nuggets of knowledge and help us remember
insights about design and can be used in combination to help innovate solutions.
The goal of this effort is that open innovation can become a discipline practised by
many rather than an art mastered by few.
As innovation evolves from an art to a discipline, it is important that there is a
common vocabulary for expressing the key concepts and for connecting and relat-
ing them together. In this book, we present an elemental set of design patterns with
the goal of presenting a body of knowledge to help tackle key tasks in successful
ecosystem/platform innovation. We present an elemental pattern language to create
a platform for OI2 which can be built upon and extended by others to help improve
the predictability, probability of success, and profitability of ecosystem-wide inno-
vation efforts. A pattern language is simply a method of describing good practices
or patterns of useful organization within a particular domain.
This new era of co-innovation requires a culture shift with a requirement to move
somewhat away from Adam Smith’s ‘invisible hand’ where the self-interest of
actors in an economy leads to some common benefits and more to a ‘sharing econ-
omy’ perspective based on a principle of shared value where actors proactively
collaborate and innovate based on a common purpose. Having a shared purpose is
the foundational pattern of the new mode of innovation whereby shared vision,
shared value underpinned by shared values is at the core of successful large-scale
innovation. Where efforts are aligned using a compelling shared vision, people’s
efforts and intellect are harnessed through commitment rather than compliance
resulting in strong synergies. Synergy is simply the cooperation or interaction of a
number of organization, which results in an effect or impact greater than the sum of
the individual efforts, and this is a core goal of the OI2 approach.
Chapter 2
Digital Disruption

Digital disruption is all around us and the different possible impacts of digital tech-
nology can reinforce each other in a chain reaction where an industry that has
existed stably for a century is transformed in less than a decade, for example, the
rise of Amazon and the demise of Borders bookstores in the USA. Amazingly today
almost 50% of consumer ecommerce transacted in the USA is transacted over the
Amazon platform.
A core impact of Digital is democratization, whereby technologies, which were
only available to governments and large corporates, are becoming more available
and affordable, creating dramatic opportunities for disruption. In the past industry,
disruption was possible but required very significant investment, time, and tenacity
but today high-expectation entrepreneurs can marry technology, ambition, and
smart business models to quickly compete and displace incumbents. Peter Diamandis
of the Singularity University says ‘when something is digitized it begins to behave
like an information technology’ and thus growth and development develop expo-
nentially and at accelerated time rates.

2.1 Pathways to the Digital Revolution

There are a series of pathways which are emerging for digital disruption with a three
phase shift from analogue or physical to digital, from single function to integrated
multifunction, and then from single system to systems of systems as depicted in the
following diagram. Thus, almost in the blink of an eye something that was once
expensive and physical becomes an App and costs a fraction of the previous instan-
tiation of something. The migration from an analogue camera through a digital cam-
era to a camera on a phone is an example of this. Polaroid and Kodak both invented
in the digital camera but clung to their cash cow film businesses and completely
missed the digital camera wave (Fig. 2.1).

© Springer International Publishing Switzerland 2018 15

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_2
16 2 Digital Disruption

Fig. 2.1 Pathways to digital disruption

Fig. 2.2 Six patterns of digital disruption

However then the camera companies, which had invested in developing exquisite
digital cameras, were bypassed by the development and integration of high-­resolution
quality onto mobile phones. This then became the catalyst for the creation of an eco-
system of digital propositions. Within a year of Kodak entering Chap. 11 in 2012 (In
1996, Kodak had almost 100,000 employees and a market capitalization of almost $30
billion), Instagram with just 13 employees was acquired for $1 billion by Facebook.
There are many ways for digital disruption to occur and next we will discuss six
of the more common emerging patterns for the disruptive impact of digital technol-
ogy (Fig. 2.2).
2.4 Democratization 17

2.2 Disintermediation

Digital creates the opportunity to eliminate intermediaries from a supply chain

between manufacturer and service provider to a customer. The intermediation effect
can change the basis of competition in an industry, often reducing costs and provid-
ing more choice to customers. Digital can dramatically increase market transpar-
ency, where much more information is known about products, services, location,
and price by many more compared to a non-digitally enabled industry or market.
The increased transparency can make the industry or market overall more efficient.
The term disintermediation was first used in the context of banking and the US
Government Regulation Q, which limited the interest rate paid on interest bearing
accounts that were protected by the Federal Deposit Insurance Scheme. In response,
customers avoided the intermediation of banks by investing directly in securities.
While that instance of disintermediation was driven by regulation, this wave of
banking disintermediation will be driven by both technology and regulation. In the
UK, Fintech start-ups such as Revolut aim to disintermediate by changing the basis
of competition offering customers the possibility of customers using the interbank
rate directly for foreign currency transactions and enabling the set-up of current
accounts in 60 s. N26 in Germany offer similar offerings and both offer contactless
Mastercard for low-cost debit transactions.
In Europe, the Payment Services Directive 2 is requiring banks to open up customer
account information, by consent, using Application Programming Interfaces (APIs)
which will disrupt and change the basis of competition. In this particular case, the
regulatory change is only possible because the digital technology makes it possible.

2.3 Distribution

Digital technology disrupts through dramatically improving access to customers

and dramatically reducing the cost of distribution of services, products, and solu-
tions. As the information intensity of products increases, they are increasingly more
easily distributed and the cost of distribution is dramatically reduced, for example,
distributing a song via an MP3 file is much cheaper and much faster than distribut-
ing it through physical media such as a CD. Similarly for a bank, the cost of a
mobile transaction is 95% less than a branch transaction and can be accomplished
much faster online rather than being present in person in a branch.

2.4 Democratization

Digital enables the democratization of services, making them more available and
more affordable than would otherwise be the case. Today, cloud computing makes
computing services, on a buy as you go basis available to start-ups all around the
18 2 Digital Disruption

world, allowing the same access and scale that previously was the domain of large
corporates and requiring substantial upfront capital investment. According to
Microsoft, the cost of acquiring a cloud service from their Azure Cloud platform is
less than one fortieth of buying, installing, and operating the server yourself. Cloud
computing operators such as Microsoft and Amazon Web Services offer economies
of scale and scope, which are enabling democratization of computing services.
Case Study: Facebook Open Compute Project.
The same can be also seen in opening up not only intangible components but also
hardware. Arduino is a very good example on how hardware has been made afford-
able to masses in the spirit of Open Innovation.
The Open Compute Project (OCP) is reimagining hardware, making it more effi-
cient, flexible, and scalable. Founded by Facebook, a community of technology
leaders are working together to unlock the black box of proprietary IT infrastructure
to achieve greater choice, cost savings, and customization.
Often with these kinds of initiatives, there is a champion who has the vision and
perseverance to sell the idea, recruit the community partners, and to make it happen.
Frank Frankovsky, the then director of Data Centers at Facebook was the visionary,
who when faced with the escalating demand, cost, and energy consumption turned to
an open innovation approach to meet the challenges. Facebook designed the world’s
most energy-efficient data centre in Prineville, Oregon, and in 2011 shared its designs
with the public and along with Rackspace, Intel, and others created the Open Compute
Project foundation. The idea was that the community would create the same type of
collaboration and creativity that the open source software movement created. The
OCP foundation believed that openly sharing ideas, specifications, and other intel-
lectual property were pivotal to maximizing innovation and reducing complexity.
Demonstrating that open innovation works, Facebook estimates it saved $1.2
billion through smarter, more energy efficient and quicker hardware designs in a
3-year period. At the Open Compute Summit in 2014, Facebook CEO Mark
Zuckerberg and VP of Engineering Jay Parikh highlighted the cost savings and
other benefits.

2.5 Dematerialization

Digital dematerialization can take place in many forms, for example, providing real-­
time information of what new fashions are selling and which aren’t in stores cou-
pled with just-in-time manufacturing and distribution can avoid inventory right offs
and allocation of scare production capacity to ‘hot’ products. Equally, 3D manufac-
turing can help eliminate expensive distribution costs when designs for parts can be
sent electronically and printed at the location where the part is required. A compel-
ling example of dematerialization is where separate bulky physical products are
integrated into a single product, for example, cameras, GPS navigation systems, CD
players, and even physical maps are now integrated into a smart phone which has
become a form of Digital Swiss army knife. This dematerialization is also calling
for new company structures like virtual enterprises or fractal factories where agility
combines with flexible capacity.
2.8 Attributes of Digital 19

2.6 Demonetization

Digital is simultaneously enabling digital currencies such as Bitcoin and taking

money out of the implementation and adoption equation. On the one hand, there are
new App industries worth billions of dollars with hundreds of thousands of develop-
ers but on the other hand, silicon, software, and network economics mean the cost
of developing and using solutions and services are decreasing continuously, often
approaching to or actually being free. The cost of DNA sequencing has dropped
even faster than the cost of computing driven by Moore’s law with the cost of
sequencing an individual’s genome in 2015 roughly costing $1000 compared to the
costs of over a million a decade previously. On a smartphone, there are many apps
available for download, which all provide utility used for almost zero cost. In paral-
lel, some luminaries such as Don Tapscott have hailed block chain as one of the
most significant innovations in computer science and many speculate that a myriad
of financial technologies innovations will be enabled through the distributed ledger
capability (DLT) it enables through the secure peer-to-peer distributed database
block chain mechanism. DLT will be one of the key elements in trusted distributed
industry commons for new business model development.

2.7 Deceptive Displacement

A disruptive technology is often initially inferior to an incumbent solution and is not

perceived as a threat, however due to the exponential nature of Digital, something
that starts as insignificant due to exponential growth can become very big very fast.
This so-called big bang disruption can happen very fast. Compare the meteoric rise
of WhatsApp to an operator like Vodafone where WhatsApp grew dramatically and
the pendulum of value capture swung towards the Digital world. Something can
start small but because of exponential growth quickly outpaces the linear growth of
more traditional products and services. Occasionally, the so-called big bang disrup-
tion also happens—today an Internet meme can be diffused around the world in a
matter of days. Angry Birds was downloaded over a million times within the 24 h of
the Android release and subsequently there were over two hundred million down-
loads within 7 months of the first release.

2.8 Attributes of Digital

What makes Digital so potent compared to other innovation ingredients? First, it is

unique in that it is both an innovation infrastructure and an ingredient and out of the
innovation process. Digital connectivity dramatically lowers collaborative friction
and dramatically extends the access to collaborators for and adopters of innovation.
20 2 Digital Disruption

2.8.1 Malleable

Unlike physical infrastructure like buildings, railways, and generators, which

fuelled previous industrial revolutions, Digital infrastructure is much more mallea-
ble and flexible. With virtualization technologies, compute loads can be moved
seamlessly across datacentres and data borders. This flexibility allows computing to
be moved close to the loads or workloads to be sent to the most appropriate datacen-
tre (Fig. 2.3). The same applies also in e.g. 3D manufacturing where the actual
production can be very local whilst the databases for the designs are globally
accessible.

2.8.2 Programmable

Programmable means being capable of being programmed for automated operation or

computer processing. Increasingly, we will hear the term ‘software defined’ appended
ahead of nouns like cities or electricity grids. Take for example a city, which increas-
ingly will be digitized and connected and the opportunity will exist to program and run
the city based on different logic or indeed business models because of the ubiquitous
nature of digital. Once there is a software-defined city one could program the city’s traf-
fic system to optimize on lowest commute times for citizens or to also optimize across
minimizing fuel consumption and environmental impact. The smart phone is the Swiss
army knife of the digital era and today’s iPhone has more computing power than the
entire compute power of the Apollo missions which sent a man to the moon and back.

Fig. 2.3 Potent attributes of digital

2.8 Attributes of Digital 21

2.8.3 Thinking

With the emergence of machine learning and artificial intelligence, computers are
becoming more and more thinking machines, with the ability to reason and provide
substantial decision support. Artificial intelligence is the increasing ability for com-
puters to perform tasks that normally require human intelligence such as translation
between languages, speech recognition, visual perception, and decision-making. In
AI, a computer mimics cognitive functions that we associate with human thinking.
Machine learning is a subset of AI that enables a computer to learn without being
explicitly programmed. Machine learning uses analysis of data to detect patterns in
data and adjust program actions accordingly.

2.8.4 Exponential

Driven by the nature of silicon, network, software, and storage economics, digital
technologies continue to improve in the performance/cost ratios year after year. There
are a variety of the so-called Laws which describe the advance of capabilities, Moore’s
law of processing power, Gilder’s law of optical fibre transmission rate improvements,
etc.—the net result is that each year we can do a lot more for less and Digital then
becomes a catalyst and a raw material for further digital transformation.

2.8.5 Interactive

Increasingly, we have seen how computers have become much more interactive with
the ability to interact with humans in a conversational way. Whether it be Apple’s Siri
or Amazon’s Alexa the ability to interact with a computer, almost in a human-like
way is a game changer. User experience and user interfacing continue to improve and
future breakthroughs in haptic interfaces will better enable humans to interact
through bodily sensations and movements. Gesture-based controls such as Microsoft’s
Kinect will continue to improve and become more and more pervasive.

2.8.6 Ubiquitous

Computers and data are becoming ubiquitous. According to Ericsson, there will be
over six billion smartphones in the world by 2020 and according to Cisco, there will
be over 50 billion connected things by 2050. As computing power and networks
continue to grow, the planet will be immersed in a giant web of technology, which
already gives us information at our fingertips but increasingly will give us actuation
at our fingertips, where will we be able to remotely control objects at will.
22 2 Digital Disruption

Together these properties make digital one of the most potent resources available
to us to and one, which is a key catalyst and enabler for a better future. This future
we call Sustainable Intelligent Living.

2.9 I T-CMF (Information Technology Capability Maturity

Framework)

Digital, as we have seen is a very potent set of technologies but in parallel a system-
atic approach is needed to define, design, deliver, and operate systems based on
digital and information technologies. At the Innovation Value Institute, we have
created a pattern language for chief information officers and other executives to
systematically manage and improve digital and information systems. A capability
maturity framework, which in turn is supported by thousands of best practices cap-
tured and created by a global team of practitioners, and researchers who used an OI2
approach to build the framework underpin this pattern language. The framework
recognizes that it is not just the technology that needs to be managed but that com-
prehensive approaches to domains such as Enterprise Architecture, IT and Digital
Governance, Risk Management, and Supply Demand Management need to be in
place as well as those for solutions delivery and services provisioning. Here, we
present a short summary of the IT-CMF. A more detailed elaboration on the IT-CMF
is beyond the scope of this book but can be found in the recently released IT-CMF
Body of Knowledge book (Curley et al. 2016).

2.9.1 IT-CMF Rationale and Summary

As the move to Digital becomes a mega trend, IT is moving from the backroom to
the boardroom. It is not sufficient to put on digital lipstick but digital transformation
must be driven by simultaneous digital and IT transformation. Organizations, both
public and private, are constantly challenged to be increasingly more agile, innova-
tive, and value adding. CIOs are uniquely well positioned to seize this opportunity
and adopt the role of business transformation partner, helping their organizations to
grow and prosper with innovative, IT-enabled products, services, and processes. To
succeed in this, however, the IT function needs to manage an array of interdepen-
dent but distinct disciplines.
In response to this need, the Innovation Value Institute, a cross-industry interna-
tional consortium, developed the IT Capability Maturity Framework (IT-CMF). The
IT-CMF represents a suite of capabilities, see below that help improve the manage-
ment of IT to deliver higher levels of agility, innovation, and value creation (Fig. 2.4).
The IT-CMF consists of a set of integrated and connected critical capabilities
which when managed and improved together drive agility, innovation, and value.
The sum of critical capabilities form a periodic table of the atomic level capabilities
 2.9

Managing IT like a Managing the Managing the Managing IT for

Macro
business IT budget IT capability business value

Capabilities
AA Accounting and Allocation BGM Budget Management CAM Capability Assessment & Management BAR Benefits Assessment & Realization
Budget Oversight & Performance
BP Business Planning BOP EAM Enterprise Architecture Management PM Portfolio Management
Analysis

BPM Business Process Management FF Funding and Financing ISM Information Security Management TCO Total Cost of Ownership

CFP Capacity Forecasting & Planning PPP Portfolio Planning & Prioritization KAM Knowledge Asset Management
Each critical capability
DSM Demand and & Supply Management PAM People Asset Management has five levels of
EIM Enterprise Information Management PDP Personal Data Protection maturity:
IM Innovation Management PPM Program and Project Management High
Optimising

ITG IT Leadership and Governance RAM Relationship Asset Management

Advanced
ODP Organization Design & Planning RDE Research, Development & Engineering

RM Risk Management SD Solutions Delivery

Intermediate
Maturity

SAI Service Analytics and Intelligence SRP Service Provisioning

Critical Capabilities for IT Maturity

Basic
SICT Sustainable ICT SUM Supplier Management
IT-CMF (Information Technology Capability Maturity Framework)

SP Strategic Planning TIM Technical Infrastructure Management Initial

Low
SRC Sourcing UED User Experience Design

UTM User Training Management

Fig. 2.4 IT Capability Maturity Framework—critical capabilities

23
24 2 Digital Disruption

Fig. 2.5 IT-CMF artifact type architecture

necessary to achieve world-class IT and business. Each capability consists of capa-

bility building blocks which are characterized by maturity levels, evaluated by
maturity questions, and improved by practices-outcomes and metrics (POMs). The
following artefact architecture figure shows the relationship between the key arte-
facts of the IT-CMF (Fig. 2.5).
Each critical capability of IT-CMF consists of capability building blocks (CBBs),
which are characterized by maturity levels, are evaluated by maturity questions and
are improved by practices-outcomes-metrics (POMs).
Business and IT professionals seeking to harness the full potential of digital and
information technology in their organizations can use the IT-CMF to demonstrate
leadership in adopting better approaches to managing technology for agility, inno-
vation, and value impact.

2.9.2 Framework Description

The IT-CMF is:

• An integrated management toolkit covering more than 30 management disciples,
with organizational maturity profiles, assessment methods, and improvement
roadmaps for each.
2.9 IT-CMF (Information Technology Capability Maturity Framework) 25

• A coherent set of concepts and principles, expressed in business management

terms that can be used to guide discussions on setting goals and evaluating
performance.
• A unifying (or umbrella) framework that complements other, domain-specific
frameworks already in use in the organization, helping to resolve conflicts
between them and filling gaps in their coverage.
• Industry/sector and vendor independent. IT-CMF can be used in any organiza-
tional context to guide performance improvement.
• A rigorously developed approach, underpinned by the principles of Open
Innovation and guided by the Design Science Research methodology, synthesiz-
ing leading academic research with industry practitioner expertise.
Considerations when using IT-CMF in your organization
• IT-CMF should be adopted at a senior management level, not just at the front-­
line staff/practitioner level to realize the framework’s full advantages.
• The framework delivers value through change. Committing to the required orga-
nizational change will help ensure expected outcomes are achievable.
• Appropriate capability selection and setting of maturity targets benefits from an
appreciation of IT-CMF’s critical capabilities, as well as a blended view across
an organization’s business strategy, IT posture, and industry context.
Chapter 3
Sustainable Intelligent Living

‘Technology is a resource liberating force’

Peter Diamandis

3.1 Sustainable Innovation

Sustainable innovation can have several meanings and all of them are desirable.
Firstly, innovations that result in better more efficient use of resources and secondly
innovations that have longevity. We define innovation (Baldwin and Curley 2007) as
the adoption and creation of something new, which create value for the entities that
adopt and create/deliver the innovation. The business proposition for a particular
innovation is only sustainable if both the creating and receiving entities achieve value
more than the cost of creation and delivery and the cost of adoption. Increasingly, we
are seeing that the unit of competition is moving to the ecosystem (Curley 2015).
Sustainable innovation is also full of disruptions requiring innovators to have
courage to seek the unexpected. OI2 approach creates a safety net for innovation.
The opportunity exists to make a significant improvement to collective sustain-
able innovation progress by simultaneously more aggressively leveraging informa-
tion technology and adopting a new emergent innovation paradigm Open Innovation
2.0 (OI2). A key sustainable development strategy is to decouple growth from
resource consumption and environmental impacts and in this context; the remark-
able productivity/energy efficiency of information technology driven by Moore’s
law can provide the basis of a viable innovation pathway towards sustainability.
While the semiconductor industry has played its part by dramatically improving the
energy efficiency of computing, a much bigger opportunity exists by leveraging IT
to automate, dematerialize, and substitute for other natural resources in value chains.
The adoption of the UN Sustainable Development goals (UN 2015) in September
2015 and the COP21 meeting in Paris in December 2015, COP 21 provide strong
platforms to catalyse efforts to create a sustainable future. The emergent OI2 para-
digm and associated design patterns can be used to align, amplify, and accelerate
innovation efforts to deliver more sustainable solutions for societal scale systems.

© Springer International Publishing Switzerland 2018 27

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_3
28 3 Sustainable Intelligent Living

3.2 Sustainable Intelligent Living

OI2 is not just a new methodology for innovating, but is also about innovating
towards a purpose. The overall vision of OI2 is about enabling sustainable intelli-
gent living by helping co-innovate solutions that simultaneously improve economic
growth and human well-being but also reduce per capita consumption of natural
resources and reduce environmental impact. OI2 is very aligned with the thinking
associated with the circular economy and indeed goes beyond that to what Stahel
(2010) calls the performance economy. Thus, the four characteristics of OI2 out-
comes are
• Improved economic or service benefits
• Improved standard of living or improved well-being
• Reduced per capital consumption of natural resources
• Reduced environmental impact
The following figure shows the desirable situation whereby resource and impact
decoupling can be achieved (Fig. 3.1).
OI2 deliberately seeks innovations which not only improve economic growth but
also human well-being while simultaneously reducing resource usage and reducing
environmental impact. OI2 is not just about the ‘how’ of Innovation but the ‘what’.
Peter Drucker often said that the problem for managers is often not ‘how to do’ but
‘what to do’. Sustainable Intelligent Living provides a focal point for dramatically
improving the results and holistic benefits from coordinated innovation efforts.
Innovation capacity is most powerful when it is mobilized in the context of a com-
pelling shared vision. OI2 proposes ‘Sustainable Intelligent Living’ as an overarch-
ing vision where innovation efforts are focused on delivering intelligent innovations
which when using the power of information and other technologies, result in new
products and services that are people centric and are better than previous offerings,
easier to use, and very importantly are more resource efficient than previous genera-
tions of products. We have all seen how IT has transformed the music, book, and

Fig. 3.1 Sustainable intelligent living, source UNEP International resource panel
3.3 Sustainable Development 29

banking industry led by companies such as Napster, Apple, and Amazon, for exam-
ple. Imagine the possibilities if we could deliver similar transformations in our cit-
ies, healthcare, transformation, and energy systems. While these transformations
are much more complex, the OI2 paradigm and methodology are targeted exactly at
enabling these kinds of transformations.

3.2.1 Sharing Economy and Collaborative Consumption

The sharing economy is transforming many of the traditional industry and service
sectors. Good examples of this are Uber and Airbnb where entirely new business
models challenge the traditional ones, and even legislation and the regulators. The
new business models would not have been possible without sharing platforms and
power of crowds to provide and consume the actual services. A sharing economy is
enabled by digital technologies, empowering different entities through information
that allows sharing, redistribution, and reuse of excess capacity of products and
services. A core concept that underpins the sharing economy is that when informa-
tion about a product or service is shared, the value of these goods may increase, and
this is an exemplar of the laws of knowledge dynamics at work.
Collaborative consumption is a phenomenon in which entities share access to
services or products rather having individual ownership. A preference for access to
services and products rather than owning products is becoming more mainstream
with the WEF reporting that more than 110 million people in the USA already par-
ticipating in the sharing economy using services like Uber and Airbnb. This shift
towards access-based consumption models can be a key driver towards more sus-
tainable intelligent living and a disruptor for more traditional business models. This
is complemented by an ongoing shift from a physical to a digital world. As evidence
of the shift Airbnb chief marketing officer, Jonathan Mildenhall, describes Airbnb
as the first community-driven super brand.
In collaborative consumption, the platform approach is evident. The division of
the ‘fair share’ of the collaborative consumption to the stakeholders involved in the
value creation process is critical.

3.3 Sustainable Development

Sustainable development as a concept can be defined as ‘development that meets the

needs of the present without compromising the ability of future generations to meet
their own needs’ (World Commission on Environment and Development 1987). The
concept of ‘doing more with less’ is a concise encapsulation of this concept. Many
reports warn of the consequences of ignoring the need for a new sustainability para-
digm. The global footprint network has stated that if current consumption trends
continue we would need two world’s worth of resources to support us by 2050.
30 3 Sustainable Intelligent Living

EF Schumacher, the German economist who worked for the UK National Coal
Board, was able to capture the essence of sustainability in his phrase “small is beau-
tiful” and this is a good lens through which to consider Moore’s law.
The impact of innovation becomes very profound when the intersection of the
emergence of technology and grand societal challenges occur. The fast pace of
development of emerging technologies offer opportunities and solutions for chal-
lenges in areas such as agriculture, cities, and health and in parallel offer the oppor-
tunity to create sustainable business and profit opportunities. Disruption on social
models will challenge the smart cities vision as well; changing nature of mobility
(as service), new ways of work, and new roles of public sector to provide services
increasingly location independent but cost-effectively will change the shape of
future cities dramatically. We are in a transition far beyond smart cities being only
cities full of sensors and data.

3.4 Digital/Moore’s Law and Resource Decoupling

Moore’s law is one of the few modern business phenomena, which actually support
the sustainability paradigm. The computer industry has certainly played a part. An
ACEEE1 study has shown computing energy efficiency improved by more than 2.8
million percent in the 30 years from 1978 to 2008 while other industries such as
lighting, automotive, and agriculture achieved orders of magnitude less energy
improvement. The introduction of multi-core technology in microprocessors indeed
has accelerated this progress even further and the continuous shrinking of geome-
tries has allowed the semiconductor industry to achieve a ‘less is more’ outcome
where each successive generation of product is smaller, more powerful, and more
energy efficient than the previous generation. As a consequence of this routinely
one new server today replaces ten older servers and consumes a fraction of the rack
space in a datacentre.
Gartner estimates that the IT industry contributes roughly 2% of the world’s
energy greenhouse gases but it is increasingly recognized that the big opportunity in
the future is to substitute information and technology for other resources across the
economy and indeed the broader society. Indeed, another ACEEE report identified
that some of the most energy-intensive industries such as transportation were
amongst the lowest in IT intensity indicating strong potential for significant energy
savings through more deployment of IT. The Intel SAP co-Lab in Belfast recently
showed that through smart scheduling algorithms that approximately 100,000 new
electric vehicles (EVs) could be introduced onto the island of Ireland without any
significant increase in electricity generation capacity. Imagine what also might be
possible when each of the EVs acts also as an energy storage device in a smart grid.
Self-driving cars might also be a game changer in urban areas as it may reduce
the need of owning a personal car. Proper simulations for policymaking are needed

1
‘A Smarter Shade of Green’, ACEEE Report for the Technology CEO Council, 2008.
3.4 Digital/Moore’s Law and Resource Decoupling 31

when elaborating the impact of new scenarios, especially when we look at the
impact of technology to change of work and living, directly influencing the city
planning, and therefore also the mobility needs.
While acknowledging the ongoing contribution of future ultra-low power IT
devices and green software to directly improving energy efficiency, the broader
impact of ICT to future sustainability will be through mechanisms such as
• Energy and resource efficiency achieved through sophisticated sensing, analyt-
ics, and actuation
• Dematerializing through substituting ICT resources for other inputs (e.g. labour,
materials) in value networks and indeed broader societal activities
• Enabling servitization, a shift from products to services, where the goal shifts
from to attempting to maximize product consumption to optimizing service
whilst optimizing product longevity and resource usage
The combined effects of such mechanisms can help achieve ‘resource decou-
pling’, whereby economic growth and quality of life can be improved, while simul-
taneously reducing resource consumption and environment degradation. One
glimpse of the impact of such mechanisms is the finding in another ACEEE report
which estimated that for every 1 kWh of energy consumed in a US datacentre, an
average of 10 kWh were saved across the broader US economy. Logistics compa-
nies such as UPS have claimed fuel efficiencies of approximately 20% through
using smart scheduling software to maximize the number of right hand turns deliv-
ery drivers are able to make on their daily delivery runs. The Innovation Value
Institute in Ireland have developed and defined a Sustainable Information and
Communications Maturity Curve and Assessment instrument to help organizations
assess and improve the impact of applying ICT for sustainability.
Better energy management with distributed electricity sources has a clear transfor-
mative role in the markets. Lowered cost of photovoltaics leads to stronger local econ-
omy even on household level. This will have a longer term impact on the power grid
management and energy storage, which interlinks the energy cluster strongly to other
ones, e.g. the mobility one. This is a good example where sustainable development
leads to multidisciplinary ecosystems with citizens as important players as well.
These mechanisms will and are already creating the potential to accelerate a
transition to a new sustainability paradigm. We are seeing a virtuous circle where
the cost of information is falling and the availability of information is dramatically
increasing as wireless, LTE, and indeed fibre infrastructure continues to be built out.
Almost unnoticeably the mobile Internet has emerged and we can envisage a world
where if something has electrical power (which may be scavenged from the ambient
environment), it will compute and communicate. This opens up the possibilities and
power of ambient intelligence.
32 3 Sustainable Intelligent Living

3.4.1 Substitution, Automation, Dematerialization

Year on year as information becomes cheaper, more of it can be substituted for other
inputs such as natural resources, labour, and capital in both business and societal
activity. eBook readers such as Amazon Kindle are a good but not well-reported
example of enabling sustainability. Fewer natural resources are consumed through
production and distribution of eBooks than physical books and also readers have
much more choice of what they want to consume and the books are cheaper. This is
a good example of the sustainability paradigm at work almost unnoticeably. It is
also a brilliant example of what McInerney and White describe in their book ‘Future
Wealth’—‘our ability to substitute information at will for every other resource,
including capital and labor, is altering the economy (and indeed society) in a funda-
mental way’. Skype is another example of a disruptive innovation with a similar
‘sustainability’ effect allowing relationships to be better sustained, business to be
more efficient all at a lower cost and with more efficient use of resources.
Furthermore, professional video conferencing services can create remote meeting
experiences, which are as good as if not better than physically, meeting saving time,
money, and resources while improving productivity.
These technical trends will also shape the future job infrastructures. We see
increasingly flexible work centres being established in municipalities, reducing
heavily the mobility needs for work. This is strongly the case in ICT and knowledge
intense jobs, e.g. engineering. The co-working spaces are going beyond the telecen-
tres, as they are combining the co-work space with prototyping facilities and maker
spaces too. These centres bring the innovation and prototyping environments better
accessible to the local community level as well.

3.5 Servitization

The shift from product to service, sometimes called servicizing, to meet dual goals
of improved profitability and sustainability benefit is often enabled by ICT. In ser-
vitization, the focus is not on maximizing the consumption of products, but on the
services the products deliver with one output being improved resource efficiency.
The adoption of cloud computing and software as a service are contemporary exam-
ples of this. Rolls-Royce with their ‘power by the hour’ program whereby they sell
hours of flying rather than aircraft engines, all enabled by remote telematics was a
pioneering example of this concept.
However, energy is also getting personal. Increasingly policy and legislation is
requiring that consumers have better information on their electricity consumption. A
study on smart metering in Ireland showed that more than 80% of consumers who had
better information on their consumption made a change to their behaviour causing a
reduction in demand. Intel labs developed personal office energy management soft-
ware to create new infrastructure using personal and participative computing to create
much richer building energy management information while helping users to monitor
and change the comfort and energy consumption of their own environments.
3.7 Plan C: Decoupling Natural Resource Use and Environmental Impacts… 33

3.6 Digital and Sustainability

Moore’s law is one of the few modern business phenomena, which actually supports
the sustainability paradigm, and the doubling in transistor density every other year
delivered at less or equal cost with increasing energy efficiency has continued for
several decades. Information technology has hugely outperformed all other industries
in improving output per unit of energy input over a 30-year period (Technology CEO
Council 2008). Whereas, for example, the automobile industry demonstrated a 40%
energy efficiency improvement over a 30-year period, the energy efficiency improve-
ment of IT over the same 30-year period was a staggering 2,857,000%. While this
performance is impressive, the real impact is achieved when IT is applied to make
other industries and societal systems more efficient. The American Council for an
Energy Efficient Economy found that ‘for every kilowatt-hour of electricity used by
IT, the US economy increased its overall savings by a factor of about 10’ (Laitner and
Erhardt-Martinez 2008). IT helps improve energy efficiency by automating and opti-
mizing other energy using systems and by substituting, IT-related services for other
services and products across the broader economy. As the Internet of Things emerges,
smart connected, collaborating things will exponentially increase the opportunities for
energy, resource, and performance optimization across systems.

3.7  lan C: Decoupling Natural Resource Use

P
and Environmental Impacts from Economic Growth

While it is clear that we must collectively embrace the sustainability paradigm,

there is collective inertia in developing and adopting solutions, which might take us
there. The UN Sustainable Development goal number 12 is focused on responsible
production and consumption; however, there is a perception that we must all sacri-
fice convenience and functionality to adopt these new green solutions. However, the
use of IT enables the possibility to create solutions, which are not only more
resource and ecologically efficient but also provide better functionality and conve-
nience. These kinds of solutions exhibit the characteristics of Plan C type solutions
(Curley 2013). Plan C type solutions exhibit a number of characteristics—they do
something better or different than is done today, are more energy or resource effi-
cient and offer more convenience than the existing method or product. Digital
books, banking, and music are all examples of Plan C patterns, offering services,
which are generally better, cheaper, and more convenient than the incumbent physi-
cal goods and services that they are displacing.
Often these kinds of products/services benefit from network effects and thus once
they hit critical mass they are widely adopted quickly bringing both user benefit and
positive ecological impact quickly. Specifically advocating for the design, develop-
ment, and adoption of goods and services, which exhibit these kinds of characteris-
tics, will not only drive energy and resource efficiency but also improve quality of
service and life.
34 3 Sustainable Intelligent Living

Industries that existed for decades are being transformed almost overnight
through the innovative use of IT—witness the music industry, catalysed by Apple
and the book industry catalysed and led by Amazon. These two examples also illu-
minate a significant pattern that as IT enables Schumpeter’s ‘creative destruction’ to
transform industries, these industries are made more energy efficient but simultane-
ously create opportunities for better service, better scaling, and better access. These
parallel benefits significantly lower the barriers to adoption of new efficient innova-
tions. There are many other industries ready for disruption with the electricity grid
being a prime candidate. In particular, the adoption of the EU Energy Union initia-
tive highlights the opportunity to create a virtuous circle of innovation using ICT to
deliver better use of distributed renewables, improved energy efficiency, and more
climate-friendly energy supply.

3.7.1 Cities as a Focal Point for Sustainable Intelligent Living

More than 50% of the world’s population live in cities, and cities consume more
than 75% of the world’s energy as well as contributing about 80% of greenhouse
gases. Cities are at the confluence of three mega trends—digital transformations,
sustainability, and mass collaboration that we have discussed previously.
In London, UK, together with Imperial College London and University College
London, Intel launched a Collaborative Research Institute for Sustainable and
Connected Cities. Together the stakeholders saw the opportunity to collectively
research and create an evolutionary leap for cities in terms of resource efficiency, new
services, and ease of living. Using a quadruple helix innovation approach involving
Government, Industry, Academia, and City Dwellers the stakeholders were trying to
catalyse and drive a step change in the outcomes of innovation for energy efficiency
and sustainability in cities. As part of the research, big data from a distributed ambient
intelligence platform is providing the opportunity to perform real-time optimizations
and city visualizations as well as enabling a completely new set of services. The
mayor of London created the Smart London Board including leading academics, busi-
nesses, and entrepreneurs—to advise on how London can put digital technology at the
heart of making the capital an even better place to live, work, and invest.
The city of Dublin led by the then Lord Mayor Naoise O’Muiri and Director of
Research and Internationalization Peter Finnegan also launched a sustainable cities
initiative and has for a number of years regularly convened a quadruple helix inno-
vation line up of experts to advise and help implement solutions. Dublin has also
launched a series of SBIR (Small business innovation research) grants to encourage
organizations to submit innovation proposals against gnarly city challenges.
ICT is also the critical enabler for the co-working spaces, which reduces the
pressure for the growth of cities and mobility of work. It remains to be seen whether
the trend of growth of megacities will be reversed, and when. Megacities will likely
also develop smaller communities within reducing the need for mobility internally.
ICT will have a crucial role in the internal reorganization and management of these
megacities too.
3.7 Plan C: Decoupling Natural Resource Use and Environmental Impacts… 35

Case Study: Open Innovation and Dublin—A Journey into Future

To leave a mark upon the ground I have walked
To make a difference in the lives I have touched
The key to handling future unknowns lies in the courage to risk innova-
tion. The success in achieving innovative solutions and driving change rests in
the openness to seek out, share ownership with and embrace partners, even
competitors, who become co-creators. People, as individuals and as decision-­
makers and shapers in organizations are more important than the tools of tech-
nology in driving and delivering effective and relevant innovation.
In Dublin we started, within the context of developing a 10-year strategy
for economic, social, and cultural development, to identify the impact and
opportunities that digital technologies would have on the city experience.
‘Dublin-City Of Possibilities’ emerged in 2001 as a Policy framework, which
emphasized openness, innovation, and collaboration as key elements to antic-
ipating and creating change in an increasingly connected and digital world. At
that time, our focus was on the Knowledge Society. Two key events that prove
the power of synchronicity conspired to create the initial theoretical frame-
work and connections that led to Open Innovation 2.0 become the guiding
principles driving innovation initiatives in Dublin. The first was our participa-
tion in an EU project called Intelligent Cities for the Next Generation
(ICCING); the second was the first encounter with Prof. Martin Curley when
he spoke at our International ICCING Conference.
ICCING was a collaboration between three cities Local Government struc-
tures, Business (Multinational and SME), and Higher Education research. It
became a model for broader networks of collaboration around the innovation
agenda, both locally and globally. The realization that a key component and
potential in the digital future was the active participation of the citizen led to
the fourth strand of the helix becoming a partner to the initiative.
Working through Prof. Curley, the research arm of INTEL became a key
partner in various projects around challenges faced by Dublin. This connec-
tion also led to the Innovation Value Institute (IVI) taking on the task of
adapting an existing impact assessment model and developing the concept of
a digital impact scorecard for a city.
Many steps followed that culminated in co-hosting with Intel and the EU
Commission, under the banner of the OISPG, the first Innovation 2.0 con-
ference and Luminary Awards in Dublin during the Irish Presidency in
2013. Along the way, we explored through Creative D the collaborative
power of the Arts and Design to grow economic development through interac-
tion with business and digital technologies; we developed an open data initia-
tive that became to be known as Dublinked; expanded our knowledge of what
was happening through the Dublin Dashboard project; and most importantly
worked with and through business, community, and public sector partners to
36 3 Sustainable Intelligent Living

launch in 2013 Dublin’s first ever Digital Masterplan (www.digitaldublin.

ie). The Masterplan was a roadmap around the innovation mindset and actions
that city stakeholders needed to take to make Dublin, not a Smart City, but
rather a Creative City, which harnessed the power of digital technology to
release the creative energy of its people, to enable the application of innova-
tive actions that connected people and improved knowledge, place, and
opportunity.
Open Innovation 2.0 provided the theoretical and conceptual framework
that captured and expressed what we had been doing as we had made our
journey to this point. The principles underpinning Open Innovation 2.0 found
echo in the way in which we had worked on the Digital Masterplan.
The strategic vision and perspective was both local and global. The newly
formed International Office adopted the digital agenda as a key strand in
building networks of collaboration with key innovative cities from the
Americas, through Europe to Asia. The sharing and openness between the city
administrations, the business communities, the academic institutions, and the
citizens reached beyond the individual city and created a global collective
energy and direction.
At the heart of the endeavour lay the importance of addressing the needs of
people. It focused on building, through the interaction of people, place, and
digital technologies, solutions to the challenges that face all humanity, chal-
lenges of sustainability, expression, connectivity, belonging, well-being, and
of cultural and economic achievement.
The journey continues within a fast moving and ever changing landscape
through the work of the Smart Dublin team (www.smartdublin.ie). The prin-
ciples and practice of Open Innovation 2.0 underpin that work and that
journey.
Although the descriptive language has changed from Knowledge Cities, to
Intelligent Cities, to Smart Cities, the underlying truths remain the same. We
live in a changed and ever fast changing world. The speed and nature of that
change is driven by the power and reach of digital technologies. Addressing
the impact of those changes requires an openness to innovate collectively,
reaching beyond the closed walls of institutions and business, beyond the
boundaries of cities and communities. It requires the practical ability to col-
laborate and co-operate within a competitive world. It requires the capacity to
think beyond the present and the local; to think, plan, and dream strategically
for the future and the global. It requires the realization that the era of ‘use and
throw away’ must be replaced by the building of a more sustainable, equal,
and engaged society and world.
Peter Finnegan,
Director of Research and Internationalization, Dublin City Council
3.8 Designing for Sustainability 37

3.8 Designing for Sustainability

Developing a product service system is a core OI2 pattern to support sustainability.

Product Service Systems are a new innovation pattern, which looks to move organi-
zations from delivering products to delivering products/service and have more sus-
tainable consumption and supply. The IOT is a fundamental enabler of this pattern,
which is also sometimes called servitization. Roll-Royce’s ‘Power by the hour’
whereby they sell hours of flight time rather than jet engines, all enabled by advanced
telematics, is the most commonly referenced example of this pattern.
Equivalent to this approach is the ‘extended product’ approach where conceptu-
ally the product consists of both the tangible and intangible part, which often is
service. This integrated approach impacts the design of the extended product, opti-
mizing the whole value the product brings to the user.
Some auto companies are looking to see how to change their business models,
Daimler’s Car 2 Go car service being an example and here the motivation of the
business changes from instead of maximizing sales and thereby consumption of
physical resources, the goal becomes to maximize the utilization and the longevity
of the assets, thereby also minimizing the consumption of non-renewable resources.
In the case of Car 2 Go, the vehicles are also often electric vehicles. Broader adop-
tion of this model requires buy-in from consumers that a car is no longer something
that we need to own but that we could instead buy mobility as a service. (MaaS)
Ultimately, the collective outcomes of the OI2 efforts is that we get to a circular
economy or even what Stahel calls the performance economy, whereby economic
and jobs growth are achieved but decoupled from resource and environmental impact.

3.8.1  igh Frequency, High Precision Control Systems

H
for Societal Level Systems

Ever increasing connectivity and the ever increasing power of compute are leading to
the emergence of the Internet of Things. In the future everything from cars to electri-
cal substations to washing machines wiil be connected to the internet which will
create the opportunity to introduce high frequency, high precision closed control
systems to societal systems which were previously in Open Loop. For example, the
electrical grid has been designed as a one-way linear system where energy is gener-
ated in bulk capacity and then distributed (quite inefficiently) through high voltage,
medium voltage, and low voltage distribution systems. With the increasing availabil-
ity of local renewable energy (wind, solar, etc.), smart home systems and smart heat
storage systems, the opportunity exists to redesign the grid creating value for all
participants, lowering costs and making the overall solution more sustainable. One
Horizon 2020 project with a set of stakeholders from across the energy value chain
from generators to consumers called Real Value will research and demonstrate this
across 1500 homes in Germany, Ireland, and Latvia. This model is an example of the
emerging concept of collaborative consumption.
38 3 Sustainable Intelligent Living

At the core of these kinds of innovations are the twin ideas of systems and closed
loop control through enabling functions of acquisition, analytics, and actuation.
Data is acquired from a thing or system, and then analytics are performed to provide
decision support, which then can drive actuation to change parameters to effect
service improvements or efficiencies. The integration of these three capabilities
enables the creation and operation of high frequency, high precision management
control circuits. An example of such a system of systems would be a dynamic con-
gestion charging system in a city which dynamically updates congestion charging
based on parameters such as localized air pollution, weather, and traffic measure-
ments to help optimize real-time traffic flows improve commute times while mini-
mizing environment impact. The operation of such a system will also create a lot of
big data and the use of machine learning and offline analytics can create a second-­
order feedback loop, which can drive further system improvements based on insights
garnered.
Chapter 4
The Evolution of Innovation

The rapid spread of information and communications technology coupled with sig-
nificant increases and lower costs of international flights and freight have created a
changing innovation landscape. The EU OISPG sketches an evolution picture for
the practice of innovation as shown in the figure below. In the past, much innovation
came from individuals in places such as Bell Labs or IBM labs, which used a closed
or vertical innovation approach (Fig. 4.1).
Henry Chesbrough identified and conceptualized the trend of Open Innovation
where organizations also use external sources for ideas, technologies, and knowl-
edge to contribute to future success. Chesbrough describes Open Innovation as con-
sisting of five core components including networking, collaboration, corporate
entrepreneurship, proactive intellectual property management, and finally a belief
that R&D is crucial to the future of a company. The core philosophy underlying
Chesbrough’s paradigm for open innovation networking and collaboration is that
innovation can be made quicker, easier, and more effective by the exchange of ideas.
Chesbrough primarily saw open innovation as a way for individual companies to
improve the commercialization of ideas for the benefit of the organizations involved.
Connect and Develop, the Open Innovation strategy pursued by Procter & Gamble,
initiated by the then CEO A. G. Laffley, is one of the most well-known examples of
open innovation with Procter & Gamble reporting that nearly 50% of their new
product ideas come from outside the company. The figure below shows how exter-
nal ideas and technologies can transfer into a company’s innovation pipeline to
create value (Fig. 4.2).
Chesbrough correctly identified that Open Innovation is a bi-directional process
and that unused or dormant ideas, technologies, patents, etc. can also flow out from
one organization to other for exploitation.
What is however very important to notice in the model if Open Innovation by
Chesbrough is that it still is based on linear innovation models, and is very much
based on cross-licensing across organizations. The societal capital, creative com-
mons, and intellectual structural capital of the ecosystem is very weakly taken into
account in this model.

© Springer International Publishing Switzerland 2018 39

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_4
40 4 The Evolution of Innovation

Fig. 4.1 The Evolution of

Innovation (source B
Salmelin, DG CONNECT)

Fig. 4.2 Open Innovation: source Baldwin and Curley, adapted from Chesbrough

Open Innovation 2.0 (OI 2.0) as defined by the EU Open Innovation and Strategy
Policy group (OISPG 2010–2016) sees the benefits of collaboration and networking
from a broader perspective as a way for firms and other organizations to improve
their innovation base so as to make optimal use of the societal capital and ‘creative
commons’ at their disposal. Vallat (2010) eloquently states ‘In addition to exchang-
ing technology, by informal or even formal means, as in Chesbrough’s ideal, the
focus here is on the involvement of all actors in the innovation ecosystem, including
­end-­users and end-user communities, brought together to share experience, infor-
mation and best practices, and build strategic alliances and cross-disciplinary
4.1 Defining Innovation 41

­collaboration’. This type of collaboration and networking leverages the benefits of

Open Innovation to a fuller extent and creates a pool of capabilities, experience, and
knowledge to create the so-called creative commons. According to Vallat (2010), it
favours the development of Silicon Valley Dynamics and ‘Positive spill-over effects
stimulated by the open environment enhance value creation for the benefit of society
as a whole, and not only for the firms involved’.
With a more open business model, there is a higher access to the market, lower
costs for innovative ideas, and risk sharing. In addition, technology has a crucial role
in facilitating information sharing because now it is easier to get and provide infor-
mation, benefit from information sharing, and using others ideas for the greater ben-
efit. However, there are some issues. In large companies, open innovation relates to
buying or selling technologies, but for smaller companies it means collaborating and
sharing technology and ideas with other parties as part of their business model. This
can create an ambiguous problem and raises the question of ‘how much information
can and should be shared to succeed preserving the most sensitive information’.

4.1 Defining Innovation

While there are many accepted definitions of innovation, we will use the following
definition to provide a common reference point for this book.
Innovation is the creation and adoption of something new, which creates value for the orga-
nization that adopts it. (Baldwin and Curley 2007).

The three key words are newness (or novelty), adoption, and value. An idea of
course does not have to be completely new, just new to a user, organization, focus
area or, indeed, society. Indeed many successful innovations are adaptions of exist-
ing ideas, products, or services, which are already adopted and successful in some
other sphere. Innovation is also about value creation and unless value is sustained,
innovations will fall away. Holt (2002) says innovation is the fusion of a user need
and a technological opportunity. Ultimately, there is only successful innovation
when a user, organization, and society perceives and receives value.
According to Schumpeter, innovation is accomplished by ‘entrepreneurs’ who
develop new combinations of existing resources. Intelligent recombinations of
existing and emerging solutions means that innovation is often less about invention
and rather more about the reapplication and synthesis of existing and emerging
knowledge and solutions.
Innovation is of key concerns to politicians—UK Chancellor George Osborne
showed a deep understanding of innovation in a speech to the Royal Society when
he said, ‘Innovation is not a sausage machine, You don’t get it by a plan imposed by
government and you can’t measure it just by counting patents or even just spend on
R&D. It is all about creative interactions between science and business. You get
innovation when great universities, leading-edge science, world-class companies
and entrepreneurial start-ups come together. Where they cluster together, you get
some of the most exciting places on the planet. That is where you find the creative
ferment which drives a modern dynamic economy’.
42 4 The Evolution of Innovation

As stated before key for our understanding is not the definitions but the fact that
innovation is about making things happen in new ways. Often innovation definitions
are strongly related to the context, whether science based, linear, triple helix, etc.
We want to look at innovation from the impact perspective and see which are the
important factors why Open Innovation 2.0 can make a difference in the highly
dynamic innovation landscape we are in.

4.2 Creative Disruption

Innovation together with bank credit, according to Schumpeter, are the economic
mechanisms ‘that define a large part of the history of mankind’ [12]. In his Theory
of Economic Development, he classified innovation into five categories: new prod-
ucts (or goods), new methods of production (or processes), new sources of supply
(or half-manufactured goods), the exploitation of new markets, and new ways to
organize business. In Schumpeter’s original schema, innovation is accomplished by
‘entrepreneurs’ who developed new combinations of existing resources [14].
However, in his later works, he came to regard the large corporation as the innova-
tive engine driving the development of leading economies [15]. His emphasis of the
entrepreneur being a single individual changed to viewing the concept as capable of
being embodied by a collaborating team of people.

4.2.1 Innovation and Growth

Prof. Clayton Christensen argues that there are essentially three kinds of innova-
tions, which have different effects on growth. They are
• Market creating innovations
• Sustaining innovations
• Efficiency innovations
Market creating innovations are the type of innovations, which create growth and
jobs. Efficiency type innovations are those, which improve margins but actually
destroy jobs. Christensen argues that economies like Japan have overly focused on
efficiency type innovation and that this has led to the Japanese economy stagnating.
One important aspect of modern innovation is to create new—products, services,
and foremost markets. Due to the latter, the co-creation of new markets with the
end-users as seamless process is essential. End-user involvement is necessary when
exploring new boundaries irrespective of whether they come from technology,
­technology application, or behavioural change in the real-world settings. Often the
user communities are taken fully on board at very late stage of the innovation pro-
cess—too late to get valuable information on scalability and success factors of the
development work.
4.4 The Extended Innovation Value Chain 43

4.3 Ten Types of Innovations: Full Spectrum Innovation

Increasingly, there is recognition that the linear model of science to innovation is

breaking down. Doblin’s ten types of innovations provide a way of thinking about
innovation more holistically and how value is captured. This builds on seminal work
originated by Schumpeter In his Theory of Economic Development book where he
classified innovation into five categories: new products (or goods), new methods of
production (or processes), new sources of supply (or half-manufactured goods), the
exploitation of new markets, and new ways to organize business. Doblin has
extended this thinking to develop a new innovation taxonomy. The taxonomy
includes business model, networking/ecosystem, enabling process, core process,
product performance, product system, service, channel, brand, and customer.
In the model, there are four categories of innovation levers—finance, process,
offering, and delivery/experience. In finance, the business model innovation is about
how you design, create, and capture value through selling product or service.
Networks and alliance are about how you join forces other companies or organiza-
tions for mutual benefit. The process sector coupled with the finance element defines
the configuration that underpins a sustainable innovation. The offering category
refers to the product performance, product system, and service elements. Finally,
the deliver/experience category focuses on the channel, brand, and indeed the expe-
rience experienced by the customer/users.
A key aspect of the Doblin’s ten types of innovation is to encourage innovators
to look beyond just product or performance innovation and to suggest that other
areas such as business model innovation or user experience innovation may bring
higher returns.
A key insight gleaned from reviewing the 10 types of innovation is that the linear
model of innovation, from science to business, is too simplistic a model to use and
can be ineffective and inefficient if followed to the letter of the law. Again, referring
to the scope of open innovation we can argue how strongly we should focus on dis-
covering the new with the OI2 approach, versus improving. Using an ‘improving’
perspective does not take advantage of the multidisciplinary nor disruptive approach
where one can experiment and prototype and focus on different types of innovation
to create value.

4.4 The Extended Innovation Value Chain

Birkenshaw and Hanson’s description of the Innovation value chain as having three
core components; idea generation, idea implementation and idea diffusion is useful,
although it needs to be extended as shown in figure 12. The innovation value chain
starts with idea generation, followed by prioritizing and funding ideas to convert
those ideas to products and finally to diffusing those products and business prac-
tices. However, diffusion is not enough and a fourth value chain step needs to be
added to drive adoption. Adoption, which is a function of six Us (including utility,
44 4 The Evolution of Innovation

Idea
Idea Generation Idea Diffusion Idea Adoption
Implementation

Fig. 4.3 Innovation Value Chain, adapted from Hansen and Birkenshaw

uniqueness, usability, usability, user experience, and design for use), is about the
actual acceptance and use of a new product or service (Fig. 4.3).
Like a venture capital pipeline, the more ideas and knowledge sources that can
be drawn upon the better the probability of successful innovation. ‘By accessing a
greater number of knowledge sources, the firm improves the probability of obtaining
knowledge that will lead to a valuable outcome’ (Leiponen and Helfat 2011: 225).
The so-called variance hypothesis (Dahlander et al. 2014), i.e. predicts that expo-
sure to diverse sources of information provides the ‘requisite variety’ of ideas and
knowledge needed to create innovations. There are important lessons from Geoffrey
Moore’s ‘Crossing the Chasm’ book about how to deliver ‘the whole product’ so
that everything is in place to enable adoption of a new product.
Although the linear model of innovation is breaking down this is still a very use-
ful conceptual model to think about where innovation supporting investment and
policy should be focused. The inaugural OI2 conference paper (Curley and Salmelin
2013) points out that in Europe the level of funding in each phase is directly the
opposite to the level of the returns, arguably this can be called the European
Innovation paradox. The Aho report on an innovative Europe pointed out that aver-
age EU innovative procurement rates at 3% were very significantly lower than the
government innovative procurement rates in the USA where the small business
innovation research (SBIR) program helps small businesses in the US conduct
research and development and empowers this sector by providing about $2.5 billion
in funding per year. The recipient companies and projects need to have potential for
commercialization and be aligned with the US Government R&D agenda and needs.
Although EU policy makers are finally getting to grips with implementing mech-
anisms for this, it points out the time lag between the speed at which the practices
and methods of innovation are changing compared to the innovation policy.
Focusing on this European research investment dilemma, the characteristics of
the new Horizon 2020 framework is moved from research and development towards
innovation. The transition is affecting the overall design of the programme, the
design of projects, creation of new support instruments as well as new criteria for
4.4 The Extended Innovation Value Chain 45

successful projects. To measure the impact Innovation Radar on project level is been
created as well which is a hugely important development. This allows to look at all
Horizon 2020 programs from a portfolio perspective and to measure innovation suc-
cess. Andy Grove, one of Intel’s founders frequently said ‘If you can’t measure it,
you can’t manage it’ and being able to measure innovation performance is crucial to
maximizing the productivity of innovation efforts (Fig. 4.4).
The figure below shows the typical anatomy of a Horizon 2020 program where
multiple organizations partner together to do joint research and co-innovate together
to ultimately co-create new products and services.
When looking at breakthrough innovations, we increasingly see how linear inno-
vation is replaced by a mash-up iterative innovation model where the innovation
environment creates fruitful conditions for positive collisions across different disci-
plines, maturity of technologies, and the market creation. A lot of the innovation
process is also experimental and prototyping by character to be able to dynamically
and more quickly respond to the real needs.
With advances in global information and communications technologies, the pro-
cess and practice of innovation is evolving and morphing at a very rapid pace.
Innovation is a multifaceted and socially complex process where myriads of knowl-
edgeable actors (organizations, individuals, institutions) interact and shape knowl-
edge and resources trajectories to create value (Assimakopoulous et al. 2012).
Despite David Teece’s statement that ‘No study of innovation can ever claim to have
the last word on the subject. The phenomenon is too complex, dynamic, and adaptive
to fit into a single conception for any extended period of time’, the remainder of the
book attempts to create a snapshot of some of the key patterns we see emerging.

Fig. 4.4 Horizon 2020 project, source Spinverse

Chapter 5
Framing OI2

In a seminal blog in 2010, John Hagel and John Seely Brown identified that the next
key challenge for open innovation was open innovation itself.1 Hagel and Seely
Brown say ‘We’re moving from a world where value is created and captured in
transactions to one where value resides in large networks of long-term relationships
that provide the rails for much richer “knowledge flows”’. Hagel and Seely Brown
argue that the opportunity is to build long-term trust-based relationships amongst
ecosystem players and encourage participants to build cumulatively upon the con-
tributions of others. Karl Erik Sveiby says that trust is the bandwidth of communica-
tions. Hagel and Brown advocate an extended open innovation approach, which
promotes fostering and building upon relationships between the players in an eco-
system. A core proposition is that increased interaction leads to increased knowl-
edge, which leads to increased value.
An important factor is also to recognize that increasingly we are moving to more
‘information intensive’ products and services where the development cost is the domi-
nating one, and the actual replication/multiplication and distributing cost is close to
zero. Apps and 3D printing are both good examples of this. This leads to different cost
and revenue model, especially when we can see that in many cases the first one in the
market ‘takes it all’. The long tail of for example the app economy is very thin.
This will likely also lead to multiple revenue streams of different types of inter-
linked products and services rather than to the old mass production dominance. Of
course, there are and will be exceptions in sectors, which require extremely high
initial investment in technology and production facilities. However, for example, the
3D printing technology might possibly disrupt some manufacturing companies.
In an attempt to provide a description and taxonomy of Open Innovation 2.0, key
patterns of the emerging Open Innovation 2.0 paradigm are described. The goal is
to help innovation practitioners and academics achieve results from innovation
which are more ‘predictable, probable, and profitable’ and to drive innovation
impacts far beyond the scope of what any one organization could achieve on its

1
http://blogs.hbr.org/bigshift/2010/02/open-innovations-next-challeng.html.

© Springer International Publishing Switzerland 2018 47

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_5
48 5 Framing OI2

own. OI2 is creating faster dynamics to create new markets and to bet right based on
common shareholder vision.
When we speak of ‘Open’, we mean openness in its broadest sense, from opening
up the input to the innovation funnel to extending the innovation focus from not just
product innovation but across a panorama including business model innovation, user
experience innovation, and service innovation all the way up to openness of individu-
als, organizations, and society to embracing and adopting innovation. To this end, a
key distinguishing attribute of Open Innovation 2.0 is focused on adoption and co-
creation of the market based on common vision across all stakeholders.
Michael Schrage of MIT has written, ‘Innovation is not innovators innovating, it
is customers adopting’. While much of the focus of innovation studies is on innova-
tion creation, very often the hardest part is the adoption of innovations. Machiavelli
famously wrote in the Prince ‘It ought to be remembered that there is nothing more
difficult to take in hand, more perilous to conduct, or more uncertain in its success,
than to take the lead in the introduction of a new order of things. Because the inno-
vator has for enemies all those who have done well under the old conditions and
lukewarm defenders in those who may do well under the new. This coolness arises
partly from fear of the opponents, who have the laws on their side, and partly from
the incredulity of men, who do not readily believe in new things until they have had
a long experience of them’. Thus, a key aspect of adoption is developing and sus-
taining a culture where innovation is the norm, rather than the exception.
Edward de Bono said, ‘Real innovation implies a readiness to explore and imple-
ment new ideas. But many organizations have a deep-seated fear of failure and do
not like to try new things, even when much lip-service is paid to innovation’.2
Taking all this into account, a strong focus is on the interaction with the users
who in the OI2 paradigm are genuine co-creators, and the solution providers. The
more efficient this interaction is the better dynamics the market creation has, and we
genuinely are moving to win-win game. If we do not focus on the creation of new
markets, we have a great risk to end up with the old win-lose game against existing
products and solutions. Breakthrough innovations and disruptive innovation is what
we need to look for in the new landscape.

5.1 Design Patterns

A key aspect of Innovation 2.0 is a focus on adoption and a key new concept in help-
ing with accelerated adoption is the concept of design patterns. Design patterns are
generally reusable solutions for commonly reoccurring problems. In the spirit of
walking our own talk, we use the concept of design patterns to help articulate the
core mechanisms of OI2.
A design pattern is a construct, which exists in software engineering (Gamma
et al. 1994), and the concept when ported to the general field of innovation can

2
http://www.management-issues.com/edward-debono.asp.
5.2 OI2 Core Patterns 49

prove very useful. A design pattern is a general reusable solution to a commonly

occurring problem (Vaishnavi and Kuechler 2004/2005), and it is often manifested
as a description or template for how to solve a problem that can be used in many
different situations. Vaishnavi and Kuechler (2004/2005) specifically define pat-
terns as a solution to a problem in a recurring context and as a general technique for
approaching a class of problems that are abstractly similar. Appleton (2000; P3)
defines a pattern as ‘a named nugget of instructive information that captures the
essential structure and insight of a successful family of proven solutions to a recur-
ring problem that arises within a certain context and system of forces’.
In addition, Vaishnavi and Kuechler (2004/2005) describe patterns as similar to,
but shorter and more structured than the case studies used in business school classes,
which communicate similarly complex and subtle information. A more concise
definition of a pattern is provided by Appleton (2000) as ‘a pattern is a named nug-
get of insight that conveys the essence of a proven solution to a recurring problem
within a certain context amidst competing concerns’.
Leveraging how design patterns are used in software engineering (Appleton
2000) the goal of patterns in innovation should help accelerate solutions particularly
to complex problems. For complex problems or opportunities, establishing a com-
mon vocabulary or language can be difficult, and design patterns create a shared
language and vocabulary for communicating insight and experience about recurring
problems and their solutions (Appleton 2000). Codifying the linked solutions and
capturing their relationships enables the capture of a useful and re-applicable body
of knowledge (Appleton 2000).
Patterns were introduced as a design concept by Alexander et al. (1977) and the
Gamma et al. book on design patterns as applied to object-oriented programming
began to popularize the use of patterns in computer science. Another application of
design patterns in the field of information systems was the work of Fowler et al.
(2002) in the domain of enterprise application architecture.

5.2 OI2 Core Patterns

In the remainder of the book, we will start by discussing the core pattern of shared
purpose. Then, we will discuss six core active patterns in turn including platform,
ecosystem, planning for adoption, agile production, industrializing innovation, and
finally data-driven innovation. We will also discuss the collective benefits and the
outputs of OI2.
A pizza pattern is the metaphor we used for communicating our design patterns.
A pizza is a universally recognized pattern for constructing tasty food from multiple
ingredients quickly. The base of the pizza provides the platform for the chef to
assemble and arrange multiple ingredients so that a ‘solution’ can be generated to
meet different criteria such as nourishment, taste, and flexibility. A pizza can be
consumed by slice or multiple slices of pizza from different types of pizzas; it can
be consumed in any one meal. Similarly, we present the initial OI2 patterns as pizza
50 5 Framing OI2

Innovation/
Disruption
Patterns

Culture Outputs:
Inputs:
Design for Data Shared Prosperity
Platform
Shared Purpose Adoption Driven Innovation

Outcomes:
Digital Attributes/ Shared Acceleration
Capacity Industrial
Ecosystem Agile Production
Innovation

Digital/IT infrastructure

Fig. 5.1 OI2 Core Patterns

patterns with the concept that they can be assembled and combined in a way that
makes sense for the ultimate consumer of the solution. In the spirit of OI2, Peter
Finnegan, South Dublin Area Manager suggested the metaphor of a pizza as a good
way of communicating the concept of the OI2 design patterns.
The patterns are arranged as depicted in the (Fig. 5.1) with shared purpose and
digital technologies being the core input patterns and outcome and output patterns
residing outside of the OI2 innovation factory. In the Innovation black box we
describe six patterns—platform, ecosystem, designing for adoption, agile produc-
tion, industrial innovation, and data-driven innovation. Different kinds of innova-
tion lenses can be applied to this innovation factory, and in this framing we use
patterns of digital disruption as a lens.
A core pattern is that of a platform. This could be just an agreed shared taxonomy
but more often than not will be a technical platform, which facilitates co- and deriva-
tive innovation. A platform is a set of core components from which a pipeline of
derivative products or services can be efficiently created and launched. A pivotal char-
acteristic of the most successful platforms is that they enable and experience networks
effect, whereby the more users and/or complementors the more valuable the platform
becomes and the greater value it creates. Thus, platforms when they reach a certain
critical mass, exhibit a positive feedback loop where users get more benefits as more
users join or as more organizations or individuals develop complementary products or
services. Uber and Airbnb are examples of platforms, which use collaborative con-
sumption as a core principle growing their business but also enabling better sustain-
ability of both the production and consumption parts of the value chain.
Associated with a platform is an ecosystem, which drives the inertia around the
platform, co-developing innovations, and distributing and driving adoption of the
outputs. Leveraging the platform pattern is the concept of the reverse innovation
pyramid where instead of innovation something done to users, users are part of the
5.2 OI2 Core Patterns 51

innovation process, and indeed sometimes take the lead. The Apple iPhone and app
store is a good example of an ecosystem and associated platform where hundreds of
thousands of developers have helped create and sustain a winning ecosystem and set
of products. Another good example of an ecosystem/platform coupled with the
reverse innovation pyramid is the Lego Ideas platform. Lego encourages children
and others to submit new product ideas for consideration by Lego. The process is
simple but not overly easy with participants submitting ideas, then required to get
enough support, 10,000 supporters for their product ideas before Lego reviews it
and ultimately decides to productivize the idea or not. There is shared value created
with successful inventors getting 1% of product royalties. Another example is
Organicity a Horizon 2020 smart cities project in London, Santander and Aarhus
where 25% of the total budget is allocated to citizen-initiated projects.
Most innovation value comes from adoption (80%) rather than creation efforts
(20%) (OECD); however somewhat bizarrely most innovation efforts are focused
on creation activities. A core-distinguishing feature of OI2 is a focus on adoption,
involving co-innovators and users so that innovations are designed for adoption by
focusing on utility, ease of use, user experience, and the creation of network effects.
The use of agile development and production methods is another core pattern of
OI2 so that a non-linear iterative, higher velocity development process replaces the
linear waterfall development model. Industrial Innovation itself is a core pattern
so that it becomes a repeatable, scalable, and automated system—this means think-
ing about innovation as a capability to be managed and invested in. Finally, a 2017
edition of the economist argued that ‘Data is more valuable than oil’. The data-­
driven innovation chapter describes common patterns for deriving value from data,
which is also a core OI2 pattern.
In an attempt to provide a snapshot description and taxonomy of Open Innovation
2.0, key patterns of the emerging Open Innovation 2.0 paradigm are described in the
remaining chapters. The goal is to help innovation practitioners and academics
achieve results from innovation, which are more ‘predictable, probable, and profit-
able’, and to drive innovation impacts far beyond the scope of what any one organi-
zation could achieve on its own. OI2 is creating faster dynamics to create new
markets and to bet right based on common shareholder vision.
Chapter 6
Shared Purpose

Open Innovation 2.O (OI2) is a new paradigm based on principles of integrated col-
laboration, co-created shared value, cultivated innovation ecosystems, unleashed
exponential technologies, and rapid adoption, often accelerated by an innovation
methods based on prototyping and experimentation in real world.
At the core of OI2 is the concept of shared vision/value and the quadruple helix
innovation model where government, industry, academia, and citizens/users aligned
around a common shared vision, can drive structural improvements far greater than
any one organization could achieve on their own through collaborative innovation.
Cultivating and orchestrating an ecosystem, which leverages a common innovation
platform allowing co-creation and deep user involvement and innovation, is crucial
to successful results. The figure below shows a depiction of the Vision of a Digital
Europe that help us in Intel Labs Europe (ILE) drive good alignment with many
partners (EU Commission, Governments, Academics and Industrial researchers)
around an innovation agenda where digital technologies help transform different
parts of European society such as cities, healthcare, and transportation. The cultiva-
tion of such an ecosystem based on a shared vision allows the alignment, amplifica-
tion of resources, and acceleration of results (Fig. 6.1).

6.1 Shared Purpose

Central to the concept of Open Innovation 2.0 is the idea of shared purpose when
shared vision, shared values, and value as espoused by Peter Senge, Porter and
Kramer (2011), Curley (2004), and others are critical. This foundational pattern
focuses on creating a shared vision to align the energy, investment, and interests of
all parties participating in the ecosystem or transformation initiative. Additionally,
this pattern helps to encourage organizations to explicitly document the shared

© Springer International Publishing Switzerland 2018 53

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_6
54 6 Shared Purpose

Fig. 6.1 ILE Digital Europe Vision, source Curley/Fleming

value they hope to create so that win-win scenarios are created. When an ecosys-
tem’s members have shared values, difficulties and problems, which are inevitably
encountered, are often more quickly and satisfactorily resolved or indeed totally
avoided. Typically, transformation efforts require significant energy and time –
investments and efforts from different organizations need to be aligned as best as
possible. Different organizations will have different motivations, goals, success cri-
teria, and dissonance that will naturally occur unless interests are aligned around a
shared vision.
When interests, investments, and energies are aligned, the result should be align-
ment, amplification, and acceleration of results as well as attenuation of risk. Rather
than participants complying to a schedule or program of work they are committed
to a vision and will typically deliver more than would otherwise be the case.
Brainstorming and collaboration to create a compelling vision is often the first step.
Recognizing the key problem that needs to be solved or key research question to be
answered provides an essential input to creating the vision. Crowdsourcing the
vision statement to the ecosystem to produce a number of candidates for consider-
ation as an agreed shared vision is often productive. For example, when Boris
Johnson commissioned the Smart London Board, the exercise of creating a vision
was outsourced to ordinary Londoners with several hundred citizens of London
submitting proposals. Ultimately, one such submission was used as the rallying
vision for the Smart London efforts—‘Using the creative power of technology to
improve the lives of ordinary Londoners’.
Having a shared vision, value, and values will maximize the chances of success
of a consortium or ecosystem in delivering a solution for a significant challenge and
will help deliver that solution in the most efficient and effective way (Fig. 6.2).
There are six core elements to the OI2 comprehension/pattern of shared purpose.
6.1 Shared Purpose 55

Fig. 6.2 Shared Purpose

• Shared vision
• Shared value
• Shared values
• Shared value at risk
• Shareholder and stakeholder value
• Stored value

6.1.1 Shared Vision

Victor Hugo wrote there is nothing as powerful as an idea whose time has come.
Major structural changes and improvements can be achieved when there is a powerful
and compelling shared vision. John F Kennedy’s vision of putting a man on the moon
and bringing him home safely is a great example of a vision, which helped mobilize
the USA to land a man on the moon while also creating a significant number of inno-
vations, which could be harvested and used elsewhere in society. An example of the
commitment, which such visions evoke, is the famous response of the NASA janitor,
when asked what his job was, he replied ‘I’m working to put a man on the moon’. A
shared vision is one to which both individuals and organizations commit to because it
reflects their own personal and organizational visions, respectively.

6.1.2 Shared Value

Shared value is about reconceiving the intersection between society and corporate
performance, seeking win-win outcomes and being profitable through solving big
problems. Underpinning the idea of shared value is a shared vision of what can be
achieved. Contributors to Wikipedia have signed up to Jimmy Wales’s vision of a
56 6 Shared Purpose

new kind of encyclopaedia and contributors get shared value from using the ency-
clopaedia. A key tactic is producing digital shared value. According to Carlos
Härtel, head of GE Research Europe ‘A 1% digitally enabled fuel saving in the
conventional aviation industry is worth $30 billion a year, and the company that
enables could have half of that game’.
Intel Corporation’s vision under the leadership of Paul Otellini’s is an example
of Porter’s shared value—‘This decade Intel will create and extend computing tech-
nology to connect and enrich the lives of everyone on the planet’. Intel then believed
that it had both a responsibility and opportunity to connect and enrich the lives of
everyone on the planet. As is wont to happen when a new CEO came on board, this
vision replaced by one which was different and less shared value oriented—‘If it
computes, it runs best of all on Intel’.
Porter and Kramer’s idea is also an extension of C. K. Prahalad’s thinking when
he wrote about ‘the fortune at the bottom of the pyramid’. Prahalad articulated a
theory that companies can make significant profits by solving problems for people
living in the so-called Third World. Thus, the possibility exists to do noble work as
well as being profitable. Ultimately, this kind of thinking will not only improve
people’s lives and drive profits but also in parallel expand collective human poten-
tial. Ajay Banga, CEO of MasterCard has a mantra of ‘Do Well and Do Good’ with
an objective of driving financial inclusion, improving the quality of life of people
who had no access to financial services and growing the overall industry.
Albert Einstein summarized the necessity of shared value thinking when he said,
‘It is not enough that you should understand about applied science in order that your
work may increase man’s blessings. Concern for man himself and his fate must
always form the chief interest of all technical endeavours’. This links to the core
idea of OI2 that organizations and people innovating and transacting in an ecosys-
tem should have shared values.

6.1.3 Shared Values

Values are important and durable ideals or beliefs held by members of a culture, com-
pany, or community about what is good or bad and desirable or undesirable. They
heavily influence both an individual’s and collective behaviour, posture, and attitude
and serve as general guidelines for dealing with various situations. For example, com-
panies like Mastercard, General Electric, and IBM who have endured large changes
typically have enduring values, for example, focused on risk taking and customer
orientation, which help guide behaviour and responses to different challenges and
decision-making processes. In a particular ecosystem, it is extremely helpful if all
participants hold similar shared values, and this can lead to the output of the ecosys-
tem being strongly synergistic rather than members of the ecosystem or community
working against each other in certain situations. It is also important to see new work
structures in this context. The competencies of individuals will increasingly be shared
across multiple actors/firms based on the values the worker and the organization have.
The organizations who best capture the empowered customers, citizens, and the high-
value competencies will more likely be the winner in the end of the game.
6.1 Shared Purpose 57

Case Study: Innovation Value Institute

The Innovation Value Institute (IVI) based at Maynooth University, which
celebrated its tenth anniversary in 2016 is an excellent exemplar of OI2 in
action and how OI2 supported by vision and resilience can deliver multiplica-
tive returns. From very humble beginnings, IVI is now taking its place
amongst the leading Information Systems Research organizations in the world
based on the adoption of its research by organizations. The Innovation Value
Institute was founded in 2006 by Professor Martin Curley, then of Intel and
Professor John Hughes, then President of Maynooth University with a vision
of creating research outputs, which could drive a structural change in the way
organizations get value from information technology. Supported by many
world leading companies such as BCG, EY, Chevron, BP, SAP, and Microsoft
the institute quickly developed momentum using an OI2 and engaged scholar-
ship approach. Initially, the institute was funded primarily from the participat-
ing companies and leading global companies, even competitors of each other,
who bought into the shared vision of working together to create a framework
and set of practices, which could drive a structural change in the way organi-
zations get value from IT.
In 2009 under the Irish Technology Centres Programme, Enterprise Ireland
announced a 5 year/€5M Phase 1 investment in the Innovation Value Institute
(IVI) Technology Centre. The main aim of the IVI was to create a set of tools
and processes housed inside an assessment framework that would give IT
organizations the means to substantially upgrade their IT capabilities across
the board, making them leaner, more efficient, cost-effective, and better able
to serve their client base both internally and externally.
The IVI collaboratively developed and released the IT-Capability Maturity
Framework, which is becoming a candidate for the gold standard for the man-
agement of IT Value and IT-Enabled innovation. This framework has been
embraced by companies globally and from many sectors including oil & gas,
banking, construction, big pharma, transport, and IT with over 500 organiza-
tions having used the IT-CMF.
By any measure, the performance of the Innovation Value Institute has
been strong with over a quarter of million hours of research in an engaged
scholarship mode being contributed by industry executives and specialists and
the IVI research team with over 1400 professionals contributing to the knowl-
edge base and over 300 publications and whitepapers. Already 800 profes-
sionals have been certified on the IT-CMF and in October 2015 the IT-CMF
Body of Knowledge Guide, a 700+ page tome was published by IVI as a ref-
erence for IT executives and professionals worldwide. Key to the ongoing
success of IVI was creating a shared vision and platform to enable co-creation
and development and governance/orchestrating an ecosystem to co-develop
and help diffuse and drive adoption of the IT-CMF. The ability to create shared
value and the common values of the different ecosystem participants deliv-
ered very strong results.
58 6 Shared Purpose

6.1.4 Stored Value

Stored value is an increasingly important concept in that there is latent or stored data
created by the interaction of community members both in the creative and execution
phase. Choosing vibrant members for the ecosystem who have high potential will
help subsequent value delivery. An example of the recognition of stored value is that
the Smart London Plan identified that Londoners generate the data that helps
London manage its transport, social, economic, and environmental systems. Digital
technology presented opportunities for London to use this data to function better,
and for Londoners to help shape and be a part of the solutions.

6.1.5 Shareholder Value

Commercial organizations are ultimately gauged by ongoing contributions to increased

shareholder value. Digital innovation efforts must be tied to the probability of increas-
ing shareholder values. Tools such Osterwalder’s business model canvass and the value
dials practice developed at Intel are useful in trying to tie-specific innovation invest-
ments to unit improvements in core variables, which have a material impact on the
business. Organizations such as the Depository Trust Clearing Corporation (DTCC)
which itself plays a fulcrum role in using value dials to help select and then manage IT
and digital innovations to help improve the probability that IT and digital innovation
investments ultimately deliver on the promise that was initially proposed.

6.1.5.1 Value Dials

Intel IT originally developed value dials, a framework for measuring the business
value contribution of IT projects. Value dials are financial metrics that map business
value to an organization's top and bottom line. For each investment project, a num-
ber of value dials were identified, targeted, and measured for improvement as the
solution was developed and deployed. Each value dial was specified using a specific
metric or equation that specified the impact. Value dials are typically the business
variables, which make a difference to the profitability of the business. An example
of a value dial would be ‘days of inventory’. Reduction in days of inventory reduces
the cost of carrying inventory and can be achieved by implementing just-in-time
systems, faster manufacturing throughput system, or better market intelligence, for
example. Another example of a value dial is ‘days of receivables’ and solutions
which enable a company to receive payment faster improve cash flow and allow
better cash flow management. For a bank, investments, which target improvements
in cost/income ratio, are particularly sought after.
Once a comprehensive set of value dials is available and maintained for an orga-
nization, these can be used to allow innovators define, design, and deliver for busi-
ness value. The use of value dials can be used to allow comparison between different
6.1 Shared Purpose 59

innovations competing for investments. I developed a tool at Intel called the Business
Value Index which looked at early stage innovations as ‘options’ and assessed the
likely potential value of innovations based on three vectors of contribution business
value, IT efficiency, and financial contribution.

6.1.6 Shared Value at Risk

Value at Risk (VaR) is an important measure of the risk of investments but also the
measure of exposure if a specific regulation is not complied with. For example, a
bank, which does not comply with the European Commission’s General Purpose
Data Regulation, risks significant fines, which are materials to the operation of their
business if they are found to have breached data collection regulations. The concept
of VaR can be extended to an ecosystem and its constituent organizations so that
there is a strong value at risk if their ecosystem or collective investments are not suc-
cessful or surpassed by those of another ecosystem which reaches critical mass first
and establishes a dominant design. When a network effect occurs, it is often very
difficult to displace an incumbent from their position, which gets increasingly stron-
ger as more users and partners adopt the services. The concept VaR is often used by
regulators and financial organizations to assess the amount of assets which might be
required or held to cover possible losses and additionally can help ecosystems assess
the amount of investments and options they need to hold to help avoid catastrophic
losses due to being outpaced and out-innovated by a competing ecosystem.

CERN Case Study

CERN, the European Organization for Nuclear Research, was founded in 1954
and is an early example of OI2 at work with over 20 countries contributing to a
shared research agenda to research and probe the fundamental structure of the
universe. While the core research agenda for CERN is Nuclear Physics, it is
perhaps more famous for a spill over innovation which came out of CERN. Tim
Berners-Lee, a scientist at CERM, invented the World Wide Web (WWW) in
1989 and it emerged out of a need to enable information sharing across universi-
ties and research institutes around the world. The Web’s development was
enabled by the ‘Open’ approach, which CERN took, putting the software in the
public domain on April 30, 1993, and the subsequent next release via open
licence. This became both the enabler and catalyst for changing the way the
world shares information and provided an infrastructure, which would underpin
a wave of digital entrepreneurship. The simplicity of the WWW idea as well as
the royalty free availability enabled its rapid adoption and further development.
CERN Open Lab as an OI2 exemplar
The CERN Open Lab is a microcosm of CERN and is another great exam-
ple of OI2 in action focused on shared purpose. Established in 2001, the
CERN Open Lab is a unique public–private partnership that accelerates the
60 6 Shared Purpose

development of cutting-edge solutions for the worldwide LHC community

and wider scientific research. The unofficial mantra of the CERN Open Lab is
‘you make it, we break it’ meaning the Open Lab community pushes new
emerging technologies to the extremes, for the extreme operating demands of
the CERN Large Hadron Collider and in doing so also discovers the operating
boundaries of new high tech products and services coming from the ICT
industry.
In the CERN Open Lab, CERN collaborates with leading ICT companies
and research institutes, provides access to its complex IT infrastructure and its
engineering experience, and occasionally extends this access to collaborating
institutes worldwide. Testing in CERN’s demanding environment allows
CERN to assess the merits of new technologies in their early stages of devel-
opment for possible future use, provides the ICT industry partners with valu-
able feedback on their products while providing academic research institutes
unparalleled access to domain and industry expertise and products. This eco-
system provides a neutral ground and platform for carrying out advanced
collaborative.
The longevity and growth of the CERN Open Lab, now over 15 years in
existence demonstrates the shared value created by participating collabora-
tors. The previous CERN Director General Rolf Heuer acknowledged that the
Open Lab delivered a long list of technical achievements, which played a vital
role in the discovery of the Higgs Boson particle. As part of the shared pur-
pose, the CERN Open Lab also demonstrates a significant commitment to
education, with funding provided for young researchers to build the pipeline
for the next generation of talent. Rolf Heuer also highlighted that the work of
the Open Lab demonstrated the virtuous circle between basic and applied
research at work.
The CERN Open Lab practices at the frontier of digital innovation and
currently focuses research on topics such as data acquisition, computing plat-
forms, data storage architectures, compute provisioning and management,
networks and communication, and data analytics.
Chapter 7
Platforms

A foundational enabler and design pattern of OI2 are platforms. Platforms and their
associated ecosystems are hugely powerful, and their emergence is driven by con-
tinued rapid evolution of computing and communications, which enable the digiti-
zation of many things including products, services, business models, user experience,
etc. The growth of an ecosystem around a platform moves the locus of innovation
from the platform owner to a network of other organizations and indeed individuals
and allow operation on a scale that can be massive and far beyond the scope of what
any one organization could achieve on its own.
Gawer and Cusumano (2013) define external platforms as products, services, or
technologies that act as a foundation upon which external innovators, organized as
an innovative business ecosystem, can develop their own complementary products,
technologies, or services. A platform is a set of standard and modular components
or parts from which a stream of derivative innovations can be developed (Meyer and
Lehnerd 1997). Reuse of components of course enables economies of scope and
scale allowing organizations to take advantage of silicon, software, and network
economics. However, perhaps more importantly, the components form a foundation
of primitives, which allow multiples of value to be created on top of the platform.
An important attribute of successful platforms is that they evolve as environmental
conditions change. A platform ecosystem consists of stable core modules, pro-
cesses, variable complementary processes, and modules. The unit of competition
has changed from the product to the platform. The output of a platform ecosystem
is a set of complementary products and services, built on the standard core compo-
nents that significantly augment and expand the capabilities of the platform. There
is a trend to migrate towards platforms in a variety of industries.
The smart architecture of a platform should provide the blueprint for mass coordina-
tion and mass collaboration. Platforms come in many different shapes and sizes but
overall the goal is to provide an infrastructure, which enables interactions between dif-
ferent types of communities, often producers and consumers. One can do this by archi-
tecting reasons to collaborate or creating incentives that repeatedly connect and pull in
participants to the platform. Platforms provide a central or ­distributed infrastructure upon

© Springer International Publishing Switzerland 2018 61

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_7
62 7 Platforms

Fig. 7.1 Platform Patterns

which participants create and exchange value. In execution mode, a platform will often
match participants with each other and with content and services created or distributed
through the platform. Platforms allow innovation and execution on a scale far beyond
what is achievable by any one organization on its own. An important characteristic of
platforms are that they are often multi-sided, where platform can bring two or more
distinct groups of stakeholders together. As one example the Apple App store and iOS
platform brings together end-users and app developers on either side of the platform.
A platform could be something as broad as the high tech campus in Eindhoven,
which has evolved from a closed Philips Lab of about 2000 researchers to a thriving
environment of more than 140 companies with over 10,000 employees. A platform
could also be the Innovation Value Institute (www.ivi.ie) which provides a common
taxonomy and research infrastructure for different organizations to contribute to an
overarching CIO framework to drive a structural change in the way organizations
create value from IT. An internal platform as defined by Gawer and Cusumano
(2013) is a set of assets organized using a common structure from which a company
can effectively and efficiently develop and produce a pipeline of derivative products
and services. An external or industry platform is a set of assets that have been
assembled to act as a foundation upon which external innovators, organized for-
mally or informally as a business ecosystem, can develop their own complementary
services or products. A key concept around platforms is the efficient use and reuse
of modules or assets, which act as a foundation for derivative innovation (Fig. 7.1).

7.1 Architecture

The architecture of a platform is foundational to its success what is the functionality

provided, what are the building blocks, and what are the interfaces provided. In a
software platform, the interface is very often an Application Programming Interface
(API), and this forms the basis of how other app developers can integrate,
7.3 Governance 63

synthesize, and further develop higher level services based on the foundational
assets. Facebook, Google Maps, and Amazon AWS are examples of platforms,
which provide APIs for further service development. The real power of a platform
is demonstrated by the Apple App store where hundreds of thousands of developers
develop mobile applications based on the Apple operating system iOS and App
store standards, there is a revenue share between the developers, and apple for each
App sold. With exquisite hardware and software and a platform approach, Apple has
created a winning platform and growing ecosystem.
Thus, a platform also requires an ‘architecture of participation’ to help grow the
ecosystems. Particularly, in the case of a software platform, app developers must
both motivate and be able to innovate on top of the platform architecture. The key
instrument for enabling innovation on a platform is Application Programming
Interfaces (APIs).

7.2 Application Programming Interface

We are heading for an API-based economy where machine-to-machine or computer-­

to-­computer collaboration will be a dominant trend. APIs are the building blocks
and scaling agenda of the API-enabled digital economy with an API offering a task
or data to another computer program to use. APIs are machine readable in real-time
rather than designed to be used by users, other than application developers who use
APIs to create more complex functions using software. There are three kinds of
APIs, private, partners, and public APIs. A private API is used within an organiza-
tion to improve the efficiency and effectiveness of the software infrastructure and
applications of a firm. Partner APIs enable the integration and coupling of software
and business processes between an organization and a partner organization. Finally,
public APIs allow anybody to use functions from an organization in an integrated
way and typically, an organization uses APIs to expose functions, data, and tasks
from their systems in an efficient way and in a way that can be monetized. APIs
change the way that software gets delivered and make it much easier to synthesize
different software components into more complex functionality.
Enabled by APIs, successful platforms exhibit non-linear growth and successful
platforms treat APIs as products and evaluate their success using critical success
indicators. Facebook grew by 160% against 5% growth of the once dominant
MySpace 1 year after Facebook opened up its APIs to enable developers to use its
platform. This statistic is very clear evidence that open API’s work.

7.3 Governance

The governance of a platform needs to be thought through and can be explicitly

codified into a software platform or may require explicit committee and a board to
oversee. For a research consortium and platform like the IT-Capability Maturity
Framework at the Innovation Value Institute (IVI), a consortium board made up of
64 7 Platforms

leading consortium members oversees the workings of the consortium while a tech-
nical committee of leading architects and researchers governs and oversees the evo-
lution of the IT-CMF platform and also enforces and oversees quality. The more
‘sides’ a multi-side platform has the greater the likelihood that more formal gover-
nance is required. The IVI brought together six types of distinct stakeholders
together, government, ICT industry, consultants, ICT enterprise users, analyst com-
panies, and academia and thus required a governance process in addition to the
shared vision that was created to drive the consortium. For commercial ecosystems,
the governance arrangements are often codified into the developer terms and condi-
tions, an example of which can be found at https://developer.apple.com/terms/.
Such agreements determine the technical specifications for participating and con-
tributing to the ecosystems as well as the revenue sharing arrangements.

7.4 Networking and the Network Effect

Networking is at the core of Open Innovation 2.0, and it is a socioeconomic process

where people interact and share information to recognize, create, and indeed act
upon business opportunities. Diane Bryant, Intel Senior Vice President, writes the
word networking as ‘netWORKING’ to emphasize that although netWORKING is
a social process it is also a key work activity used to establish and extend relation-
ships while also enabling the creation and striking of options. Networking is very
much a collaborative process. De Bresson and Amesse (1991) wrote, ‘that no firm,
large or small can innovate or survive without a network’. Any yet few organiza-
tions explicitly manage their network with a deliberate strategy and indeed a focused
network manager.
We have all seen cases of collaboration that create effects which are at best addi-
tive, delivering a sum of the parts which is less than the sum of each of the indi-
vidual components. OI 2.0 generates synergies and network effects rather than just
additive effects. Synergy describes two or more entities interacting together to pro-
duce a combined effect greater than the sum of their separate effects. The root of the
word synergy is in the Greek word ‘synergia’ which means, ‘working together’ and
this term is one way of effectively describing one key attribute of OI 2.0. A network
effect is the effect that a user of a service has on the value of that service to other
people, with the telephone being the classic example of the network effect. Where
there is a network effect, the value of the service is dependent on the number of
people using it or contributing to it. New users, players, or transactions reinforce
existing activities, and there is acceleration in the number of users and value cre-
ation. Bob Metcalfe postulated Metcalfe’s law and said that the value of the network
was proportional to the square of the number of connected users. David Reed, one
of the founders of Lotus, postulated that the value of the network will come from
what he calls ‘group-forming networks’, where users come together to collaborate
and generate wealth. He expressed the value arithmetically as two to the power of
7.4 Networking and the Network Effect 65

Fig. 7.2 Synergy versus

Additive effects (inspired
by W.M. Gore)

the number of users. As the number of users gets very large, the primary value will
come from collaborative groups (Fig. 7.2).
In Open Innovation 2.0, the goal is not to design additive effects but to design for
exponential effects where ‘power’ laws manifest themselves. A power law is a
description of an interaction where there is a mathematical relationship between
two variables, often where the frequency of an occurrence varies as a power of some
attribute of another variable.
The every expanding developer ecosystem that Apple established around the
iPhone is a contemporary example of a network effect and many argue that this pro-
vides the greatest stickiness to the Apple products and services. As networks prolifer-
ate and companies such as Intel and Cisco see pathways to connecting everybody on
the planet, the opportunities to create network effects increase dramatically as the
cost to connect to or contribute to a new service continues to fall and the access bar-
riers drop. This is an unparalleled opportunity for would-be entrepreneurs as access
to users and computing and communications costs continue to fall significantly and
a global business can be built very quickly from a bedroom or garage—e.g. Facebook
and Google. The European Internet foundation have identified mass collaboration as
the dominant paradigm for next decade and organizations that can create platforms
and venues to harness and exploit this trend can achieve great results.
A network effect occurs when a platform becomes more useful with each subse-
quent user that is added to the platform or system. The classic example of a network
effect is the telephone system whereby as each new user is added the more valuable
the network becomes. Once a system hits critical mass, a positive feedback loop
drives increasing returns as more users are attracted. Often with platforms, a
­dominant design emerges which becomes ever more dominant due to the positive
feedback loops that are associated with platforms. Network effects can be either
single sided or multi-sided. A same-side network effect occurs when adding a user
to one side of a platform increases the value to all participants on the same side of
the platform—e.g. adding another user to Skype makes the platform more valuable
to all other Skype users. Cross-side network effects occur when adding an addi-
tional participant on one side of a platform increases value to participants on the
66 7 Platforms

other side of the platform. For example, adding a developer to the App store side of
a platform increases value to all the users of the App store. In many cases, positive
network effects occur with platforms but it is also important that negative network
effects can occur when, for example, too many users create congestion for other
users of the system.

7.5 Ease, Emergence, and Incentives

Well-architected platforms become blueprints for mass collaboration (Tiwana

2014). They have to be easy to use and have to provide incentives or reasons why
actors continue to return to the platform to create and exchange value. Emergence is
an especially important characteristic of platforms that are successful. Emergence is
a self-organizing ecosystem-wide order (Dougherty and Dunne 2011) that arises not
only from preconceived design principles of the platform owner but also from the
interdependent actions of platform contributors and users based on the shared vision
of the platform and the continuous adaption of what participants contribute and use
based on what others are doing with the platform. Where a shared vision exists and
shared value is defined, the emergence of ecosystem innovation can be accelerated
and more efficient compared to an ecosystem where there is no shared vision and
shared value espoused.

7.6 Industrial Mash-ups

EY’s Jeff Liu has proposed the idea of industrial mash-ups as a new way of collabo-
rating, which will accelerate innovation in the API economy. According to EY,
industrial mash-ups are new forms of alliances that will form live and die very
dynamically based on synthesis of APIs to deliver customized functionality. The
concept emerges from the same principles that are underpinning the sharing econ-
omy, utilizes shared data, services, or indeed physical assets increasingly via
machine-to-machine methods, and enables derivative innovation to create new busi-
ness value which is distinct from the original value derived from an asset, data
source, or app, and allows integration of partners functionality serviced via APIs
into your own organization services.
Jeff Liu (2016) explains, ‘Fundamentally, the sharing economy exists because of
the idea that you can separate, or detach, new kinds of value from an underlying
physical thing. You’re able to use your car as a transportation service, or use your
apartment as a hospitality service, because another organization has built an easy-­
to-­use, automated transactional environment on the Internet with new kinds of
usage terms that depart from standard lease contracts’.
As more assets and products are made more visible and accessible via APIs,
industrial mash-ups enable existing processes, assets, and IP to be monetized in new
7.7 Multi-Sided Platforms 67

ways. Increasingly, design patterns for industrial mash-ups will become available,
so that once a new form of industrial mash-up is developed; others will be able to
imitate it using their own proprietary and/or ecosystem assets.
An industry where this is likely to happen quickly is in banking where the EU’s
Payment Services Directive 2 (PSD2) calls for opening up banks’ customer infor-
mation, subject to permission, by new kinds of financial players to drive
innovation.

7.7 Multi-Sided Platforms

A core, if not the core property of a platform is that it connects two types of players
together, in a way which has much lower connection and transactions costs than
there would be if the different parties had to connect, find each other, and transact
with each other. Typically, a multi-sided software platform brings end-users and app
developers together but platforms have existed before the emergence of global soft-
ware platforms as iOS and Android. For example, the credit card companies connect
cardholders, merchants, and banks together. In this case and in many other cases,
the credit card platform creates value by mediating interactions between different
sides of a market. Of course, Global Distribution Systems such as Amadeus have
long existed as platforms connecting travellers and airlines.
A winning platform exhibits network effects whereby the additions of more
users create incremental value to existing users and of course to the platform. Once
a platform hits a critical mass participation, growth of the platform and service can
be autocatalytic as new apps or users are added to a platform, the platform becomes
more value adding and attractive to more app developers and users. As with the case
of autocatalytic chemical reactions, the output of a platform, which demonstrates a
network effect, is fundamentally non-linear. In platforms, one can observe power
laws where one quantity such as the number of users varies as a power of another,
such as the number of apps.
Once a network effect is triggered, the platform and associated participants enter
a self-reinforcing cycle, adding significantly more value but also creating a high
barrier to entry or would be disruptors. Platforms can exhibit both same side and
cross-side network effects. When one more user joins, a telephone network or a
system such as Skype value is increased to all users. Cross-side network effects
occur when an increase in either side of the platform creates value for both sides.
For example, the more people that buy iPhones, the more that app developers are
encouraged to write apps.
Chapter 8
Ecosystem Orchestration and Management

‘The new leaders in innovation will be those who figure out the
best way to leverage a network of outsiders’.
Pisano and Verganti

An ecosystem can be defined as a network of interdependent organizations or peo-

ple in a specific environment with partly shared perspectives, resources, aspirations,
and directions (Andersson, Formica and Curley 2010). The ecosystems with the
biggest critical mass and the greatest velocity will have the most momentum and
will ultimately win. The following figure shows different participants in and differ-
ent formats of innovation (Fig. 8.1).
In this chapter, we will discuss some of the key patterns associated with ecosys-
tem management and orchestration as shown in the following figure (Fig. 8.2).

8.1 Partnering: Triple/Quadruple Helix Innovation

A core characteristic of the OI2 paradigm is used of the quadruple helix model where
government, industry, academia, and civil participants work together to co-­create the
future and drive structural changes far beyond the scope of what any one organiza-
tion or person could do alone. When all participants commit to a significant change
such as transforming a city, or an energy grid, by collaborating everyone can move
faster, share risk, and pool resources. Industry, academia, and civil participants work
together to co-create the future and drive structural changes far beyond the scope of
what any one organization or person could do alone. When all participants commit to
a significant change such as transforming a city, or an energy grid, by collaborating
together everyone can move faster, share risk, and pool resources.
Triple Helix innovation involves government, academia, and industry working
together to drive structural innovation improvements beyond the scope of what any
one organization could achieve on its own. Henry Etzkowitz, the originator of the
term, postulated that because this interaction is so complex it needed a triple helix
rather than the double helix of DNA to describe it. In a generative knowledge
­economy, industry is seen as the locus of production (products or services), govern-
ments provide a stable and defined regulatory environment as well, often as invest-

© Springer International Publishing Switzerland 2018 69

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_8
70 8 Ecosystem Orchestration and Management

Fig. 8.1 Innovation ecosystem constituents

Fig. 8.2 Ecosystem

8.2 Citizens as Innovators 71

ments and investment incentives while the role of universities is changing from
primarily providing a supply of trained people and education to also providing pri-
mary knowledge to the innovation process. Triple helix innovation is all about
designing for and achieving systematic synergies. Quadruple helix innovation
extends the concept to include the user, customer, and indeed citizens in the innova-
tion process. The following figure depicts the collaborative nature of OI2 taken in a
European context (Fig. 8.3).
Europe’s FP7 and now Horizon 2020 are arguably the world’s largest open innova-
tion and research funds and Horizon 2020 is increasingly adopting an OI2 posture. In
Horizon 2020, we are seeing quadruple helix innovation configurations (Carayannis
and Campbell 2010; Curley and Salmelin 2013/2014) arising where the use of users
and citizens as co-innovators and participants in Living Labs is actively promoted and
incentivized. The following figure depicts the intertwining efforts and energies of the
different partners working together towards a shared vision.
While I was at Intel Labs Europe, we invested heavily in FP7 and had more than
70 FP7 projects and then over twenty five projects were active in Horizon 2020.
Intel’s open labs in Ireland, Munich, and Istanbul served as portals to the broader
network of more than fifty European R&D labs. Additionally, Intel had co-labs with
companies such as BT and SAP where using a shared agenda we are able to move
much quicker together (Fig. 8.4).

8.2 Citizens as Innovators

Increasingly, citizens have an appetite to participate in innovation and are an exam-

ple of stored potential in an ecosystem whereby with the right platform and incen-
tives their latent ideas and energy can be converted into kinetic energy for the good

Fig. 8.3 Quadruple helix

innovation in action in
Europe
72 8 Ecosystem Orchestration and Management

Fig. 8.4 Quadruple helix

innovation

of all. Nambisan and Nambisan (2013) from the University of Wisconsin call out
four different roles of citizens in the public service innovation process.
• Explorer
• Ideator
• Designer
• Diffuser
As an explorer, citizens can explicitly discover and define existing and emerging
problems and opportunities in public services. As an ideator, citizens can suggest
and formulate potential solutions to these and other problems in public sector.
Challenge.Gov is one noteworthy example where the US government uses online
contests to solicit ideas from citizens to help solve problems. As a designer, citizens
can design and conceptualize solutions to specified problems with NYC Big Apps
being one such vehicle for this. Finally and importantly, citizens can support the
diffusion and adoption of public service innovations.
The Nambisans call out two of the core OI2 patterns to enable co-creation
between citizens and government, the innovation ecosystem and platform. The
innovation platform is the venue for citizen engagement and co-creation and
includes ways to facilitate knowledge sharing and collaboration amongst partici-
pants and most importantly provide standard components and modularization of the
problem-solving process. The ecosystem refers to the milieu and organizing struc-
ture for government agencies and citizens through creating a shared vision and
worldview and defining the participative architecture to coordinate innovation and
collaborative activities.

Enernet Case Study

In Ireland, Intel Labs Europe have worked together with a leading electrical
heating company Glen Dimplex, the National Grid, Utility Suppliers, and
home owners to co-innovate a new electrical energy operating model which
will optimally take advantage of renewable energies, new technologies, and
maximize efficiencies while lowering costs for all involved. This initiative
called the Enernet, which involves integrating electrical grid and Internet
technologies is developing rapidly and at the time of writing was being tested
where smart electric thermal storage systems are installed in twelve hundred
8.3 From Clusters to Open Innovation Ecosystems 73

and fifty homes in Ireland, Germany, and Latvia funded by a Horizon 2020
project called Real Value. In the Enernet, demand-side management allows
energy users of all kinds to act as virtual power plants. The project involved
leading executives from the key players in the Irish energy system who
coalesced around a shared vision of developing a future grid in Ireland lever-
aging digital and other disruptive technologies such as advanced thermal stor-
age technologies. Key executives from all stakeholders used Osterwalder’s
business model canvas to agree how to configure the solution so that shared
value was created for all stakeholders.
A good example of a Horizon 2020 project, which involved all parts of the
quadruple helix innovation, is the Enernet—Real Value project. Real Value is
a game-changing €15.5m energy storage project funded by Horizon 2020.
Real Value commenced in June 2015 and involves installing thousands of
Smart Electric Thermal Storage Systems (SETS) into 1250 homes across
Ireland, Germany, and Latvia. The Real Value consortium is a microcosm of
an ecosystem, which represents the entire electricity supply chain and has
secured key expertise from various specialisms including industry, energy
services, network, and research organizations with partners from Ireland, the
UK, Germany, Latvia, and Finland. A key enabling technology is Smart
Electrical Thermal Storage (SETS) developed by Glen Dimplex in Ireland.
This technology has been developed to meet householders’ space and water
heating needs in a low cost and energy-efficient manner while also enabling
the electricity industry to exploit its energy storage capacity.

8.3 From Clusters to Open Innovation Ecosystems

To enable the establishment of common vision and to create co-creative culture

across all stakeholders, including the end-users, open innovation ecosystems need
to be fostered. In these, the mash-up and experimentation can create the creative
commons needed for the growth of intellectual capital in the ecosystem. Following
the research of Lin and Edvinsson, there are clear indications that intellectual capi-
tal and especially structural intellectual capital drives competitiveness and innova-
tion. This means in turn that from innovation policy perspective the interaction
fluidity is a critical feature of any successful innovation system. Fluidity in this
context means frictionless interaction, experimentation in real world, and a lot of
unexpected, unplanned collisions of ideas, problems, and of course competencies to
collide, giving the spark. It is not only about single excellent components in the
system, it is centrally about collisions and connectivity.
Previously, it has been shown that the diversity of research teams increases sig-
nificantly the probability of breakthroughs. Cross-fertilization of ideas is nothing
new as such, but what ecosystem thinking does is embed diversity and serendipity
in the innovation process more systematically than ever before.
74 8 Ecosystem Orchestration and Management

It is important to move from clusters to ecosystems in our innovation system

design. There is nothing wrong with clusters, but they tend to be rather monolithic
focusing on one sector only. Of course, the clusters reinforce the sector they work
in, but the tendency is more towards improving, extrapolating than to create some-
thing new. Hence, the emphasis on modern innovation systems need to be increas-
ingly on the ‘in-between’ areas where creation of new is likely, and as consequence
also the fast growth.

8.3.1 Living Labs

According to the European Network of Living Labs (EnoLL), Living Labs (LLs)
are defined as user-centred, open innovation ecosystems based a systematic user
co-creation approach, integrating research and innovation processes in real-life
communities and settings. LLs are both practice-driven organizations that facilitate
and foster open, collaborative innovation, in real-life environments and arenas
where both open innovation and user innovation processes can be studied, experi-
mented with, and spaces/sites where new solutions can be developed. LLs operate
as intermediaries amongst citizens, research organizations, companies, cities, and
regions for joint value co-creation, rapid prototyping, or validation to scale up inno-
vation and businesses. LLs have core elements but multiple different implementa-
tions and manifestations.
The industrially led think-tank for Living Labs strategy in Europe was estab-
lished in liaison with European Commission, DG Information Society in 2003 to
conceptualize the European approach. It soon became evident that the European
approach should be focusing on creation of innovation hubs which would build on
the quadruple helix innovation model, i.e. strong and seamless interaction of the
industry, public sector, research institutions, and universities and finally also the
‘people’.
The target was to create attractive environments, which would be attractive for
industrial and research investment due to better innovation dynamics. This dynamic
would be supported by the public sector and one of the focus areas would be public
sector services, which could be co-developed with the user communities, in real-­
world settings. Part of this thinking was based on the idea to stretch the boundaries
of societal behaviour as well, as we saw the connectivity and ICT shared environ-
ments (with emerging social media) to change society as well. The quest was to
push the boundaries with real-world projects including strong technological devel-
opment too. Only by doing the research and development with citizens involved, we
could see what finally would be acceptable and thus scalable to products and
services.
This led to the first concept of Living Lab in European context; a real-world site,
not an extension of a laboratory. Important was also the scale as it was seen that for
scalability we needed the ‘sample users’ to be large enough, at least in hundreds
(Fig. 8.5).
8.3 From Clusters to Open Innovation Ecosystems 75

Fig. 8.5 Living Labs in a European context

In the figure above, we have all the components needed for European Living
Labs: Citizens, application environments, technology infrastructure, organizations,
and experts. Important to see is the later addition of societal capital into the picture
as functioning Living Labs build strongly on the idea of spillover effects back to the
society, giving motivation for all of the stakeholders, including citizens to contribute
to the common goal, making the Living Lab a winning game for everyone.
Based on these conceptual thoughts, the European Commission and the Finnish
EU presidency launched in 2006 the first wave of European Living Labs, which
built a network, European Network of Living Labs, which became later the ENoLL
movement. From the first wave the network grew fast under the subsequent EU
presidencies to the substantial scale, it has now 340 sites even beyond European
borders. And, the network is still growing. What we can say that the Living Labs
have now a strong foothold in all European regions, and is being applied as impor-
tant component in regional innovation systems too.

IPPOSI Case Study

An early example of the quadruple helix innovation is the Irish Platform for
Patients’ Organisations, Science and Industry (IPPOSI) which celebrated its
10-year anniversary in 2016 was established to provide a platform for discus-
sion between patients’ organizations, scientists, and industry (and where pos-
sible with State Agencies) in Ireland on policy, legislation, and regulation
around the development of new medicines, products, devices, and diagnostics
for unmet medical needs. IPPOSI is a unique partnership of patient groups/
76 8 Ecosystem Orchestration and Management

medical charities, science, and industry. The IPPOSI shared vision is one
where state-of-the-art innovations in healthcare are available to Irish patients
at the earliest stages. Through expertise, dialogue, consensus building, net-
working, and influencing they aim to smooth the path in Ireland for new medi-
cines and therapies to move from basic science in laboratories to the patients
who need them.
Membership is open to all constituent groups with an interest in healthcare
research and development; Patient Representatives, Academic, Science or the
Healthcare Industry. IPPOSI is funded by membership fees from industry
partners matched by government funds, through the Irish Health Research
Board. This allows patient organization/charity and academic partners to join
without incurring financial burdens.

In the same vein is the ‘Carecity’ initiative set-up as a joint collaboration between
the NHS in the UK and the Barking and Dagenham council in London, involving
the community and patients to help introduce a roadmap of innovations into the
council area, which would help improve public and patient health. In a deprived
area, the idea is that the community can help co-suggest and co-innovate the solu-
tions in a response to the problems on the ground.
Another example of Triple Helix innovation is Intel’s network of Exascale
Computing labs which have been established in France, Belgium, Germany, and
Spain in conjunction with various European Universities and National Agencies to
jointly perform the research which will inform the design of the Exascale computer
of the future as well as understanding how best to take advantage of Exascale capa-
bilities. Exascale is seen as the next moon-shot for the computing industry and
refers to computing systems capable of at least one exaFLOPS, or a billion billion
calculations per second. Such capacity represents a thousand-fold increase over the
first petascale computer that came into operation in 2008.
In the creation of the Living Labs in Europe as new technology policy compo-
nent in early 2000s, the user component was present. The idea was to create hubs of
innovation, which would be attractive for industrial and intellectual investment due
to faster prototyping and experimentation in real-world settings. In this European
Network of Living Labs, the quadruple helix wording was highlighted as the co-­
creative approach from the first beginning. Independently, other scholars such as
(Carayannis and Campbell 2009) have expanded the triple helix concept to include
user-led innovation and described this as a quadruple helix innovation process. The
first generation of Living Labs were also founded in 2006 with significant EU fund-
ing to bring the culture of co-creativity, user-centricity, and quadruple helix approach
into wider use in Europe.
Intel’s collaborative research institutes and activities with the cities of London
and Dublin explicitly comprehend user collaboration and discovery, both at design
and run time, and are good examples of quadruple helix innovation. When diverse
8.4 Collaborative Architecture 77

stakeholders align and combine creative and productive forces, everyone has the
opportunity to accelerate and capture the value created.

8.4 Collaborative Architecture

A crucial choice is the collaborative architecture and four archetypes have been
identified by Pisano and Verganti (2008) which are derived from the combination of
modalities of network participation and governance structure (Fig. 8.6). Pisano and
Verganti (2008) articulate ways to establish ‘which kind of collaboration is right for
you’ and they make a bold statement that ‘the new leaders in innovation will be
those who figure out the best way to leverage a network of outsiders’.
Key questions include how closed or open should your organizations network of
collaborators be and which kind of network configuration and which problems or
opportunities should the network tackle. Innovation openness is not a binary variable
and at least three dimensions need to be considered (Brunswicker and Hutschek
2010), IP and appropriability strategies, Innovation Search and Sources, and
Relationships and networks. Pisano and Verganti (2008) describe four kinds of open
innovation configurations: a closed and hierarchical network (an elite circle), an open
and hierarchical network (an innovation mall), an open and flat network (an innova-
tion community), and a closed and flat network (a consortium). Choosing which net-
work configuration is a trade-off considering all the benefits, costs, and risks of each
configuration. Importantly Brunswicker and Vanhaverbeke (2015) identify that both
a demand-driven and a widely diversified search strategy can improve the success of
small and medium sized companies in launching innovations. Thus, it is vital high
expectation entrepreneurs figure out how to take advantage of this new OI2.0
paradigm.

Fig. 8.6 Collaborative Architecture, Pisano and Verganti

78 8 Ecosystem Orchestration and Management

8.5 Participative Architecture and Governance

Deciding whom and providing the right incentives to ecosystem participation is

vital to success. The Innovation Value Institute is an example of an ecosystem,
which was explicitly designed and then orchestrated for success. Six different cat-
egories of organizations were brought in to establish a critical mass of ecosystem
participants with the right variety of perspectives and expertise. Participants were
motivated to participate by a compelling shared vision of driving a structural change
in the way organizations achieved value from information technology and were
incentivized by the fact that they could generate lots of shared value through using
the output of the IVI research either as an end-user or as a consulting organization.
BCG, one of the steering patrons of the IVI have used the output with more than two
hundred clients (Fig. 8.7).

8.6 Business Model Innovation

Business model innovation is a key area of interest and energy currently. According
to Doblin’s research, it is an area of high return. According to Osterwalder, ‘A busi-
ness model explains the rationale of how an organization creates, delivers and cap-
tures value’. In another part of this book, we refer to the concept of design patterns
and Osterwalder’s business model canvas is a great example of a design pattern.
Osterwalder and Pigneur’s book on Business Model Generation (2010) is also a
great example of co-creation with the book co-created by 470 practitioners from 45
countries.
An important part of driving innovation forward is the creation of a taxonomy,
where a taxonomy involves identifying, naming, describing, and classifying the
core elements of a business model. Osterwalder in addition presents the business
model canvas as a design pattern, which gives a shared language and vocabulary for
describing, assessing, visualizing, and innovating business models.

Fig. 8.7 IVI Ecosystem—Categories of participants

8.6 Business Model Innovation 79

Venkatraman, a strategic management and information technology professor

from MIT Sloan School of Management and Boston University, describes the pat-
tern shift from the business-driven era to the innovation-driven era, ‘The Five levels
of IT enabled Business Transformation’. This theory although very academic and
speculative at the time does present the business model change due to ICT in a very
straightforward and realistic way.
The operative phrase today is ‘IT changes the way we do Business’. The distinc-
tive role of IT is well known in shaping tomorrow’s business operations, but when
does it become a new value proposition instead of just digitizing the old existing
ways of operations?
The first level for leveraging IT functionality within a business typically occurs
when managers respond to operational problems or challenges; this causes minimal
changes to the business processes and underleverages IT’s potential capabilities
failing to provide the organization with more advantages (Fig. 8.8). Because the
decision is based on need and no radical changes are made to the business pro-
cesses, competitors are easily able to imitate such practice. The decision should be
motivated by a focus on differentiation and strategic effectiveness.
The second level of integration occurs when there is business process interdepen-
dence and technical interconnectivity, however as well as in the previous level; the
decision should be based on improving a specific efficiency and not simply the
result of automating already inefficient business processes.
The third level is business model redesign by altering ‘First Principles’. The
benefits from IT functionality cannot be fully accomplished if superimposed on the
current business models, just like the two previous levels. That is because the cur-
rent business processes come from a set of organizational principles from the indus-
trial revolution. ICT functionality has altered some of these ‘first principles’; ICT
should be used as a lever for designing the new organization and associated business
processes.
The fourth level is based in the previous level, altering the ‘first principles’ and
in addition considering that the exchange of information amongst participants in

Fig. 8.8 The Five Levels for Business Model Change, with a twist
80 8 Ecosystem Orchestration and Management

a business network by using IT capabilities is not only effective and efficient for
all participants, but also allows for further innovation and development of enter-
prise by using the innovations and developments from other enterprises to the
bigger benefit of all.
The fifth level is considering that the business networking benefits and the role of
information technology have direct impacts on the logic of business scope and the
resulting redistribution of revenue and profit, meaning that, tasks may be elimi-
nated; some tasks may be restructured, and some tasks may be expanded. IT’s
potential benefits are directly connected to the degree of change in organizational
practices, strategies, structure, processes, and skills. The sixth level is not part of the
original five levels of business model change because it is the NEW business model.

8.6.1 Business Model Experimentation

Business model experimentation is about doing things that are unfamiliar and dif-
ferent but present a great opportunity for business model innovation. Business
model experimentation considers the facts and assumptions that are already known
and trialing others that might be risky, but in business model experimentation tools
to reduce these uncertainties are used to decrease risk and increase success rate.
One of the best business model experimentation concepts in the industry is the
business model canvas introduced by Alexander Osterwalder. His model considers
all basic aspects of business models and allows for experimentation and flexibility;
it accepts modifications on-the-go and opens the business for different opportunities
in regard to customer segments, solutions and benefits, value and cost levels, pric-
ing, differentiation, channels and relationships, as well as resources and partner-
ships. The business model canvas consists of cost structure, key resources, key
partners, key activities, customer relationships, customer segments, value proposi-
tions, channels, and finally revenue streams.

8.7 Ecosystem Development and Evolution

Bruce Tuckman’s stages of team or group development model can be applied to the
development of evolution of an ecosystem. Tuckman’s (1965) four-stage model
describes the four stages a team will go through before the team becomes high per-
forming. In the initial stage ‘forming’, the team meet and agree what are the goals and
challenges. Typically, team members act relatively independently and the leader has to
take significant responsibility for direction and guidance. In the second stage of devel-
opment ‘storming’, the leader often has to take the role of a coach as trust is not yet
established across the team and team members’ view for position as they try to estab-
lish their role and relationships within the team. ‘Norming’ is the third stage of devel-
opment where consensus and agreement emerge as the dominant decision-­making
8.8 European Innovation Ecosystem and Scoreboard 81

mode and the leader acts as a facilitator and enables. In the third stage, individuals often
move from a compliance mentality to a commitment mentality. The fourth phase is the
‘performing’ phase where the members of the team are aligned around and execute to
a shared vision. In this mode, the team often commit to over-achievement goals and
operate with a lot of autonomy. A key distinguishing factor of a high ‘performing’ team
is trust, while disagreements might well occur they are resolved positively within the
team. A high performing team delivers synergy where the collective output of the team
is much higher than the sum of the contributions of the individuals on the team.
For an ecosystem a keystone player, as defined by Michael Moore is needed to
act as an orchestrator and to determine the beat rate of the ecosystem. When an
ecosystem gets to stage four, it is high performing and individual members acting
autonomously almost like natural occurring biological ecosystems with individual
entities efforts and contributions aligning and accelerating the collective impact of
the ecosystem. This is not to say that there is no competition amongst members of
the ecosystem; a healthy ‘coopetition’ exists and the right balance between collabo-
ration and competition is achieved when ecosystem members adopt a ‘win-more,
win-more’ mentality.
Ecosystems may well organically evolve but where the ecosystem is explicitly
orchestrated and managed this significantly increases the chance of success and the
efficiency and effectiveness of the ecosystem as well as maximizing the sustainabil-
ity and longevity of the ecosystem.

8.8 European Innovation Ecosystem and Scoreboard

The annual innovation union scoreboard provides a comparative assessment of the

research and innovation performance of the EU28 member states and the relative
strengths and weaknesses of their research and innovation systems. It helps member
states assess areas in which they need to concentrate their efforts in order to boost
their innovation performance. This is a crucial tool to help evolve national innova-
tion ecosystems and system by pinpointing the areas in need of most improvement.
The EIS is holistic in that it looks at input, output, and intermediates innovation
indicators (Fig. 8.9).
Ireland is a great case study of how to use the EIS. Ireland began a focus on
research and development and initially from a very low base had a focus on generat-
ing research publications. In 2008, Ireland had three times the average volume of
scientific publications but was only at the European average in terms of top ten
percent of scientific co-publications thus indicating that quantity was delivered over
quality. With the appointment of a new Director of Science Foundation Ireland
Mark Ferguson, a focus on quality research with impact worked to improve quality
over quantity (Fig. 8.10).
Additionally, new tools are emerging to help manage and get better yield from
pan-European R&D investments. One such tool is the innovation radar work led by
82 8 Ecosystem Orchestration and Management

Fig. 8.9 Innovation Union Scoreboard

Fig. 8.10 Health of Ireland Innovation System vs. EU Average

Eoghan O’Neill in the European Commission, which aims to systematically iden-

tify the winning innovations and innovators, which could be scaled. Additionally, it
will help identify the innovation results and the differentiators for success in EU
projects to assist in selecting future projects. Thus, innovation radar results will also
be used in designing new action types for the EU research and innovation pro-
grammes and to highlight the impact of the investments. Also we highlight the need
8.9 The Entrepreneurial State 83

of new professions in these open innovation ecosystems; the curator taking care of
quality thematic contents, the bridger making the connections between curated con-
tents and ideas, the orchestrator driving the talent together for a common objective,
and finally the systems designer who makes all this possible from process and con-
nectivity perspective.

Case Study: Cambridge Wireless

Cambridge wireless is a contemporary example of ecosystem orchestration
and stewardship. CW is an organization, which is managing a vibrant com-
munity with a rapidly expanding network of nearly 400 companies across the
globe interested in the development and application of wireless and mobile
technologies to solve business problems. CW connects those companies and
stimulates collaborative innovation through a range of thought-provoking
high-profile networking events.
In addition to these high-profile VIP networking activities, CW run nineteen
special interest groups (SIGs), each focused on a specific technology and/or
business area. SIG meetings provide opportunities for member organizations to
meet, learn from each other, and explore opportunities to work together.
CW’s interest is in practical solutions to business needs in the areas of
mobile, networks, Internet, semiconductor, advanced software, and particu-
larly anything cellular. While the community is global, it does have a geo-
graphic locus in Cambridge and helps turbocharge the local ecosystem.
CW’s mantra is to network, collaborate, and innovate representing a very
valid innovation pathway. CW is a not-for-profit organization that is owned by
its members, with a governing board that is elected by the membership.
Members are drawn from all parts of the wireless-enabled world, from securely
connected devices, networks, smart phones, software, and applications, through
to data analytics, content delivery, telecommunications, and satellites.

8.9 The Entrepreneurial State

Mariana Mazzucato in her book ‘the entrepreneurial state’ says that the government
needs to do more than create the right conditions for innovation such as policies that
favour industrial growth and better education. She argues that the government needs
to initiate large-scale innovation initiatives that are society transforming. This is at
the essence of quadruple helix innovation where a shared vision is established with
a major transformation goal. Often the vision may come from outside the govern-
ment or public sector but the government needs to adopt and intellectually and
financially support the innovation program that strives to implement the vision.
Professor Mazzucato emphasized the important role of the state and found after
a detailed review of case studies that it was only after an entrepreneurial state had
84 8 Ecosystem Orchestration and Management

made a high-risk investment that the private sector found the courage to invest. Her
ground-breaking research showed that many of the breakthroughs required by Apple
to develop the iPhone were funded by government research in the USA and Europe.

8.10 Policy: National Innovation Strategy

The role of the government is changing from not just enabling innovation and creat-
ing the conditions for innovation but also to be an innovation driver setting key
focus areas or smart specialization strategies and actively participating in the inno-
vation process.
According to the European Innovation scorecard, Ireland is an innovation fol-
lower but the Irish government and the department of jobs, enterprise, and innova-
tion have defined a national innovation strategy which sets out an ambition and a
strategy to make Ireland an innovation leader in a number of defined areas—this is
called Innovation 2020 and sets out a 5-year strategy and a roadmap towards a goal
of making Ireland an innovation leader towards creating a strong sustainable econ-
omy and a better society. Ireland in recent years create a research prioritization
process to focus the countries innovation capacity on efforts on a limited number of
key high potential focus areas. Having completed and implemented the research
prioritization exercise, the next step in maturity was to implement an innovation
strategy. This is in line with the aphorism ‘Research turns money into knowledge,
Innovation turns knowledge into money’.
According to Innovation 2020, ‘Innovation—the quest to find solutions that are
original, more effective and deliver positive change—is at the heart of Government
policies for enterprise, education, social and cultural development, and the delivery
of public services’. Interestingly, Ireland has one of the most open economies in the
world and has attracted through a ‘low tax and talent’ policy a disproportionate per-
centage of US foreign direct investment in Europe into Ireland. Through sustained
investment, Ireland has been transformed from a primarily agrarian-based economy
to a leading centre for education, research, and industry across a range of cutting-
edge disciplines. From this agrarian base, Ireland today has nine of the top ten global
pharma and ICT companies with European headquarters or significant presence in
the country demonstrating the benefit of sustained innovation in innovation policy.

The Case of Ontario: Incentives Matter

The state of Ontario, which had lagging economic performance compared to
peers states and following the creation of a taskforce1 identified that Ontario
needed to encourage innovation to compete in the modern global economy. A
core conclusion of the report was that innovation plays a vital role in the

1
Finding Its Own Way: Ontario needs to take a new tack, Institute for Competiveness and
Prosperity, Ontario (2014).
8.11 Co-creation 85

state’s prosperity but identified that Ontario lagged its peers in key measures
of innovation such as R&D expenditure, commercialization of innovations,
and patent output.
After a detailed analysis, the taskforce came to a very interesting conclu-
sion that it was not the amount of money that was spent on innovation that
mattered but the incentives for innovation that mattered. They found that indi-
rect support and a patchwork of different support programs failed to generate
major chance. The taskforce concluded that Ontario needed to provide more
direct support for innovation, particularly for large businesses. Three action
items were agreed.
• Increase the amount of business R&D expenditure
• Introduce policies which encourage the commercialization of R&D and
give better protection to IP
• Broaden the understanding of innovation and incorporate innovation edu-
cation into Ontario’s education curriculum

8.11 Co-creation

Ramaswamy’s and Goiullart’s book (2010) on the power of co-creation and how to
boost growth, productivity, and profits nicely conceptualizes a growing trend in both
business and societal co-innovation. Central to the concept of co-creation is a shared
vision of how two organizations have a shared vision of how they could and do create
shared value. Intel Labs Europe collaboratory (co-labs) with SAP, BT, and Nokia
were excellent examples of this where companies with complementary strengths,
capabilities, and interests can align and accelerate innovations to the market.
Increasingly, open flexible functional platforms for rapid evolution of solutions
are important to provide platforms for innovation. Alexander von Gobain, former
Chair of the European Institute of Innovation and Technology, described the EIT
Knowledge and Innovation Communities (KIC) as ‘Innovation Factories’ where
each KIC tries to establish a distributed ecosystem to support innovation and entre-
preneurship in a specific domain.
One example of an open functional innovation platform is the GE ecomagination
challenge for which 3800 ideas were submitted many by entrepreneurs with strong
track records. The $200m funding commitment by GE and four venture capital
partners is a very attractive way of funding would-be entrepreneurs and the linking
of similar ideas and the ability to comment on other people’s ideas create a platform
for rapid emergence and evolution. The ecomagination program is another great
example of share value at work representing GE’s commitment to imagine and build
innovative solutions to environmental challenges while driving economic growth.
The Ireland-based Innovation Value Institute has developed a global platform for
research and innovation in creating tools to help Chief Information officers (CIOs)
better manage their IT capabilities and improve business results through IT. Most
86 8 Ecosystem Orchestration and Management

participants in the IVI consortium both contribute knowledge and use the collective
knowledge generated. Shared value is not only created through adoption of the
research outputs called ‘artefacts’, but the IVI is also catalysing the formation of
new start-up consulting firms as well as helping existing consulting firms scale
through provision of assessments and services. All the global members of IVI sign
up for the IVI vision, which is to drive a structural change in the way companies and
governments get value from information technology.

8.12 Visualizing Innovation Ecosystems

Innovation ecosystems are difficult to manage and characterize. Increasingly, there

are software tools becoming available to help map and graph what is happening in
the ecosystems to help inform executives about future decisions. In a rapidly evolv-
ing ecosystem such as that for the Internet of Things where there is no keystone
player and no dominant design this can be very helpful. Equally, for a start-up the
StartUp Genome ecosystems report, which analyses the vibrancy and leadership of
different cities for their start-up culture and environment, can be invaluable. StartUp
Genome apply science to ecosystem measurement and visualization and have devel-
oped a four-stage model to describe which part of the ecosystem life cycle a particu-
lar city or ecosystem is in.
Activation describes the start-up phase of an ecosystem where there is a low
number of start-ups, typically less than a thousand and where there are resource
gaps. In the globalized phase, there have been several high profile and large exits
(>100m) which have put the ecosystem on a global map. In the expansion phase,
there are more than two thousand start-ups and there have been a number of multi-­
million dollar exits and unicorns, which have elevated the status of the ecosystem on
a global level. The integration phase is the pinnacle of the models where the size and
results of the ecosystem are world-leading as measured by rate of early-stage suc-
cess, number of unicorns, and rate of exits.
StartUp Genome LLC ranks cities annually using criteria such as performance,
funding, reach, talent, and start-up experience with ecosystems such as Silicon Valley,
New York, London, Beijing, and Boston being the top five start-up ecosystems in the
2017 report. Start-up genome make their database of data available for a small fee to
facilitate further research and analysis by different stakeholders perhaps looking for
the right place to locate their start-up or a local authority figuring out what gaps should
be closed to make their ecosystem more competitive and attractive.

8.13 Intel Labs Europe Ecosystem Management

By 2016, Intel Labs Europe (ILE) numbered more than fifty labs across Europe.
There is a lot that can be achieved with this number of labs. However, the real power
of ILE was the number of organizations that interacted with it in its ecosystem
8.14 Makers and a New Innovation Ecosystem 87

Fig. 8.11 Intel Labs Europe Ecosystem

leveraging OI2 principles. In 2016, there were more than seven hundred organiza-
tions participating in joint research with ILE as depicted in the ecosystem diagram
above (Fig. 8.11).
Alignment was achieved by sharing ILE’s Innovation agenda, which had a vision
of a Digital Europe, using digital technology to transform societal level systems in
Europe through digital technologies. This became a shared vision, which extended
over Intel’s research participation in European programs. With ILE labs participat-
ing in over seventy EU framework seven project, ILE was able to achieve influence
and results far beyond its own footprint and investments in Europe. Additionally, it
helped to build generic innovation capacity with researcher and developers who
developed an aptitude and affinity for using Intel Architecture in projects.

8.14 Makers and a New Innovation Ecosystem

Innovation ecosystems can be physical or virtual, encompassing all stakeholders

driving for common goals. Ideally, ecosystems have hundreds of projects/experi-
ments simultaneously, cross-fertilizing each other.
88 8 Ecosystem Orchestration and Management

Engagement platforms are important to test, verify, and develop the ideas to
innovation. The maker movement is an umbrella term for independent inventors,
designers, and technology tinkerers. The creation of FabLab type of facilities and
maker spaces is making experimentation and prototyping accessible and affordable
for all stakeholders.

Arduino Case Study

Arduino is an open-source hardware and software prototyping platform
intended for both professionals and hobbyists who are interested in creating
interactive objects or environments. The platform is extendable by using
‘Shield’ add-on boards. Originally invented in Italy, the open-source Arduino
movement has become a favourite of makers worldwide with its low-cost and
usability helping democratize the ability to use digital technology for innova-
tion by a global maker community. The Arduino’s community project prod-
ucts are distributed as open-source hardware and software, which are licensed
under the GNU General Public license permitting the manufacturing of
Arduino board and software distribution by anyone. It was estimated that by
2013, there were over 700,000 Arduino boards in use across the world and the
growth and value of Arduino and its associated community is an excellent
example of OI2 at work.
Beginning in 2003, the Arduino project started as a program for students at the
Interaction Design Institute in Ivrea, Italy aiming to provide a low cost and simple
way for both professionals and beginners to create solutions using sensors and
actuators such as thermotstats, motion detectors, cameras, and even robots. The
name Arduino comes from a pub in Ivrea where the founders used to meet. This
example demonstrates the power of a shared vision to create a worldwide move-
ment with a report greater than a hundred million visits annually to the Arduino
site by 2017. Also in 2017, the Arduino founding team were awarded a European
Innovation Luminary award by the EU OIPSG and associated academy.

8.15 Innovation Ecosystems Orchestration

In the past innovation, ecosystems grew organically and took time to emerge. Today,
there is a recognition that innovation ecosystems can be designed and orchestrated for
success. Innovation ecosystems can exist in many forms, in a geographic region, across
a particular industry or increasingly they can be virtual not tied to a specific geography.
Geographical or virtual ecosystems can span or traverse a number of business ecosys-
tems. Bill Aulet of the MIT Entrepreneurship Centre describes seven key pods that
make up the innovation ecosystems: government, demand, invention/innovation, fund-
ing, infrastructure, culture and, most importantly, entrepreneurs themselves.
Rather than letting innovation ecosystems evolve organically, there is increasing
recognition of the need to explicitly invest in and manage national and regional
innovation ecosystems. For example, to spur economic development in the state of
8.15 Innovation Ecosystems Orchestration 89

Connecticut, Governor Daniel Malloy as part of the state’s innovation ecosystem

program announced four innovation hubs in October 2012 hosting financial, techni-
cal, and professional resource offerings for business. Initially costing $5 million
they were funded through the Malloy’s 2011 Jobs Bill. Another example is the 2010
Irish Innovation Taskforce report commissioned by the Irish Prime Minister, which
put developing and supporting the national innovation ecosystem at the centre of the
national strategy for innovation ‘Building Ireland’s Smart Economy’.
However, innovation ecosystems are extending beyond regional and national
boundaries. Victor Hwang (2012) identified the hugely important impact of IT and
networks when he wrote, ‘Fortunately, the social networks of the future no longer
need to be imprisoned by geography, as we can build overlapping social networks
that traverse the boundaries of the past’.
It is becoming apparent that a new more powerful kind of open innovation is hap-
pening where we have broad collaboration across many actors, with the locus of com-
petition not only revolving around particular companies but around competing
ecosystems. Consider the case of launch of Microsoft’s Surface tablet, which at launch
was targeted to have five thousand apps available for consumers to use. At first blush,
that might sound impressive, but compared to the seven hundred thousand, which
were already available on the Apple iPad (Wall Street Journal, October 24, 2012) it
puts in perspective the power of a developer ecosystem surrounding a platform.
The analogy of linear momentum can be applied to innovation ecosystems with
momentum being mass by velocity. The ecosystem, which has the most mass (either
value chain participants or users) and the highest velocity, is in the strongest posi-
tion to win. However that is not always the case and small ecosystems, which are
agile, and have high velocity can overcome the inertia of an established ecosystem.
Also past success is not a guarantee of future success. Witness the struggles that
Nokia/Microsoft are encountering in try to compete with the Apple iPhone and
Android ecosystems.
Would-be entrepreneurs who attach themselves to fast-moving ecosystems stand
to derive significant benefits from the velocity of an ecosystem. We must not con-
fuse speed and velocity. Velocity is speed by direction, and where innovations are
delivered in the context of a vision vector that is much more likely to have longevity
rather than ad hoc innovations that are delivered with speed. As Stephen Covey
says, ‘begin with the end in Mind’.
And yet many successful entrepreneurs did not have an end state in mind and
their products or services evolved as they learnt more and collaborated with part-
ners. With increasing interconnectivity, the Internet itself creates a platform for
emergence, where half-baked ideas and prototypes can be quickly piloted and iter-
ated to deliver new value products or services. Indeed, with the continuing advance
of information technology, many products are becoming much more IT intensive
and this creates new opportunities for technology-based entrepreneurs.
One example of new innovation ecosystems established is the GENIVI non-­
profit industry alliance committed to driving the broad adoption of an In-Vehicle
Infotainment (IVI) open-source development platform. The mission of the GENIVI
consortium is to drive the broad adoption of an open-source development platform
90 8 Ecosystem Orchestration and Management

by aligning automotive original equipment manufacturers (OEMs) requirements

and delivering specifications, reference implementations, and certification programs
that form a consistent basis for an innovative infotainment system. GENIVI was
formed by a broad consortium of players such as BMW, Jaguar LandRover, and
Intel to drive efficiencies and innovation across the automotive ecosystem for the
so-called in-car infotainment systems.
Rather than each automotive company and supplier, having to build custom hard-
ware and software the goal was to develop a standard platform for infotainment that
companies could then innovate on top of. The fact that many competing automotive
companies and suppliers could come together successfully to collaborate to lower
costs, increase agility, and accelerate innovations in in-car infotainment is a great
example that something is fundamentally changing in the nature of innovation and
collaboration.
Another similar example from the computer networking industry is the
Greentouch consortium led by Alcatel Lucent which is a consortium of competitors
and suppliers working together around a unified mission of improving the energy
efficiency of networks by a factor of one thousand from current levels.
Jeff Alex at SRI uses the metaphor of a biological ecosystem to describe the nature
of a business ecosystem. A key characteristic of an ecosystem is that it is evolving
with organic, diverse, and symbiotic attributes. The principle of synergy is central—
the idea that through collaboration entities can deliver something, which is unattain-
able on one’s own. Ecosystems are also complex-adaptive systems. Once the raw
materials are put in place and the initial relationships and couplings established they
are often self-organizing and self-regulating according to Darwinian principles.
The longevity of an ecosystem and its relative fragility or resilience is dependent
on whether it is organized as a value chain or as a value cycle. This is a critical dis-
tinction. A value chain is built for linear production where ‘you use it (products,
resources) up, throw it away and not worry about where it goes when it’s gone,
because that is someone else’s problem’ (Haque, 2011). ‘Linear production is built
to make stuff that dies after a fixed life cycle, over and over again’. Now how could
that be sustainable?
In a value cycle (Haque, 2011), resources are used intensively without depleting
them. In fact, the more intensely and durably that resources can be recycled or at
least exchanged the more longevity is assured as prices drop because each cycle
amortizes and offsets the capital and expenses, costs of production like factories,
people, and knowledge. In a value cycle scenario, an ecosystem can approach the
efficient frontier (Marjanovic et al. 2012) because more value is created over a lon-
ger period of time with less risk.
Ultimately, the goal is to have innovation ecosystems, which are autocatalytic—
where a reaction or ecosystem is catalysed by a product developed by the ecosys-
tem. Again the Apple App store ecosystem is an example of this where new apps
added help catalyse the creation and adoption of further apps.
A key task of the ecosystem orchestrator is to achieve the right balance between
control and enabling/inspiring. The most effective ecosystems will be those that are
empowered by a shared vision rather than controlled. When there is commitment
rather than compliance, the results will ultimately be much stronger.
Chapter 9
Designing for Adoption

‘Innovation is not innovators innovating but customers

adopting’
Michael Schrage, MIT

A hallmark of OI2 is the focus on adoption and innovation in OI2 is defined by the
creation and adoption of something new, which creates value for the entities that adopt
it. Similar to the movement of ‘Design for Manufacturing’ where engineers designing
products consider how to make products more easily manufacturable, designing and
innovation for adoption is critical for successful adoption of innovations. According to
the OECD, 80% of the value of innovation comes from the successful adoption of an
innovation with just 20% of the value coming from the creation activity. This is of
course obvious and often we consider the hard part of innovation to be the creation
phase and this is where most resources are often committed. However ironically as
stated most of the value from an innovation comes when it is adopted which is the
phase that is least considered or invested in. By carefully considering the factors
required for successful adoption, we can significantly increase the probability of suc-
cessful adoption. We see that the quadruple helix co-creation process is crucial for
rapid scalability of new extended products, especially in new markets.
Users are an enormous source of innovation and when products or services are
co-created they are designed for adoption from the get-go. Erik von Hippel’s
research shows that the majority of significant innovations in the semiconductor
industry over a 30-year period came from lead users. Co-innovation with users or
direct innovation led by users is especially powerful. Designing a platform where
users can innovate on a foundational set of assets with an associated set of standards
can be very powerful. The Apple app store and platform is powered by an enormous
community of app developers whose imagination and energies fuel the increasing
adoption and use of the Apple platform.
Usability in OI2 can be achieved faster by collaborating with users with real-­
world experiments in living labs; here, we have the notion of fail fast, learn fast, and
scale fast. Experimentation using agile developments is crucial in evolving utility,
user experience, and usability to meet the needs of the user community.
The six components in the 6U adoption pattern are

© Springer International Publishing Switzerland 2018 91

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_9
92 9 Designing for Adoption

Fig. 9.1 6U Designing for Adoption Pattern

• Utility
• Usability
• User experience
• Users
• Ubiquity
• Uniqueness
When these attributes are sought, especially with the involvement of lead users
using a platform-based innovation approach, the probability of subsequent adoption
is substantially higher (Fig. 9.1).

9.1 Utility

By utility, we mean the quality or state of being useful and we explore what is the
value or usefulness does the innovation provides? perhaps doing something better,
faster, or cheaper than before or else creation of a whole new function that was not
available or possible before. Innovations which are quirky but do not provide utility
quickly fade from view. Products and services need to be designed for Use. A beau-
tiful product or service, which has an unacceptable mean time between failure
(MTBF) or ‘blue screen’ rate may not have longevity. With the increasing emer-
gence of the sharing economy, innovation design and operation criteria will need to
be optimized for utilization and longevity of assets as well as utility.
Industry commons is a good example of utility functions enabling integrated use
of agreed functionalities across technologies, in a technology agnostic way. An
open approach is essential as only then the industry commons can have a wide cov-
erage across industries.
9.4 User Experience 93

9.2 Uniqueness

Uniqueness is a critical factor for adoption. With Digital, it is increasingly possible

to do things that even several years ago appeared impossible. Indeed, it seems the
Adidas marketing slogan ‘Impossible is nothing’ seems increasingly to apply to
Digital. When we consider platform innovations such as Airbnb or Uber, the unique-
ness was the scale at which they were able to bring new services to the market,
making unused capacity in private homes or cars available for use and providing the
capability to meet needs of people in real time. Both of these services are exemplars
of the kind of innovations, which make up the ‘Sharing Economy’ where the utiliza-
tion of assets are improved in everyone’s interests. For a digital wallet, the ability to
store and automatically exchange a digital coupon at a store and to automatically
accumulate loyalty points rather than having to produce paper coupons at a till will
provide a unique capability which will speed adoption.

9.3 Usability

Usability examines how usable is the new innovation or service. For example, many
in the financial services industry are pushing the deployment of digital wallets but
for many users the set-up efforts required and lack of merchant infrastructure cur-
rently deployed means that credit cards currently provide better usability than cur-
rent generation digital wallets. Additionally, some have contrasted the implementation
effort of current generation digital wallet software at issuing banks to be the equiva-
lent of an ERP (enterprise resource planning) software installation, which signifi-
cantly increases the barrier to adoption of digital wallets across the broad financial
system. Innovations may be unique and may bring much value but if they are com-
plex to use then adoption can be slowed or indeed fail. Co-creation with the users
focuses the development process towards adoptable, usable solutions which in the
innovation process are verified in real-world settings.

9.4 User Experience

User experience is increasingly considered a critical factor in the adoption and use
of innovations. Analysts often refer to the experience economy and increasingly
those products and services, which provide better user experiences are more quickly
adopted and can command a healthy price and margin premium. When a product or
service provides both utility and a good user experience, then the probability of
adoption is significantly increased. There were many MP3 players in the market
before Apple launched the iPod, but it was the user experience of the iPod, both in
terms of touch and feel and the backend services provided through iTunes that drive
outrageously successful adoption compared to earlier market entrants.
94 9 Designing for Adoption

9.5 Ubiquity

Innovations that take advantage of the network effect, whereby the value of the inno-
vation increases with each additional user, can have dramatically increased rates of
adoption once a critical mass of users is adopted. Here, innovations take advantage
of network, software, information, silicon capabilities, and economics and designing
carefully to create utility and incentives before an innovation is launched can have
dramatic effects on adoption rates. Platforms such as Facebook, Airbnb, and Google
all exhibit network effects and are very hard to displace once a network effect takes
hold. There are many criteria, which influence adoption of innovations—two impor-
tant ones are described in the Bass Diffusion equation, which are the innovation
index and the imitation index. However, the imitation index appears to be much more
influential than the novelty index in successful consumer adoptions.

9.6  ser-Driven Innovation and the Reverse Innovation

U
Pyramid

Jean Claude Burgelman was one of the first policy makers to identify the trend of
user-led and user-centred innovation. Burgelman outlined the shift from the user as a
research object to the user as a research contributor to ultimately the user as a full
research participant. Erik von Hippel argues that innovation is now being democra-
tized in that users, supported by ever improving computers and communications,
have ever improving ability to develop their own services and products. Von Hippel
also noted that these users often freely share their innovations with others creating
new intellectual commons and associated user-driven innovation communities, a key
characteristic of OI2. Intel’s joint innovation lab with Nokia in Oulu where the mayor
and the collective citizenry were an integral part of the innovation process is another
good example of this. In Oulu, the municipality provided a good user engagement
environment with open Wi-Fi for all covering the whole city. The university and
research was much focused on mobile communications and their applications.
Finally, the city offered also public services (e.g. health services) to be developed in
real settings, with real citizens.
The Internet is itself a great example of a user-driven phenomenon where once it
was established, without central governance it has continued to grow, evolve, and
deliver more and more utility driven often by the users. Johnny Ryan (2010)
describes the Internet as a ‘centrifugal force, user driven and open’.
The Internet also acts as intellectual supercollider bringing people and ideas
together with low collaborative friction and fast feedback loops.
Dell Computer encourages users to submit new product features and ideas to it
and also allows customers vote on the top new features they would like to see in Dell
products. The standout example of user-led innovation is the powerful developer
community—many just individuals who contribute new apps to the Apple iPhone,
which transform it to a modern day digital Swiss army knife.
9.7 Reverse Innovation Pyramid 95

In parallel, the EU IT advisory group (ISTAG) identified more than a decade ago
the future trend of the consumer moving to a prosumer. ISTAG recommended
strongly to invest in EAR (Experimentation and Application Research) methodol-
ogy in European frameworks.
YouTube is an excellent contemporary example of this where users not only
consume content but also create and upload content. YouTube and Facebook are
forerunners of a potential much deeper level of mass collaboration that is enabled
by pervasive high-speed networks and ever-increasing computing power.
The European Internet Foundation in their seminal report ‘the Digital World in
2025’ identified mass collaboration as the emerging dominant paradigm. Wikinomics
(Tapscott and Williams 2006) described the positive effects of peer production. The
Innovation Value Institute consortium physically based in Ireland although virtually
distributed across the world is an excellent example of mass collaboration amongst
IT executives in which CIOs have created a model ‘built by CIOs, for CIOs’.
With predictions of potentially more than fifteen billion connected devices by
2015, collaboration will not be limited to increased person-to-person collaboration.
There will likely be waves of machine-to-machine collaboration and person-to-­
machine collaborations. It is projected as the car becomes part of the network (Bill
Ford announced at Mobile World Congress in 2012 that the car is now part of the
network) that future cars may transmit three thousand messages per second to other
cars in their vicinity. This will call for a whole new meaning of embedded comput-
ing, but will also enable mass synchronization of traffic likely resulting in earlier
arrival times and more fuel efficiencies.

9.7 Reverse Innovation Pyramid

Geleyn Meijer, Gohar Sargsyan et al. in the 2012 OISPG report on the socioeco-
nomic benefits of open service innovation neatly conceptualized the new aspect of
user-led innovation and called this the reverse innovation pyramid as shown in the
figure below (Fig. 9.2).
Rather than innovation being ‘done’ to users, in the new open innovation models,
users are participants in the innovation process and there is often shared wealth
­created. The Apple App store and its massive community of app developers is a
standout example of this.
Open Innovation 2.0 enables a reversal of the typical innovation pyramid with
the users as a primary source of innovation and indeed the user innovators poten-
tially sharing part of the revenue stream. The Lego Kuuso platform http://lego.
cuusoo.com/ mentioned before is a great example of this. The development of the
Lego Kuuso platform is also an example of reapplication as Lego piggybacked on
the existing Kuuso community in Japan.
When users are intimately involved or indeed drivers of innovation, then adop-
tion is almost guaranteed as these lead users help make sure the innovation actually
solves a real problem or helps seize an opportunity.
96 9 Designing for Adoption

Fig. 9.2 Reverse Innovation Pyramid: source Meijer & Sarsgyan

9.8 The Power of Crowds

Through the power of the crowds, innovators and thinkers have found new ways of
generating value to all stakeholders through hedonism and stimulation of the mind as
well as by sharing this newly found pleasure in innovation and information sharing.
One of the advantages of the power of the crowds is the positivism that the
crowds bring into the equation. Usually, people that find pleasure in the discovery
of new ideas and are passionate about innovation are positive individuals, and
­positivism is a very powerful tool when it comes to generating value. When indi-
viduals possess a ‘forward’ mentality and continue exploring thoughts always
thinking that something positive is going to come out of it, more often than not
something positive actually comes out of it. Sharing this positive ideas can create a
domino effect and make other innovators realize how powerful their positive ideas
are getting around and how working and sharing ideas in a positive environment can
generate more innovative ideas and create even more value.
The value of Open Innovation 2.0 is seen when not only information but also facili-
ties and services are shared. Developing solutions so that companies can profit from
each other in the use of intellectual property, facilities, technologies, and even resources
can be cost-efficient, effective, and adds value. Integrated research, development, man-
agement, marketing, technology, and other complex tasks could be beneficial.
9.10 Social or Peer Production 97

An example of the role of the crowds in open innovations is that when employees
change jobs, they take their knowledge with them, resulting in knowledge flows
between firms, and even countries!
The role of the crowds becomes even more important when the acquired knowl-
edge is combined with internal knowledge from the new environment and that
external knowledge generates new ideas and subsequently innovation, this is where
the value added is found.
However, even more value added is found when different crowds get together such
as large corporations, small, medium and micro enterprises, universities, technology
centres, and associations amongst others. It is natural for people to share ideas and
thoughts, but getting people to innovate requires the right crowd to be together.

9.9 Crowdfunding

An extension of crowdsourcing is the idea of crowdfunding made popular by platforms

such as Kickstarter and Indiegogo. Crowdfunding is a mechanism of venture funding
where many people contribute small amounts of capital, typically over the Internet.
According to Dan Marom, a crowdfunding pioneer ‘Crowdfunding is powerful because
it transcends finance; the mechanism is a vehicle for marketing, innovation, market
validation, sales, and intrapreneurship’. Crowdfunding can be very effective as it both
secures start-up funding and also secures customers based on a compelling share vision
articulated as part of the funding campaign. Crowdfunding also helps democratize ven-
ture funding by making new funding mechanisms available to people and organiza-
tions who otherwise would have great difficulty accessing funding.

9.10 Social or Peer Production

Social or peer production is a new form of socioeconomic production in which many

people work collaboratively together towards a common goal. Often commons-­based
peer production projects are designed without a need for financial compensation by
others—the example of Linux being a hallmark of a peer production activity.
At the core of peer production are the principles of modularity and integration.
Objectives must be divisible into components or modules that can be independently
produced and then seamlessly integrated.
98 9 Designing for Adoption

Lego Case Study

A good example of a win-win situation for all stakeholders is the LEGO inno-
vation community.
LEGO has millions of active users of the toys. From that base they have
created an engagement environment where participants to the forum (unlim-
ited, but in practice hundreds of thousands of people worldwide) can come
with their LEGO toy ideas for public crowd voting. Lego’s vision is to inspire
and develop the builders of tomorrow and their Kuuso platform enables chil-
dren to design new LEGO models and submit them to review a Lego review
board. Prior to being approved for review by the Lego review board, they have
to get 10,000 votes from the community to pass the review threshold. Users
who have their designs approved by the Lego review board receive 1% of the
revenue from sales of the design when it is manufactured. For Lego, the ben-
efits are many, including building brand affinity through participation, sourc-
ing new ideas externally and creating new sources for revenue. For the users,
Lego have created a platform to help them express their creativity, help
develop entrepreneurial skills as well as having fun through play.

9.11 Adoption Pattern Analysis

An adoption pattern analysis can be helpful in identifying whether a new innovation

is likely to be successfully adopted or not, as shown in (Fig. 9.3). Adoption is
assessed against the six core components of the designing for innovation pattern.
The adoption pattern analysis shows an estimate of the current mapping of a digital
wallet and a future digital wallet compared to a credit card. It is likely that in the
future digital wallets will be pervasive but some functions need to be improved upon
before the conventional physical wallet/credit card will be displaced.
Users may often compromise on one 6U dimension to take advantage of a par-
ticularly strong capability in another 6U adoption factor. For example, older genera-
tion mobile phones which did not have large colour screens typically had battery
lifetime longer than a week while smartphones often have battery lifetime that are
shorter than a day; however, users are willing to compromise on battery lifetime due
to superior functionality of the smart phone. Thus, utility and user experience
trumps design for use or usability.

9.11.1 API Adoption

Since API’s will be a scaling engine for the data economy you also have to think
about the user experience for developers. Thus well defined and easy to use and easy
to access API’s are essential to help drive developer adoption. In fact, the six key
characteristics for adoption apply equally well and are essential to successful API
9.12 Adoption Focus: Crossing the Chasm 99

Adoption Pattern Analysis

Physical Wallet/Credit Card Current Digital Wallet
Future Digital Wallet

Utility
5
4
Uniqueness 3 Usability
2
1
0

Ubiquity User Experience

Use

Fig. 9.3 6U Adoption Pattern Analysis

adoption. In future, APIs and their associated documentation will need to be fully
machine readable as a cohorts of API users may well be bots.

9.12 Adoption Focus: Crossing the Chasm

Geoffrey Moore, building on the seminal work of Everett Rogers, identified the key
factors required to drive adoption of new products. Moore identified five kinds of
adopters of new products or services, innovators, early adopters, early majority, late
majority, and laggards. Depending on the phase of adoption, different kinds of man-
agement focus are required. Crossing the chasm from the innovators to the early
adopters, the early majority is often referred to as the Valley of Death. This is where
‘management of adoption’ is especially needed.
The process of how new products and services are adopted as an interaction
between existing users and potential users is well described by the Bass Diffusion
equation (Bass, 1969), and the diffusion equation is influenced heavily by two coef-
ficients: the coefficient of innovation and the coefficient of imitation. The coeffi-
cient of innovation is a measure of the influence of the novelty of the product and
the advertising impact while the coefficient of imitation is measure of the word of
mouth effect where existing users refer the product or service to potential users.
Typically, the coefficient of imitation is much more important for adoption success
than the coefficient of innovation and the connectiveness that modern social net-
works provides further drops the barrier for referrals. Paying attention to the user
experience of using an innovation can be really crucial in ensuring a thrilled user
can influence further adoption by spreading the word.
Chapter 10
Agile Development and Production

Agile development and production is hugely important as development and adoption

cycles shrink. The clock-speed of virtually every industry is being shortened by digital
disruption. The objective of agile development and production is to move iteratively
as quickly as possible from idea to a product or service, which meets a need or oppor-
tunity. Agile production is about creating and supporting the processes, training and
tools quickly and iteratively create new products and services as well as responding to
customer needs and market shifts. A key enabling factor is the development of a pro-
duction support tools to allow the relevant organization members from designers,
developers, and marketers to a common database of code and other parts. As different
products cycle through the production process from concept to product or service,
they draw upon and also add to the manufacturing support platform.

10.1 Agile Methods

There are a number of core principles for agile software development whereby
requirements and solutions evolve through the disciplined collaborative efforts of
self-organizing cross-functional team—these include proactive and adaptive plan-
ning, rapid evolutionary and iterative development, early delivery of system arte-
facts, continuous improvement all encapsulated in a closed loop, and high velocity
repeatable process (Fig. 10.1).
The famous manifesto for agile development is a set of principles not published
from the high moral ground of academia but from the swamp of practice and are
evolved from real-world practitioners experience of what actually works. In the
inherent tensions that are present in product development, the agile manifesto advo-
cates biasing towards
• Working software over comprehensive documents
• Individuals and interaction over processes and tools

© Springer International Publishing Switzerland 2018 101

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102 10 Agile Development and Production

Fig. 10.1 Agile Production

• Customer collaboration over contract negotiation

• Responsiveness to change over strictly following a plan
Perhaps the core principle underpinning agile developed is that the highest prior-
ity is about providing high customer satisfaction through early and continuous
delivery of value adding software. In this closed loop, iterative process, changing
requirements are actually welcomed even late in the process as it means that the
product or service developed will be closer to meeting market and customer needs.
Using cross-disciplinary teams where developers and business people work together
on a daily basis with software delivered frequently in periods from a couple of
weeks to several months are also core to success. The secret ingredient in successful
agile development is often passion, where individuals motivate and propel the team
forward. Daily stand-up meetings and continuous face-to-face interaction are the
modus operandi of agile teams and actual working software is the primary measure
of success. Regularly creating the space to enable self-organizing teams to reflect on
their processes and effectiveness is also important. Although ‘Sprints’ are the nor-
mal work method for agile teams, they need to be done in the context of a ‘mara-
thon’ mindset in that sustainable competitive advantage is only achieved by
consistently delivering a stream of successful software innovations.
Core OI2 process in Agile production include rapid prototyping and piloting,
and these patterns are often used in the context of a living lab whereby rapid experi-
mentation with users and citizens is a key part of the innovation process. The Intel
Collaborative Research Institute for Sustainable cities uses London as its living lab
and research projects/ experiments have been run in locations such as Hyde Park,
Enfield, Elephant and Castle, Tower Bridge and across a number of different
schools. Using an instantiation of the Intel ® IOT platform over six hundred sensor
end-points were deployed. One disruptive technology opportunity where Intel part-
10.2 Design Science Research and Digital Assembly Lines 103

nered with Enfield council and several UK suppliers was to build an IOT-enabled
distributed air quality system which could give the borough a much better picture of
the quality of air in the borough and provide opportunities to drive actions to
improve quality.

10.2 Design Science Research and Digital Assembly Lines

Design science research is an outcome-based digital research and innovation meth-

odology, which is at the core of the OI2 paradigm. It is a six-step process, which
offers specific process steps and has guidelines for evaluation and interaction within
research and development projects.
The six steps are
• Visioning
• Understanding
• Implementing
• Evaluating
• Exploiting
• Results
These are six steps, which are connected in a closed loop fashion with frequent
iteration as shown in the following figure (Fig. 10.2).
We begin with the vision steps where a problem or opportunity is to be
approached. We start with clearly defining the research question or opportunity. It is
critical to have a clear problem or opportunity statement to begin with and getting a
multidisciplinary set of stakeholders involved. Creating a shared purpose or vision
is crucial to success.

Fig. 10.2 Design Science research

104 10 Agile Development and Production

The next step is the understanding phase where both field and desk research are
carried out and the right team is established to design and produce the innovation.
Agile methodologies underpin the OI2 DSR approach augmented by techniques
such as DeBono’s six hats or lateral thinking and focused brainstorming.
The next step is implementing where agile methods create prototypes, which
ultimately become a minimum viable platform, which can be both co-created and
tested with lead users and early adopters. In the evaluation process, field deploy-
ments in living labs can be very useful so innovators and users themselves can see
how well the solution meets the need or opportunity. There can be a range of out-
comes from the evaluation, not limited to data, knowledge, patents, and publica-
tions. Through the ongoing iterative process, prototypes and MVP are constantly
improved unless a data-based decision is made to stop the innovation, which is also
a very valid outcome. The final step is to convert the innovation into value whereby
a new product or service is defined and delivered or the outcome becomes part of a
product or service roadmap. As we have said before, innovation only happens when
there are adopters and value has been created.
In the iterative flow, we continually passed through phases of ideation, iteration,
correlation, and ultimately where all the learnings are fused into a new product or
service or indeed a valuable insight.
When such a process is well practiced and is supported by foundational tools, it
becomes the equivalent of a digital design and assembly line.

10.3 Prototyping

Prototyping and experimenting are the core learning process in agile development
and production and is a rudimentary or rough working model of a product or ser-
vice, primarily built for demonstration and learning outcomes. A picture is worth a
thousand words and a working prototype is worth a hundred pages of product/ser-
vice requirements. Prototyping emanated from the automotive industry where man-
ufacturers would built small-scale prototypes and indeed concept cars to quickly
test and showcase possible functions and features. While prototypes are often used
to see if the software being developed meets the software specification, prototyping
can and should be used to evolve and develop the software specification. It also
helps with estimating the fuller software development efforts and the prototype
servers as the key input to the productization process. When a prototype is suffi-
ciently mature, then it may be deployed in a pilot or proof of concept, but this stage
often requires a minimum viable platform.

10.4 Minimum Viable Product

A working minimum viable product (MVP) is one of the holy grails of agile devel-
opment teams, delivering a product or service, which has just the core features and
functionality so a product can be deployed to a subset of early adopter possible
10.4 Minimum Viable Product 105

customers who can give feedback and help, validate, or invalidate the product
vision. Feedback on the MVP becomes the core stage gate on deciding to produc-
tize, otherwise modify, or possibly stop product development. A core objective of
use of an MVP is to help pick winning products early, while avoiding building
products that customer do not want or will not pay for and maximize efficient learn-
ing. The further a product or service goes through the development cycle the costlier
it becomes to fix mistakes and feature or functionality mismatch. An MVP is the
core artefact in the process of product/service idea generation, prototyping, evalua-
tion, and ultimate productization.

Case Study: IOT MVP at Intel Labs Europe

While I was at Intel Labs Europe, we effectively used a design science
research and agile development process to advance a concept and vision
around an Internet of Things (IOT) platform. In collaboration with Charlie
Sheridan who was my head of IOT systems labs, we established collabora-
tions with both the cities of London and Dublin. We led the establishment of
the Intel Collaborative Research Institute in London, based on OI2 principles
with two of the leading universities in the world, Imperial College and
University College London to create two compelling and credible living labs.
Working also with leaders from the cities we established a context of high
trust and were able to deploy and test multiple IOT uses, cases based on a
common MVP IOT platform.
The figure describes an 8-week process we used at Intel Labs Europe to go
from a concept to a working IOT Gateway MVP which we deployed in Dublin
City after 6 weeks and then proliferated to a London City living lab. The pro-
cess began by hosting representatives from several Intel divisions including
the IOT and datacentre product group at our lab in Leixlip. In the first week of
the agile process a shared vision and architecture of what we would jointly
produce was developed. The goal was to develop an IOT platform, based on
Intel assets and new components which we would need to develop, that could
be deployed in cities and sense a wide range of measurements from micro-
climate to air quality. Based on the shared vision and rudimentary architec-
ture, an integrated team of software developers, hardware architects, and
business people led by our lead principal investigator/scrum master Mark
Kelly moved quickly through a series of high intensity sprints, an example of
which is shown in (Fig. 10.3). This culminated in a working prototype being
deployed to the living lab we had deployed in Dublin. Following 2 weeks test-
ing and iteration, we could declare that we had an MVP and then deployed in
wider scale in the living lab that we had established in London in collabora-
tion with UCL and Imperial College London. The agile process proved to be
highly effective and the MVP and learnings from it provided the main input to
the Intel ® IOT platform architecture.
106 10 Agile Development and Production

Fig. 10.3 Agile process for Intel (r) IOT Platform MVP

10.5 Living Labs

In OI2, we see a new form of industrial research where the use of living labs where
real-time experimentation is conducted in real-world situations allowing simultane-
ous technical and societal innovation. Intel Labs Europe living labs in Dublin,
London and San Jose are good exemplars of OI2 in practice where city government,
industry, academia, and citizens are involved in the innovation process (Fig. 10.4).
In the London Living Labs using a common Internet of Things platform, multi-
ple innovative projects were deployed with engagement across many stakeholders
and we are witnessing embryonic network effects as the platform gets adopted in
new unanticipated scenarios.
The probability of breakthrough improvements increases as a function of diverse
multidisciplinary experimentation, which is an essence of OI2. In today’s complex
world, experiments simply cannot be conducted in isolation. Collaborative research
will accelerate the innovative process and improve the quality of its outcomes.
While closed-world innovation will not disappear, it will be dwarfed by the efforts
of cross-border and cross-disciplinary teams that enable a wide spectrum of stake-
holders to take on active roles.

10.5.1 Living Labs in a European Context

The origin of ‘Living Labs thinking’ was in the Massachusetts Institute of Technology
(MIT), where the approach was to construct test and verification environments in
laboratory settings to develop and experiment with different technology solutions
with real users invited to visit those environments. However, some earlier attempts
exist to enhance users and other stakeholders for developing, validating, and testing
products and services in living labs and living laboratories in the USA. MIT approach
led to early prototyping with ‘real users’, again with the potential for faster scaling-
up of the results. William J. Mitchell, a Dean and Professor at MIT, was one of the
key drivers in this new research and prototyping approaches.
10.5 Living Labs 107

LONDON LIVING LAB

Hyde Park Project

Air Quality Enfield
Affordable Environmental
Air Quality Awareness
Monitoring for Urban
Green Spaces Improving Traffic Flow

Water, Air & Soil Quality Improving Local

Noise & Light Pollution Environments

Public Engagement Mini Holland

Scheme

Tower Bridge
Brixton Listening
Measuring impact
Labs Elephant & of traffic idling
Urban Behavior waiting for bridge
Change & Walking Castle Measuring the to close
impact of photo
catalytic paint in Collaboration between Public
Built Environment
Bodies, Industry, Academia and
Citizens
Source: ICRI cities

Fig. 10.4 London Living Labs

When discussing that approach from a European innovation-system perspective,

it soon became evident that end-user involvement could be the key factor for the
renewal of the European innovation system. In Europe, we have very demanding but
also very diverse user communities for our products and services; the question was:
how do we harness these user communities to increase the success rate and speed of
the innovation processes in Europe? Part of the answer came from Democratizing
Innovation by von Hippel (2005), which triggered thinking of co-creation and user
involvement in the innovation processes.
In 2003, an industrially led think tank for the living labs strategy in Europe had
been established in liaison with the European Commission’s Directorate-General
for the Information Society to develop and conceptualize the European approach.
Soon it became evident that the European approach should be focusing on creation
of innovation hubs, which would build on the quadruple helix innovation model:
strong and seamless interaction of industry, the public sector, research institutions
and universities, and last, but definitely not least, ‘the people’.
The goal was to create an environment that would attract industrial and research
investment due to better innovation dynamics than could be achieved with traditional
approaches. These dynamics would be supported by the public sector, and one of the
focus areas would be public sector services that could be co-developed with the user
communities in real-world settings. Part of this thinking was based on the idea of
stretching the boundaries of societal behaviour, given that we saw, the connectivity
and environments with shared information communications technology (including
emerging social media) begin to change society. The quest was to push the boundar-
ies with real-world projects featuring strong technological development. Only by
doing the research and development with citizens, could we see what solutions would
ultimately be acceptable and thus scalable to products and services.
108 10 Agile Development and Production

These early steps led to the first concept of a living Lab in a European context: a
real-world site, not an extension of a laboratory, with sufficient real-world users
numbering at least in the hundreds to allow for scalability. By this point, we know
that a European living Labs should comprise citizens, application environments,
technology infrastructure, organizations, and experts. Later, we would add societal
capital into the picture once we learned that living labs depend on the idea of spill-
over effects back to society. This spillover provided motivation for all stakehold-
ers—including citizens—to contribute to the common goal, making living labs a
winning game.
Based on these concepts, the European Commission and the Finnish EU presi-
dency launched the first wave of European living labs in 2006. Next came the
European Network of Living Labs (http://www.openlivinglabs.eu/), which grew
quickly under subsequent EU presidencies to the substantial scale it has now, to
more than 340 sites, some of which are even beyond European borders. And, the
network is still growing. Living labs now have a strong foothold in all European
regions, and the approach is also being applied as an important component of
regional innovation systems.
On European level, the networking associated with living labs is of utmost
importance. Using a living labs methodology to find common, scalable solutions
with different user environments is essential when driving towards common
European services based on common architectural approaches. I am happy to see
that the thematic cross-border networking of the sites is accelerating, enabling the
most interesting living labs to collaborate as partners, for example, in Horizon 2020
projects, especially in the contexts of smart cities and public services.

10.5.2 Open Innovation as Part of Living Labs Thinking

Openness was a starting point when developing living labs in the European way.
Openness in sharing platforms for services but also an open mindset for collabora-
tion amongst all stakeholders. The thinking stems from the early 1990s, when the
hot topic was ‘virtual’ and ‘holonic enterprises’ were creating both agile and scal-
able structures for operations, by sharing common operating architectures and by
collaborating strongly on a task-driven basis. Good examples of holonic-/fractal-/
virtual-enterprise theory were developed, for example, in the intelligent manufac-
turing systems initiative amongst the leading industrial economies. By scaling up
this thinking, we come very close to the foundations of Living Labs by adding in the
public and societal components.
Combining the user-driven and co-creation approaches to innovation from von
Hippel with the open innovation approach Chesbrough (2003) introduced, we come
to the two fundamental aspects of modern innovation theory. The definition of open
innovation by von Hippel focuses on the creation of public goods, whereas the one
by Chesbrough builds on sharing, cross-licensing, and in that way is a market- and
product-driven approach.
10.6 Privacy by Design 109

Open platforms, sharing, and seamless interaction between all stakeholders are
essential characteristics of living labs. The quadruple helix has thus been central as
an innovation model underlying the Living Labs movement from the very begin-
ning. And, recently, we are seeing a new paradigm as open innovation ecosystems
are increasingly becoming the synthesis of Living Labs and open innovation pro-
cesses. Open innovation has become much more than the cross-fertilization of ideas
between organizations; it has become a flow of colliding ideas, raising sparks for
new innovations in real-world settings.

10.6 Privacy by Design

Privacy by design (PbD) is an approach to agile development which takes privacy

into account during the whole development cycle, but particularly at the design
cycle so that privacy is not an afterthought and is built into the innovation. PbD
asserts that privacy assurance must become part of an organizations’ standard
modus operandi rather than being about compliance with legislation and regulatory
frameworks. PbD was originated by Dr. Ann Cavoukian who was the then
Information and Privacy Commissioner in the 1990s and it is less about data protec-
tion but more about designing so data does not need protection. A reference exam-
ple of this is Dynamic Host Configuration Protocol where computing devices based
on random identifiers gets an IP address from the server and then is enabled to com-
municate without sharing personal identifiers. The worldwide GPS system is also
quoted as an example where a device can detect its geographic location without
sharing identity or location.
Many applications will use user data, natively, aggregated or anonymized and
increasingly regulators will look for privacy impact assessments before such ser-
vices as developed and launched. PbD advocates for an approach that is proactive
rather than reactive. Rather than waiting for privacy risks to occur, PbD aims to
prevent them from occurring. Ann Cavoukian has articulated seven principles of
PbD which have been widely adopted which can be summarized as follows:
1. Proactive and preventative rather than reactive and remedial
2. Privacy as the standard and default setting
3. Privacy embedded into design
4. Full functionality—positive-sum, not zero-sum
5. End-to-end security—full life cycle protection
6. Openness—visibility and transparency
7. User-centricity, respect for user privacy
Organizations or developers who ignore or skirt around privacy will ultimately
be found out. The coming into law of the 2018 EU General Data Protection
Regulation will be a regulatory milestone that should change the face of privacy in
the future with likely other jurisdictions following suit quickly.
110 10 Agile Development and Production

10.7 Productization and Proliferation

Perhaps the most difficult step in the agile innovation cycle is the productization
process, where disciplined and robust processes for launch and support of a product
or service are necessary. This means taking a manufacturing and quality assurance
mindset and having the appropriate processes, capacity and scale in place to drive
adoption and meet demand. As we have discussed before, it is crucial that the inno-
vation has been designed with adoption in mind. As more and more products and
services are cloud enabled, the ability to have cloud, bursting capabilities to meet
unanticipated demand is hugely important. With fickle consumers, a service only
has to be unavailable once and it can then be dismissed forever. If a product or ser-
vice has been ‘designed with adoption’ in mind, then the process of proliferation is
made much easier. With the marginal costs of distributing software almost zero,
digital products are designed for low cost distribution and particularly those that use
Apps stores have dramatically reduced adoption barriers. Social media can be a
hugely important tool in the proliferation of digital solutions.

10.7.1 DevOPs

DevOPs is emerging as the new way of managing seamless transition and operation
between development teams and IT operations, which need to support and monitor
production and software services. Less than a decade old, the term DevOps emerg-
ing from the agile community in Belgium in 2009. DevOPs sits at the intersection
of software development, IT operations, and quality assurance.
DevOps is about establishing a culture, infrastructure, and environment when
software-based products can be built, tested, released, and adopted seamlessly and
with high velocity. The benefits of a DevOPs approach are faster time to market but
in particular lower failure rate of new releases. With increasing complexity of soft-
ware and increased mission criticality of software strong discipline and processes,
need to be in place. An over the air download to the embedded controller of a mov-
ing vehicle cannot fail.

10.8 Servitization

An observable shift from ‘product’ to ‘service’ is happening. Aston business school

define servitization as ‘The process by which a manufacturer provides a holistic
solution to the customer, helping the customer to improve its competitiveness, rather
than just engaging in a single transaction through the sale of a physical product’.
10.8 Servitization 111

Many companies seek to build on services to products and this while also can be
financially attractive, will also help with the establishment of a new sustainability
paradigm: A simple example of this is the adoption of cloud computing which
enables new service models which are likely more efficient and effective than each
company provisioning their own hardware and infrastructure. Additionally, cloud
computing will also help shorten development time for new services, helping to
bring benefits faster to the market and to the broader society. Servitization is about
moving from selling products to services and indeed even today information about
products is sometimes even more valuable than the products themselves. Companies
such as Rolls-Royce with their ‘power by the hour’ strategy have pioneered this
approach. Instead of selling aircraft engines, Rolls-Royce sell hours of flight time in
a win-win configuration for Rolls-Royce and their customers. Similarly, Amazon’s
and Apple’s transformation of the book and music industry are other great examples
of servitization being profitable, more convenient, and more sustainable.
Servitization can be as the ultimate for extended products, which consist of tan-
gible and intangible components. In this approach, one can see the tangible part
giving access to the intangible part of the extended product. Good examples of this
can be found in the telecom market where in certain markets the phone (device) is
paid by rather high subscription fees, or in the reverse case in the Apple iProduct
approach where the premium price of the tangible component is giving access to
(relatively) cheap contents.
Extended products are often a successful path towards servitization. Servitization
fits beautifully with the sustainability paradigm, which is about moving from maxi-
mizing consumption to optimizing asset utilization and asset longevity. Some auto-
motive manufacturers are exploring models, which exactly embrace this concept.
Servitization is also attractive from a business model standpoint with the opportu-
nity to move from one time payment to annuities. Still the life cycle cost from the
user perspective needs to be looked at more thoroughly, case by case.

Fig. 10.5 Services Value Cycle, source Chesbrough

112 10 Agile Development and Production

Good examples of servitization are, e.g. the concepts leading to Mobility as a

Service: MaaS. The service providers integrate the offerings under a common
umbrella and the user subscribes to a mobility package. Conceptually, and first
pilots are ongoing in the Helsinki capital region, where the detailed planning is
going on on a subscription-based mobility scheme. The user can subscribe on
monthly basis on packages for different transport means (bus trips, train trips, taxi,
bike rental, and collective bus services) depending on the need. Ministry of
Communications in Finland is in active phase to launch the service in 2016. This is
also an example where traditional business models of the individual service provid-
ers are challenged as the concept is based on collaboration rather than
competition.
Henry Chesbrough has sketched an elemental services value chain or indeed
web, which is based on design experience points, which leverage co-creation as,
described in the figure below (Fig. 10.5).
Chapter 11
Industrial Innovation

‘No matter how beautiful the strategy, you occasionally need to

look at results’.
—Winston Churchill

Too often innovations fail. Industrializing innovation is about managing innovation

as a capability similarly to manufacturing processes, with the outcomes being a
series of more predictable innovations (Fig. 11.1). By applying an industrial lens
and discipline to the Innovation process, the probability and predictability of inno-
vation outputs and outcomes can be significantly increased. There is of course a
tension between the risk minimization needed for reliable manufacturing and the
risk tolerance needed to encourage innovation; however, these can be appropriately
balanced to deliver more predictable outcomes.
In this chapter, we will review key attributes of core functions that are part of the
industrial innovation pattern where we begin with visioning.

11.1 Visioning

A core function of an R&D department or product development department is pro-

ducing a vision, which provides a context in which team-based innovation can take
place. A strategic innovation vision can provide a lens for driving both more effec-
tive and efficient innovation. In OI2 terms taking the users as co-creators help mar-
ket adaptation and fast scale-up of products and services to be developed. This
safety net not only speeds up the process but also makes the likelihood of market
success higher.

11.2 Strategic Innovation

Innovations are likely to be one off or sporadic unless there is a vision, which paints
a desirable future state. The most effective kind of innovation happens with in the
context of a vision, and this creates the possibility of a stream of linked and mutu-
ally reinforcing innovations. Strategic innovation happens when we have ideas,

© Springer International Publishing Switzerland 2018 113

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_11
114 11 Industrial Innovation

Fig. 11.1 Industrial innovation

which are implemented and then adopted, and all of this takes place in the context
of a vision. We could loosely define strategic innovation as the product of ideas by
execution by adoption, all performed in the context of a vision.

Strategic Innovation = Vision ( Ideas × Execution × Adoption )

Europe 2020 is an example of a pan-national vision, which creates a context for

vectored innovation; however, there is recognition that its predecessor the Lisbon
Strategy while a compelling strategy failed to have the execution and adoption to
make it real. The development of USB is a great example of a strategic vision that
had massive strategic impact.

Case Study: USB Invention to Innovation

The development of the Universal Serial Business (USB) standard by Intel
and others is an example of OI2 at work although at the time of the USB ini-
tiative the concept of OI2 had not been conceptualized or described. Prior to
the creation of USB computers required many different drivers and ports with
different interfaces to communicate with peripheral devices. Ajay Bhatt at
Intel created a vision, which became a shared vision of a new standard con-
nection interface that would recognize and immediately be able to use new
devices that were plugged into the PC. This shared vision became a reality,
which dramatically drove the development of many new peripherals, and dra-
matically improved the ways files could be shared from user to user through
USB sticks. Collaborative friction was dramatically reduced in that users
could immediately plug-in devices such as web cams, smart phones, even
11.3 InVenting 115

scientific instruments to PCs, quickly, seamlesslys and instantly. More than

ten billion USB devices have been shipped making it one of the most impor-
tant computer interfaces ever developed. The USB protocol acts as a translator
between various devices translating bespoke instructions into a standard set of
instructions that a PC can understand.
Even though a vision can be compelling sometimes, adoption is slow, in
this case because USB required a redesign of the Microsoft Windows soft-
ware platform that was not available until 1998. In the meantime, Apple com-
puters launched its iMac, the first mass-produced USB-enabled computer that
helped catalyse adoption and acted as a proof point amongst a nice user com-
munity. Subsequently, an explosion of innovation happened with thousands of
USB products created creating all sorts of innovations. Because a new plat-
form with well-defined standards was created, a completely new ecosystem
grew up around developing USB based products, and the user market for PCs
and iMACs also grew very substantially. The USB became a key to unlock
massive latent potential of the PC.
Intel Corporation was granted a patent on USB technology in 1997, but the
protocol system was created in conjunction with six other companies and the
technology rapidly became a standard in the industry. However, we know from
both legal, business and technical perspective that patents and industry stan-
dards can be tricky. The solution used for USB was to create a ‘patent pool’
where all the holders of essential USB technology patents combined their pat-
ents into a single pool, the USB Implementers Forum. This open mechanism
allows other organizations who wished to use USB to license USB patents
under reasonable and non-discriminatory (RAND) terms without having to
pay royalties and without fear of litigation from the patent holders.
This OI2 spawned a massive USB development ecosystem and created
value and contribution far beyond the value of the USB ecosystem itself.

11.3 InVenting

Since the dawn of time, people often have been inventing and we all have heard the
expression necessity is the mother of invention. Inventing is about something new
into being. Many inventions are useful but equally many are not. We often confuse
invention and innovation, many inventions are not successfully adopted, and it is
often only through the perseverance of an inventor that an invention is ultimately
adopted. Innovation is a much broader process thinking about the broader aspects of
getting an invention to market including the business model, marketing plan, and
production process for the invention.
116 11 Industrial Innovation

11.4 Validating

Validating is a process where we test to confirm or disprove assumptions around the

particular functionality and features of a particular invention or innovation. Today,
a key mantra around validation is ‘Fail fast, learn fast’. By experimenting quickly,
we can learn which research project or innovations we should stop or shut down, as
they do not meet the requirements. This is a hugely valuable process as it can avoid
a company investing in a product and only finding out that it does not or will not
work when it appears on the market. Validating also allows us determine which
innovations are likely to be successful so they can be accelerated towards the
market.

11.5 Venturing

Venturing is a great way of trying to accelerate and harness the velocity of an eco-
system, and it can be a two-way process. Many companies have initiated corporate
venturing program to get competitive intelligence and make investments in compa-
nies, which have the potential to strengthen their ecosystem and/or may yield dis-
ruptive technologies or business model. In parallel, some companies have put
processes in place to support the creation of ventures from within an R&D depart-
ment or indeed from any source in the company. At Intel, a New Business
Development process, organization, and fund were put in place to support this
source of innovation where promising ideas or technologies developed internally
can be accelerated trying to commercialize. Often a ‘Learn fast, fail fast’ mantra
permeates these kind of models. Notable successes in Intel include Apple
Thunderbolt, which went direct from Intel Labs to Apple—Thunderbolt was a revo-
lutionary I/O technology that supports high performance data devices and high-­
resolution displays through a compact port. A different type of success was the
pioneering work of former Intel Fellow Mario Paniccia on Silicon Photonics for
high-speed datacentre interconnects, leading to the development of silicon-based
semiconductor lasers to support 50 GBit/s optical links for servers. His work gradu-
ated from the silicon photonics lab through a venturing process through to becom-
ing a silicon photonics solutions group in Intel’s highly successful datacentre
business group.
From a shared value standpoint, there are lots of attractive things from a start-­
up’s point of view to being involved in a corporate venturing process. These include
five C’s Cash, Cache, Capacity, Capability, and Confidence. In early stage ventures,
cash investment is of vital importance but other factors can be of equal if not more
importance. The ‘cache’ of having an investment from a leading company is impor-
tant and can inspire ‘confidence’ in others to purchase products or services from the
start-up. Equally, the start-up can leverage capability and capacity from the ventur-
ing company.
11.7 Value 117

New Forms of Venturing Case Studies

OI2 formations in venturing are emerging with the example of Cisco, Intel,
and Deutsche Telecom’s ‘Challenge Up’ accelerator program being particular
noteworthy. Challenge up is a start-up and accelerator program for early stage
IOT companies. Typically, the process is run yearly and approximately 12
companies are chosen from the hundreds that apply and are run through an
intense 6-month incubation program with physical meetings typically held
monthly in different European start-up hot spots. The three companies align
around a shared purpose of driving open innovation in the Internet of Things.
Start-ups benefit from the technology, business, and sales expertise and reach
of the three companies resulting in accelerated development and faster
go-to-market.
Mastercard’s Start Path program enables start-ups to leverage Mastercard’s
global ecosystem and to leverage Mastercard’s capability and expertise, creat-
ing new relationships with Mastercard and some of its key customers and
indeed suppliers. Mastercard involves key customers and partners in the pro-
cess through a subscription model, which helps fund the program. Companies,
which are selected for Start Path, participate in a 6-month virtual program
with 2 immersion weeks in different cities and importantly there is no upfront
equity required for participation. Companies can apply to regular selection
competitions and typically receive much benefit from participation in the pro-
gram including the ability to network with other similar stage companies and
Mastercard executive and technologists.

11.6 Velocity

Today, the clock-speed of most industries has been dramatically speeded up as infor-
mation technology more and more permeates new products and services and the
R&D and production processes used to create those products and services. Time-to-
market is crucially important and one takes a risk by waiting until one has a perfect
product. The risk is that in a competitive market, a competitor may usurp your orga-
nization by delivering an inferior product earlier into the market and achieves a
strong market share or even becomes a dominant design by virtue of being earlier in
the market. Velocity is of course more than random speed, speed being in a particular
direction. When an organization has velocity in the context of a strategic innovation
vision, then there is a much higher probability of sustained success.

11.7 Value

Leading R&D organizations are increasingly thinking about value earlier and ear-
lier in the innovation process. IT organizations, which have often assumed central
roles in the digital transformations of many organizations, now often focus and
118 11 Industrial Innovation

design their digital innovations based on value dials. While I was at Intel, we devel-
oped a practice of measurement around the so-called value dials. At Intel, value
dials represented a standard set of business variable for which innovation efforts
could be targeted against to drive improved business performance, for example,
days of inventory or factory uptime. By maintaining a list of business variables and
the current monetary value of improving performance of these, innovations compet-
ing for funding could be compared and also managed to success to deliver on the
benefits, which were promised at the start of the innovation project.

11.8 New Innovation Value Constellations

When looking at new collaborative forms between stakeholders and enterprises, we

see a dramatic change from predetermined collaboration to more opportunistic
approaches based on mutual strengths. The figure below illustrates this (Fig. 11.2).
Typically, subcontracting chains are stable, within clusters of industries. The
component supply chain is stable, and very much determined top-down, also regard-
ing the pricing and the design of the components. The subcontractors provide mostly
the production capacity.
In many areas, we see the subcontractors becoming stronger and having respon-
sibility of managing larger entities. Typically this can be seen, e.g. in automotive
industry where suppliers are serving many brands with their products and services.
The subcontractor typically is offering special competence and capacity to be deliv-
ered. In this context, the clustering includes strong networking effects. However, the
business relations are more or less fixed and predetermined.
When the business opportunity dynamics is even higher, and the production flex-
ibility increases we move towards business model constellations, where enterprises/
competencies configure according to the needs the task to be performed is setting.

Fig. 11.2 Towards Value Constellations

11.10 Innovation Systems 119

This value constellation analogy should be seen as stellar constellations: The con-
stellation is dependent on time, the viewer, and the location. We are moving to task-­
driven forms of delivery, which is very much in the spirit of Open Innovation 2.0 as
well, where dynamic resource and competence configuration is determining the
success of a company/ecosystem.

11.9 I ndustrializing Innovation: Innovation Capability

Management

A key component of the Open Innovation 2.0 paradigm is explicit management of

innovation capability and systematic management of the improvement of the capa-
bility. Organizations are increasingly realizing that innovation is not something that
happens always by accident or serendipity.

11.10 Innovation Systems

In organizations, we can design closed loop innovation systems and look to manage
innovation as a capability. Building on an innovation system, we can articulate an
innovation capability maturity framework as depicted in the following diagram for
the four vectors involved in the innovation management system.
As one traverses the innovation capability maturity framework, one moves
through phases of practices that move from ad hoc behaviour to current to best to
next and finally future practice. By systematically managing capability organiza-
tions and ecosystems can improve the predictability, probability, and profitability of
innovation outcomes.
The Innovation Value Institute has built a sophisticated innovation assessment
instrument, which allows companies to assess their relative innovation maturity and
provides recommendations from a best practice repository, which contains leading-­
edge practices from companies and academics. The build out of the innovation
CMF in itself an example of Open Innovation 2.0 at work with more than eighty
organizations working together to create shared value. The figure below shows the
innovation capability building blocks that the IVI has identified and that need to be
in place to manage innovation more systemically (Fig. 11.3).

11.10.1 Innovation Strategy and Innovation Capacity

Innovation strategy and innovation capacity have to be aligned with business strat-
egy as the following figure shows (Fig. 11.4). If innovation capacity is not aligned
with innovation strategy and it itself is not aligned with business or organization
strategy then you get innovation leakage and wasted efforts. In an organization, it is
120 11 Industrial Innovation

Fig. 11.3 Innovation Capability Maturity Framework (CMF)—source Baldwin and Curley

Fig. 11.4 Innovation Capacity, Strategy, and Business Alignment

important that there is appropriate governance so that as innovation capacity is

developed, it is applied to the organizations innovation strategy, which in turn needs
to be aligned with the overall organization strategic direction.
11.11 Industry 4.0 121

Fig. 11.5 Industry 4.0

11.11 Industry 4.0

Industrial innovation has been at the heart of driving progress since the dawning of
the industrial revolution, and now we are witnessing what many call the fourth
industrial revolution or Industrie 4.0 as originated by the German government and
promoted by the German Academy of Engineering Acatech (Fig. 11.5).
The first industrial revolution began towards the end of the eighteenth century
with mechanization water power and steam power being the key drivers. At the start
of the twentieth century, we entered the second industrial revolution with the emer-
gence of mass production, as exemplified by the Model T Ford and assembly lines
and electricity as a new power source. The third industrial revolution began in at the
start of the nineteenth century with the adoption of computers and automation.
Arguably, the fourth industrial revolution has begun with the simultaneous emer-
gence of the Internet of Things and ubiquitous networking. The use of cyber-­
physical systems enables ever more complex and capable manufacturing to occur.
Chapter 12
Data-Driven Innovation

Big data and data-driven innovation are creating significant information monetiza-
tion opportunities. Former European Research Commissioner, Maire Geogeghan
Quinn, coined the phrase ‘Knowledge is the crude oil of the 21st century’ and it
aptly describes the opportunity. Even this analogy is not powerful enough as data or
knowledge does not get used up as it is shared or used up, as it is a non-rival good.
In fact, it often multiplies. Debra Amidon, Piero Formica, and others have defined
the three laws of knowledge dynamics, which underpin the practice of data-driven
innovation.
For many individuals, organizations, and ecosystems the emergence of big data,
with ever more powerful machines and data mining and machine learning algo-
rithms will present an opportunity of a lifetime. However, the opportunity of a life-
time has to be taken in the lifetime of the opportunity.
Data-driven innovation is simply about using data for innovation. Here, we iden-
tify six key patterns although we recognize that there are other patterns and more
will be discovered. Data is a non-rival good meaning that it does not get used up or
dissipate unlike a rival good such as petrol in a car. Data has a very unusual property
in that the same data can be used in theory in infinite ways and by an infinite number
of users to generate insights, services, and value. Thus, data can be considered as
both an infrastructure and a capital good.
Knowledgeification in fact changes the economy, as all our economic rules
have been based on managing and optimizing scarce resources, now we are enter-
ing an era where there is an abundance of the primary wealth generating resource,
data. Indeed, the so-called GAPP rules seem no longer appropriate in that for
companies such as Google and Facebook their physical assets on their balance
sheets only account for approximately 15% of their market capitalization or worth
(Fig. 12.1).
When looking at fast-growing companies, the so-called unicorns, it is worth-
while to observe that they are based on user-generated contents and large user com-
munities, signifying their role as data generators for the new value creation business
models.

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124 12 Data-Driven Innovation

Fig. 12.1 Data-driven innovation patterns

Peter Pham (2015) describes the need for a new paradigm well ‘A shift in thinking
needs to occur in the way that data is viewed. Data is no longer a static d­ isposable
resource that loses usefulness once it has served its singular purpose. Its life may be
extended through multi-use, multi-purpose data processing. As a renewable resource,
its value should be assessed not by the bottom line, but as an asset that not only grows
in value but one which further provides value creation opportunities. It is the raw
material of business and as with other raw materials i’s ability to be used for a variety
of applications makes it profoundly more valuable than the original product itself’.

12.1 Generating Insights from Data

A great example of generating insights from data is Farecast, which was an early
consumer applications of big data whereby using pattern recognition Farecast would
inform consumers to pick the likeliest time to purchase a particular flight between
two destinations or could be informed when a particular flight was about to increase
or decrease in price. Microsoft paid $114 million for Farecast in November 2013,
which gave the two founders a handsome return on their investments. Farecast is an
exemplar of the idiom ‘Overnight success takes on average a decade’ as it was
founded in 2005 before such kind of services became mainstream and adopted by
other travel sites such as Kayak. It demonstrates the importance of timely pathfind-
ing and technology scouting. Machine learning and artificial intelligence are emerg-
ing as related disruptive technologies but are being demystified by technologists
such as Irving Berger describing these as simply ‘brute force engineering’ whereby
big data, ever most sophisticated software and ever more powerful computers allow
better and better results. As Arthur C. Clarke has said ‘Any sufficiently developed
technology is indistinguishable from magic’.
12.3 Digitizing Assets 125

12.2 Augmenting Products/Services Using Data from Objects

The second pattern is using data the objects generate, or indeed could generate to
create new services and value. A textbook example is that of Rolls-Royce’s power
by the hour whereby using advanced sensing and analytics Rolls-Royce were able
to transform its business model and sell hours of flying time as a service to airlines
rather than just selling aircraft engines. With reduced cost sensing, volumes of new
data and advanced telematics, Rolls-Royce were able to perform preventative and
predictive maintenance of their engines, improving performance and reliability and
extending engine life. This is an example of what is called servitization or product
service systems where one is able to extend a product offering with a one-time sale
to a service which has an annuity stream. Such an innovation is an early example of
OI2 work as a new real win-win scenario was created for the supplier and the cus-
tomers and the resulting solution was more sustainable than the previous offering.
With the ‘Power by the hour’ service, cash strapped airlines were able to buy a
service rather than having to carry significant capital investments on their balance
sheets while Rolls-Royce better balanced and augmented their revenues. For the
environment, the engines had better utilization and longevity and improved fuel
efficiency as engineers could analyse big data from the engines to suggest modifica-
tions or future improved designs. Rolls-Royce was awarded a 2016 EU Innovation
Luminary award for their servitization innovation. Data from supermarket loyalty
cards are another example of generating value from consumer shopping data, super-
markets are better able to understand trends and different market demographics,
tailoring inventory and tailoring offers to specific consumer based on the data avail-
able. The subsequent reduction in food wastage and overstocking is another exam-
ple of a small step towards sustainable intelligent living. Renault use engine and
driving data to coach drivers to drive in a more eco-friendly way, caring for the
environment and also extending car and engine life.

12.3 Digitizing Assets

At Mobile World Congress in 2013 William Ford, CEO of the Ford Motor company
said that the car is now part of the network. Others have followed on to say that, a
car is now actually a datacentre on wheels.
With objects being addressable on the network whole new business models such
as Uber and Airbnb have been created which are again examples of OI2 and are
textbook examples of the sharing economy at work. While some regulators and
incumbents may not like the new business models, one cannot argue that they are
steps on the way to sustainable intelligent living whereby under-utilized assets are
matched in real time to consumer needs in a way that creates a win-win situation for
both parties in the value exchange.
Both Uber and Airbnb have shared vision and are examples of multi-sided mar-
kets, connecting producers and consumers efficiently and effectively. Also Airbnb is
126 12 Data-Driven Innovation

another reminder that most innovations emerge from a stated need, the two founders
created the concept when they needed to generate income through letting a room in
their apartment.

12.4 Increase Information Intensity

Marc Andreesen famously said that software is eating the world. Driven by silicon,
software and network economics, and capabilities, it is now possible to dramatically
increase the information intensity of products.
As everything from machines to cities become more instrumented and real-time
communications continue to improve, these objects or entities become program-
mable and become software defined.
And as control loops consisting of acquisition, analytics, and actuation are
increasingly easily constructed, performance of the machines or cities can be
increasingly optimized. Indeed, in some cases information about a product can be
more valuable than the product itself. A recent estimate showed that software con-
tent of cars was over 40% and Henry Ford said in 2017 that the future of the car was
much more about software than the hardware.

12.5 Data Mining, Combining, and Refining

Data mining is the process of searching for and discovering patterns in large data
sets involving methods at the intersection of computer science, machine learning,
databases, artificial intelligence, and other domains.
Imagine the power of being able to combine, for example, Tesco consumer spend-
ing habits data and a national health service database of illness and using advanced
analytics to look for patterns and insights. The opportunities are very exciting in gen-
erating recommendations for healthier buying habits as well as improving quality of
life and saving on healthcare costs. This would be a great exemplar of OI2.
Intel Labs Europe (ILE) in collaboration with the UK Future Cities catapult and
the greater London Authority, UCL, and Imperial College established a network of
IOT gateways across different areas of London to collect various environmental
data such as air quality and micro-climate information. Together with Enfield
Borough, the air quality data was used to build a better picture of air quality across
the borough to help inform real-time traffic management systems and future
­planning actions for the borough. ILE also built a prototype dynamic congestion
charging system, which would change real-time tariffs for congestion charging as
well as modulate incentive pricing for park and ride facilities based on the real-time
air quality across a borough. When data is combined like this, there is the opportu-
nity to create high precision, high frequency control loops, providing better services
and taking steps towards achieving sustainable intelligent living.
12.7 Closed Loop Control 127

12.6 Trading and Monetizing Data

Data monetization is the process of generating revenue by selling data available from
real time of offline data sources. Financial services companies are good examples of
firms trading or monetizing data where, for example, credit card issuing banks use
customer transaction data to improve targeting of cross-sell propositions.
Another well-known example is whereby cellphone operators can sell their data
so that it can be combined with navigational data to identify areas of traffic conges-
tion and suggest alternative more efficient routes. Again, this type of example is an
example of sustainable intelligent living whereby commuters get more efficient and
faster commutes in a way that is more friendly to the environment.

12.7 Closed Loop Control

Our ever-increasing connectivity, the ever-increasing power of compute and the

emergence of the Internet of Things where everything from cars to electrical substa-
tions to washing machines is creating the opportunity to introduce high frequency,
high precision closed control systems to societal systems which were previously in
Open Loop. For example, the electrical grid has been designed as a one-way linear
system where energy is generated in bulk capacity and then distributed (quite inef-
ficiently) through high voltage, medium voltage, and low voltage distribution sys-
tems. With the increasing availability of local renewable energy (wind, solar, etc.),
smart home systems and smart heat storage systems, the opportunity exists to rede-
sign the grid creating value for all participants, lowering costs and making the over-
all solution more sustainable. One Horizon 2020 project led by Glen Dimplex with
a set of stakeholders from across the energy value chain from generators to consum-
ers called real value is researching and demonstrating this across 1250 homes in
Germany, Ireland, and Latvia. This model is an example of the emerging concept of
collaborative consumption.
At the core of these kinds of innovations are the twin ideas of systems of systems
and closed loop control through enabling functions of acquisition, analytics, and actu-
ation. Data is acquired from a thing or system, and then analytics are performed to
provide decision support, which then can drive actuation to change parameters to
effect service improvements or efficiencies. The integration of these three capabilities
enables the creation and operation of high frequency, high precision, management
control circuits. An example of such a system of systems would be a dynamic conges-
tion charging system in a city which dynamically updates congestion charging based
on parameters such as localized air pollution, weather, and traffic measurements to
help optimize real-time traffic flows improve commute times while minimizing envi-
ronment impact. The operation of such a system will also create a lot of big data and
the use of machine learning and offline analytics can create a second-order feedback
loop, which can drive further system improvements based on insights garnered.
Chapter 13
Openness to Innovation and Innovation
Culture

‘It is not just about open Innovation but openness to

Innovation’.

Open innovation requires courage to be open for innovation. It requires courage to

seek (and discover) the new which might lead to disruptive solutions. Openness to
innovation also has a twin: courage for seeking the unexpected. Experimentation
involves failures but not fundamental and costly ones, and thus the probability of
finding timely scale-up solutions is significantly higher than in traditional project
approach.
The culture of an organization or indeed a society is a critical factor in innovation
success. Culture can be hard to define but one of the better definitions is that of col-
lective programming of the mind that differentiates or distinguishes an organization
or society from another. Culture is complex and is a product of the cumulative
knowledge, beliefs, experience, rules, etc. acquired and put in place by an organiza-
tion or indeed a society. According to Dictionary.com, culture is ‘The sum of atti-
tudes, customs, and beliefs that distinguishes one group of people from another’.
President Obama summarized US cultural approach to innovation when he said,
‘Innovation does not just change our lives, it is how we make a living’. The City of
San Diego has transformed itself over multiple decades into a strong vibrant
innovation-­based economy and a recent book by Walshok and Shragge, charting the
journey has credited cultural values and social dynamics as being crucial in the
transformation from a military-based economy to an innovation-based economy.
Peter Drucker often wrote that ‘culture eats strategy for breakfast’ and unless an
organization or society’s culture is open to innovation, it will not prosper. ‘A starting
point for the idea of openness is that a single organization cannot innovate in isola-
tion’ (Dahlander and Gann 2010). The ‘openness’ of an organization or society’s
culture to change and innovation is critically important to the creation and co-­
creation rate but particularly to the adoption of innovations. Countries such as Korea
are known to have fast technology metabolism rates, which are conducive to rapid
adoption of technology-based innovations. Organizations or countries which adopt
Digital as a value or ‘Digital First’ as a mantra greatly increase the possibility of
extracting optimized value from Digital technologies.

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130 13 Openness to Innovation and Innovation Culture

13.1 Technology Metabolism Index

Dawn Mafus is an anthropologist at Intel who sought to understand why different

countries adopt technologies at different rates with Korea and Estonia as standout
example of fast adoption. Key factors that she identified are that both of these coun-
tries had agile governments, strong social networks, and major upheavals in living
memory. These cases seem to be evidence of the old innovation axiom that ‘neces-
sity is the mother of invention’. Indeed Israel, which has more NASDAQ listed
companies than the entire 27 countries of the USA, is a further example of this
axiom at work.
Tuft’s University and MasterCard have created a Digital Evolution Index (DEI)
that tracks the progress countries have made in integrating digital technologies into
the lives of their citizens and their economies. The DEI looks at factors across four
key drivers, supply, demand, institutional environment, and innovation. Supply
evaluates Internet access and infrastructure whilst demand explores consumer appe-
tite for digital technologies. Government policies/laws and resources are the critical
aspect of the institutional environment whilst the Innovation aspect examines invest-
ments into R&D and Digital Start-ups. The DEI classifies countries into four cate-
gories: standout, stall out, break out, and watch out. Stand out countries demonstrate
high levels of digital development whilst also leading in innovation and new growth
and in 2017 countries such as Singapore, the UK, UAE, and New Zealand were in
this category. Stall out are countries which have a history of strong growth but have
slowing momentum and this categories included many Western European countries.
Break out countries such as Russia, Brazil, and Mexico are those that historically
have had relatively low levels of digital advancement and are now demonstrating
fast momentum. Watch out countries is a category where there are low levels of
digital advancement and slow pace of growth. The index is published with a per-
spective that is very aligned with the OI2 ethos, providing a comprehensive report
which allows different countries to learn from each other. The 2017 report also
found that ‘consumers’ trust in digital technologies correlates with digital competi-
tiveness’, according to Bhaskar Chakravorti, Senior Associate Dean of International
Business and Finance at The Fletcher School at Tufts University. Governments
seeking to improve society and their economies can use the DEI as a way of learn-
ing best practice, influencing culture, and measuring progress.

13.2 Operational Excellence Versus Innovation Excellence

Many industrial organizations have their culture oriented towards supporting opera-
tional excellence and programs such as Lean Six Sigma are often in place to instil a
quality and operational excellence mindset and discipline in the organization.
However in modern organizations, cultures of operational and innovation excel-
lence need to co-exist. The interesting thing is that the conditions needed to
13.3 High Expectation Entrepreneurship 131

encourage and support innovation, for example, risk taking, experimentation, and
tolerance of failure are exactly the opposite of those needed to support operational
excellence, e.g. minimize deviations, no tolerance for failure. Creating the condi-
tions for both these mindsets to exist in an organization or culture is difficult but
important for sustainable success. One approach is to separate the innovation orga-
nization from the execution organization in an attempt to provide the right environ-
ment for disruptive innovation discovery and development and avoiding the tyranny
of the urgent. When I was at Intel and we created the IT innovation centres, the then
CIO Doug Busch deliberately separated the IT innovation centres from the rest of
the organization so that the right culture and environment could exist for disruptive
innovation.
Modern organizations are designed for operational excellence with the goal on
variation minimization and risk reduction. However, the conditions needed for inno-
vation are very different with requirement for risk taking and experimentation. An
organization or society wishing to prosper needs to find a way for these two require-
ments to co-exist in harmony. Managing risk with open innovation and prototyping
approach is one of the answers to the change drivers we see now. Serendipity must
be given the chance.

13.3 High Expectation Entrepreneurship

According to Schumpeter, ‘entrepreneurs’ who develop new combinations of exist-

ing resources that accomplish innovation. High expectation entrepreneurship occurs
when people with high ambitions collide with disruptive technologies.
Clayton Christensen coined the term disruptive technologies, which describes a
technology, which is initially inferior and cheaper than an incumbent technology
but ultimately displaces the incumbent technology. The displacement of mainframe
computers by the PC, or valves by transistors and integrated circuits are classic
examples of disruptive technologies.
High expectation entrepreneurship deserves special focus because of its over-
sized impact on economic growth. According to the Global Entrepreneurship
Monitor, less than 7% of nascent entrepreneurs expect to employ fifty or more
employees within 5 years; however, the economic impact is disproportionally posi-
tive as high-expectation entrepreneurs (HEEs) are responsible for up to 80% of total
expected jobs by all entrepreneurs. Also as an example for a group of highly devel-
oped countries a 1% increase in the general rate of entrepreneurial activity raises
economic growth by 0.11% while a 1% increase in high growth entrepreneurship
yielded two-times multiplier effect with a 0.29% increase in GDP growth (Stam
et al. 2007). Governments and policy makers should work to especially incentivize
and lower barriers for HEEs. Ryanair is an example of a HEE, an airline which grew
from one small regional airline to the largest carrier in Europe in just two decades,
powered by a visionary leader with high ambition and demanding work ethics.
132 13 Openness to Innovation and Innovation Culture

13.3.1  penness to Innovation: Managing Six Vectors

O
of Innovation

Machiavelli wrote ‘There is nothing more difficult to take in hand, more perilous to
conduct, or more uncertain in its success, than to take the lead in the introduction of
a new order of things’. Thus for Innovation to prosper, there has to be an openness
to innovation. In managing innovation, there are at least six vectors need to be man-
aged successfully in parallel to ensure that the value promised through an innova-
tion is delivered and realized.
These vectors are
• Vision
• Technology
• Business Ccse
• Business process change
• Organizational change
• Customer or societal change
Unless these vectors are managed in tandem, the chances of innovation success
are significantly reduced. Ultimately, innovation only occurs when something is
adopted and thus often the customer or societal change vector is ultimately the most
important. People often resist change but when the benefits of change significantly
outweigh the benefits of the status quo then adoption will happen. When a particular
organization or society has an openness to change, then innovations are more likely
to be adopted. One needs to be careful not to overload an organization or indeed a
society with too much change as there is a limit to how much change individuals,
organizations, and a society can absorb at one time.

Case Study: Alstom

Alstom is a French multinational operating worldwide in the railway business
and previously in the energy business. Innovation is one of Alstom’s strategic
pillars and what makes the Group a world leader in its sectors. Innovation was
a key factor for competitiveness, sustainability, and anticipating the customers’
needs. To create new momentum in the Group’s future technologies, Alstom
created an Innovation Committee led by chief innovation officer Ronan Stephan.
Five major cross-functional themes, as guidelines for R&D, were identified:
materials and especially nanotechnologies, power electronics, digital, energy
storage, and future urban systems. The innovation committee also fostered an
‘open innovation’ culture and strove to implement strategic partnerships with
research teams, innovative start-ups, universities, and industry leaders in these
fields. As part of this innovation culture, the Group organized an annual
Innovation Awards whereby all Alstom employees were invited to submit inno-
vative projects or inventions. These awards were introduced to foster a spirit of
innovation in Alstom and stimulate the cross-­fertilization of ideas. Leadership
in culture has to come from the top and the clear prioritization of innovation as
a priority in Alstom helped make it part of the DNA of the company.
13.4 Culture and Absorptive Capacity 133

Social Capital

Network Ties Boundary Absorptive

Spanning Capacity

Fig. 13.1 Connectedness, Enhancing the Innovation Capacity of an Organization (source:

Mastrangelo)

13.4 Culture and Absorptive Capacity

Connectness and absorptive capacity of organizations in an ecosystem are crucial

factors for success. Dolly Mastrangelo argues that ‘that network connections across
the ecosystem, combining deep expertise from different perspectives across indus-
try, academia and government, will likely stimulate interactions to enhance innova-
tion. These network interactions provide connectedness among people in enlightened
organizations to leverage diverse networks of expertise and better address the new
demands emerging to enhance value’.
Mastrangelo explains that there are four building blocks for connectedness
(Fig. 13.1). They are as follow:
• Social capital
• Network ties
• Boundary spanning and
• Absorptive capacity
Mastrangelo defines these four building blocks as follows:
SOCIAL CAPITAL: the measure of connection amongst elements (people, busi-
ness units, organizational entities, etc.). Social capital represents the willingness
and motivation of people and organizations to interact with others.
NETWORK TIES: arrangements between people and organizations to interact.
Ties can be strong or weak (each with benefits and drawbacks), formal or
informal.
BOUNDARY SPANNING: is the act of crossing organizational boundaries to
access external intellectual proper. These can be formal or informal with differ-
ent levels of protection and accessibilities. Objective is to identify novel ideas.
ABSORPTIVE CAPACITY: a firm’s ability to recognize the value of new infor-
mation, assimilate it, and apply it to marketable ends.
Social capital refers to the networks of relationships amongst people who live
and work in a particular industry, ecosystem, or society, enabling that industry, eco-
system or society to function effectively. The second building block is an organiza-
tion’s ability to build network ties to span boundaries with people in other
organizations in the innovation chain. The crucial third building block of innovative
capacity is spanning boundaries of other organizations to discover new external
134 13 Openness to Innovation and Innovation Culture

ideas across the innovation value chain. Through boundary spanning, individuals
and organizations discover unexpected information to create new ideas for novel
products or services. Mastrangelo argues that the first three building blocks are very
interdependent as the ability to span boundaries is reliant on an organization’s net-
work ties and the culture as reflected in its social capital. The fourth building block
is an organization absorptive capacity. Absorptive capacity is a measure of how well
an organization recognizes and welcomes the value of external ideas, assimilates the
ideas with current internal knowledge, and brings innovative products and services
to market. Innovative organizations reflect on how their culture evolves and look to
bring their connectedness to the appropriate level to optimize use of external net-
works and relationships. As indicated by Liu and Edvinsson in their work at New
Club of Paris context, structural intellectual capital seems to have a crucial role
when assessing and improving the competiveness of a country.

13.4.1 Social Innovation

Social innovation can refer to both social processes of innovation such as open
source and peer production but more often than not, it refers to innovations, which
have a social purpose. Organizations like Ashoka spearhead and support social
innovation initiatives. Social innovation can refer to a broad set of outcomes such as
new strategies, solutions, and organizations that meet and improve social needs such
as public health to education to community development. Digital technologies can
be a catalyst, platform, and resource in accelerating the development, diffusion, and
adoption of social innovations. When social innovation and social media are tightly
connected, there are great opportunities for fast, efficient, and effective impacts
from social media.

13.5 Interdisciplinary Innovation

OI2 is also focused on interdisciplinary innovation and on what we call full spec-
trum innovation where the focus is not just on technical innovation but on equally
important aspects such as business model innovation, process innovation, user expe-
rience, and brand innovation. Larry Keely’s ten types of innovation model (Keeley
et al. 2013) is a very useful taxonomy to help stimulate different kinds of innovation
to maximize the possibility of successful adoption of an innovation.
OI2 subscribes to the philosophy that innovation is a discipline that can be prac-
tised by many rather than an art mastered by few and that successful innovations can
become more predictable, probable, and profitable. The Innovation Value Institute
has developed an innovation capability maturity framework and associated assess-
ment tool, which helps guide organizations to improve their innovation capability
and associated results. The goal is to deliver innovation results, which are more
predictable, probable, and profitable.
13.5 Interdisciplinary Innovation 135

OI2 requires a new mindset focused on teams, collaboration, and sharing. OI2
mindset combines courage and openness for innovation, but also courage to find
disruptive solutions and let different disciplines ignite new ideas to be developed
further.
Only with this focus will it be possible to tear down the walls that form separate
silos of civil, academic, business, and government innovation. Silos will be replaced
with creative commons, shared intellectual and societal capital, and the systematic
harvesting of experimental results. Information and communications technology
will play a special role because IT can supply the necessary connectivity/computing
power and enable social networking amongst innovators and the communities they
serve.
Lastly, OI2 subscribes to a broader view of growth aligned to a vision of sustain-
able intelligent living and aims to deliver a broader kind of value, one that Venkat
Ramaswamy calls wealth, welfare, and well-being. In OI2, the goal of each innova-
tion effort is not just to create wealth but also sustainable solutions which help
improve welfare and well-being by solving key problems and seizing opportunities.
With the continued development of information technology according to Moore’s
law, a key opportunity is to automate and dematerialize, substituting IT for other
resources to deliver services which are better than prior services and are more
resource efficient.
We believe the adoption of the new OI2 paradigm can be the catalyst that
unleashes a virtual Cambrian explosion of innovation in Europe and beyond. Instead
of gravitating to the lowest common denominator of its society, citizens will deliver
to the highest common multiple by leveraging all the talents and resources of the
broader society. Through co-innovation based on a shared vision and shared value
creation, we can collectively move towards a vision of sustainable intelligent living.
In the OI2 vision, each of us has multiple roles simultaneously in the innovation
ecosystem. We have several professional roles, and several private roles in our
knowledge sphere as professionals, in our experience sphere related to our family
roles, citizen roles, in our free time hobbies, etc.
OI2 advocates for strong user involvement in the innovation process, and that
co-creativity needs to be seamless in the process. Involving all stakeholders in a
common shared vision means also that the users (citizens or user industries as
example) are not anymore objects for innovation but active subjects in the process.
In the new paradigm, users seamlessly take part in the ideation, development, and
verification of the solutions in an iterative process, often based on real-time experi-
ments and prototyping.
In the twenty-first century, the type of business models, depend on how technol-
ogy is used, and instead of technology adapting to business models, business mod-
els have to adapt to technology. Technology includes open innovation and
user-generated content. User-generated content has allowed companies such as
Facebook, twitter, Rovio, an Apple to create their own benchmarks and become
more competitive. This business model creates value by involving the customers in
the creation process, while benefiting from their ideas.
136 13 Openness to Innovation and Innovation Culture

New business models are key, but we should not forget the role of the ‘society’
in providing the safety net to protect the stakeholders. The role of the public sector
will be changed with stronger empowerment of individuals and with unlocking the
location dependence for many services. Policy will be derived from societal and
technological experiments and prototypes as the changes to be expected are poten-
tially quite radical. We cannot make policies by looking at the rear view mirror. The
same applies to strategic business decisions. The need for early prototypes and
experiments to create the ‘new’ either markets processes or products (including
services) on strategic level has dramatically increased.
Often this user-enabled co-creation is dependent on available open engagement
platforms. Apps platforms are good examples on how with relatively small cost
experiments and scale-up of the successes are possible. Likewise, the Open Data
can be a fruitful engine for many new applications for services.
In general, open innovation and the approach favours ecosystems with open
engagement platforms for collaboration and creativity across all the stakeholders,
and which lead to real-world experimentation and prototyping possibilities. Public
sector has its clear role in driving for these platforms, in an open way. Competition
will increasingly be between ecosystems and platforms rather than companies.
With the emergence of the Open Innovation 2.0 paradigm, there is an opportunity
for a new entrepreneurial renaissance, which can drive a new wave of sustainable
wealth creation. The aforementioned open platforms are also critical enablers to
change the granularity of entrepreneurship from SMEs to even individuals who
work outside traditional enterprises. Everyone can be a micro-entrepreneur and
innovator.

13.6  ompetitiveness of New Types of Organizations

C
in Open Ecosystems

Technological revolution has a transformative nature. Society is moving towards a

less hierarchical form, both in time and space. The ‘power of the crowds’, new busi-
ness models conquering old models that were valid in the industrialized era, need to
adjust to the new values. We have moved from an ‘individual needs’ basis to a ‘soci-
etal needs’ basis where the added value sometimes is more important than profit-
ability. Even though, profits are made when value is added, the value is what makes
the difference between competitive advantages and unstable businesses.
We have moved from an industrial, production incentive society to an ICT-based
value generating society. And so, our values and basic needs have been adjusted to
those higher up Maslow’s hierarchy of needs. For example, we see that the levels of
esteem and self-actualization start to grow through outlets such as social media.
Therefore, the focus for successful innovation will be on the upper-level needs
(Fig. 13.2).
13.6 Competitiveness of New Types of Organizations in Open Ecosystems 137

Fig. 13.2 Maslow’s hierarchy of needs

Fig. 13.3 Adapted Maslow’s hierarchy for the organization

A similar change arguably can be seen in enterprises. In the industrial era, the
attention was cost oriented. In the current technological revolution, the most critical
levels for success are cross-organizational issues, innovation culture, and the orga-
nization’s agility to position the competences of the company in the society.
Increasingly, the most successful organizations are those with a sense of purpose
(Fig. 13.3).
A similar change can be seen in enterprises. In the industrial era, the attention
was cost oriented. In the current technological revolution, the most critical levels for
138 13 Openness to Innovation and Innovation Culture

Fig. 13.4 Schwartz Universal Schwartz’s Values Theory, Modified Pie Chart

success are cross-organizational issues, innovation culture, and the organization’s

agility to position the competences of the company in the society (Fig. 13.4).
Schwartz presented a captivating framework on the new values of entrepreneurs
and enterprises. He used his ‘Schwartz Value Inventory’ (SVI) based on a wide
survey of over 60,000 people to identify common values that acted as ‘guiding prin-
ciples for one’s life’. He identified ten ‘value types’ that gather multiple values into
a single category (9).
Schwartz stated that security and power were the main incentives for people at
their jobs for many years. Many sociologists and psychologists believed, and some
still do, that the motivation for a person to succeed in a professional environment is
the ability to control others and to dominate resources paired up with safety and
stability, and the comfort that these brings to their existence.
In relevance to innovation and ‘today’s principles’, Schwartz presented a frame-
work on ‘new’ values for innovation, entrepreneurship, and present-day enterprises
and that is to create value. As we can see in the figure, hedonism and stimulation
create tangible value and the environment for openness, creativity, and ‘self-­
fulfilment’. Hedonists simply enjoy themselves. They seek pleasure above all
things, which on its own may lead to debauchery that when paired up with stimula-
tion gets a better mix. The need for stimulation is close to hedonism though the goal
is slightly different. Pleasure comes from excitement and thrills. Additionally,
Schwartz also presented and additional ‘value’ in the openness to change area, and
it is self-direction, this value relates to those who enjoy being independent and
­outside the control of others. They prefer freedom and may have a particular cre-
ative or artistic bent; this creativity is what allows for innovation and
entrepreneurship.
13.8 Payback–Return on Innovation 139

Fig. 13.5 Output of OI2

Innovative personality traits naturally motivate individuals to be an entrepreneur.

Self-direction, stimulation, and hedonism are not enough to become an entrepre-
neur, but they are enough to stir curiosity. In addition, the need for achievement,
propensity to take risk, tolerance of ambiguity, self-confidence, and innovativeness
are the traits argued by many other authors.

13.7 OI2 Outputs

The outputs of OI2 can be described by a number of different outputs profit, prog-
ress, prosperity, performance, probability, predictability, and payback–return on
innovation. All of these different outputs are intertwined, some are very short term
and others are very long term. We all know that innovation is risky but our hypoth-
esis is that by using the OI2 patterns, the probability of innovation success using
platforms and ecosystems can significantly improve and that multiplicative effects
can be achieved. The win-win outcomes that be achieved by using OI2 take us
closer to what Stahel calls the performance cconomy. Ultimately, however, money
talks so we shall briefly discuss payback and return on innovation as this is the lan-
guage that financiers and accountants mostly understand (Fig. 13.5).

13.8 Payback–Return on Innovation

Innovation is risky and so anything can be done to improve the probability of inno-
vation success is very worthwhile. Sustainable innovation is even more difficult and
elusive. A closer examination of US stock market returns, which has been performed
140 13 Openness to Innovation and Innovation Culture

by Bessembinder (2017), is very revealing. Over a ninety year period only thirty
companies (out of over twenty five thousand companies) accounted for one third of
the cumulative wealth of the entire US stock market. Half of the wealth created over
that 90-year period was contributed by just 0.33% of all companies. In addition, less
than 1.1% of the stocks that existed in that period contributed three quarters of the
stock market’s cumulative gains. The top one thousand performing companies, less
than 4% of listed companies, since 1926 have accounted for all the stock market
gains. The corollary of this is that for 96% of these companies investors would have
been better off investing in Government treasury bills.
By using the value dials approach explained in the shared purpose pattern, pro-
spective innovations can be defined, designed, and delivered against targeted finan-
cial improvements. When network effects are involved supra-linear and exponential
returns can be achieved.

13.9 OI2 Outcomes

In parallel with improved output, OI2 delivers improved outcomes as shown in the
following figure (Fig. 13.6).
By working together using OI2, we get a range of outcomes including alignment
of innovation intent, amplification of resources, acceleration of results due to the
power of the ecosystem, risk attenuation because of shared risk, agility as we can
leverage the power of the ecosystem and co-innovation on a common platform, and
finally action as we have latent energy converted into potential energy through
action. The collective impact of these outcomes is that the efficiency and effective-
ness of innovation efforts can be significantly improved as an ecosystem will always

Fig. 13.6 OI2 Outcomes

13.10 Fast and Slow Innovation Cycles 141

have economies of scope and scale advantages over individual companies. This is
really the power of OI2, with organizations and individuals working together to
accelerate results which they could not hope to deliver on their own. Whether for an
ecosystem or for a societal level system such as an energy grid or a transportation
system, the OI2 patterns can help improve the predictability and probability of
results as well as their shared profitability.

13.10 Fast and Slow Innovation Cycles

Innovation requires co-creation and participation by all stakeholders in their com-

plementary roles. In the figure below, we see two innovation cycles; the rapid one
(1) which builds on fast user/co-creator feedback in real-world settings (Fig. 13.7).
Here, the users together with the industry are co-creating new services and products,

Fig. 13.7 Fast and Slow innovation cycles

142 13 Openness to Innovation and Innovation Culture

and even more, markets together. The R&D seed is filtered through user experience
and needs, and opportunities as well to experimentations and prototypes in the new
markets to see what flies and what is to be left out. This iterative process is dynamic
and has a lot of serendipity in it by nature.
The slower innovation cycle (2) is related to innovation infrastructures and
framework creation for frictionless and rich innovation ecosystems. The public
institutions have here an important role by focusing public procurement for innova-
tion thus scaling up innovations coming from the user-industry-research collabora-
tion. Public sector is an important buyer who is able to change the innovation
landscape significantly. Public research and infrastructure funding, together with
creating the right framework conditions (like IPR) is influencing the richness and
fluidity of the innovation ecosystem directly.
Public funding enables research institutions to invest in fundamental explorative
research, growing seed for the R&D to harvest into innovation injection. It is very
important to view these two cycles separately as they involve same players but in
different interconnected roles. In addition, the innovation policy actions should take
these both into account to have a balanced short-term and long-term perspective on
the innovation ecosystem development.
Chapter 14
Looking Forward

According to Steven Carter, author of ‘Where good ideas come from?’ the great
driver of scientific and technological innovation has been the historic increase in
connectivity. Indeed, we are witnessing what Kurzweil called the law of accelerat-
ing returns with each new innovation building on prior innovations and also often
becoming infrastructure for future innovations. The OI2 innovation paradigm is
based on extensive networking and co-creative collaboration between all actors in
society, spanning organizational boundaries well beyond normal licensing and col-
laboration schemes. With the ever-increasing speed and rate of connectivity, we are
creating a giant global intellectual supercollider and the possibility exists that peo-
ple and machines alike may participate in a giant neural network, which spans the
globe. Maybe this is what Peter Russell had in mind when he wrote the Global Brain
book in the 1970s.
Looking forward, we need to collectively adopt the mindset of shared vision and
shared value, and build innovation strategies and ecosystems to tackle the major
societal problems. For example, we could build the equivalent of Moore’s law and
an ecosystem to deliver healthcare transformation—systematically and continu-
ously finding technology interventions which will improve quality of life and qual-
ity of care which when cumulatively added help create longer healthier lives—a key
role of the citizen would be taking more individual responsibility for their health. In
parallel, there will be difficult challenges to solve in areas such as security, stan-
dards, trust, and privacy as more and more systems are open and interconnected.
However, this should not stop us making progress. Tactically, the EU and govern-
ment agencies in approving research projects for public funding should take into
account criteria like on 360 participation of actors and the quality of the proposed
design pattern(s) to help successfully diffuse the outcomes of the project.
Ultimately, it is not just about open innovation, but openness to innovation.
Again, Peter Drucker wrote that culture eats strategy for breakfast everytime, high-
lighting the importance of culture to the success of any strategy. Fostering a culture,
which is open to innovation and risk taking, is important. Increasingly, it seems

© Springer International Publishing Switzerland 2018 143

M. Curley, B. Salmelin, Open Innovation 2.0, Innovation, Technology,
and Knowledge Management, DOI 10.1007/978-3-319-62878-3_14
144 14 Looking Forward

there is increasing appetite by citizens to be involved in larger innovation efforts, as

exemplified by more citizen science initiatives. In a Dublin City Council survey of
visitors to a future cities exhibition in Dublin in 2013, over 90% of respondents felt
that Dublin should be used as a venue for testing experimental solutions and they
would be willing to participate in the experiments themselves. The UK govern-
ment’s whitepaper on community engagement ‘Communities in control: real peo-
ple, real power’ also indicates that there is a desire from the top for more community
and personal engagement.
Denis and Donatella Meadows et al. wrote in 1972 that ‘Man Possesses, for a
small moment in time, the most powerful combination of knowledge, tools and
resources the world has ever known. He has all that is physically necessary to create
a totally new form of human society—one that would be built to last for generations.
The missing ingredients are a realistic long term goal that can guide mankind to the
equilibrium society and the human will to achieve that goal’.
It is strange that this statement seems even truer today and yet the progress made
has been disappointing. We have the technology and now we now have an emerging
innovation paradigm and methodology. We have to take the opportunity of a life-
time, in the lifetime of this opportunity. The technology is almost ready—are we?
Let’s create our future together with the OI2 approach!
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