[MUSIC] What is open innovation? Open innovation is defined by Henry Chesbrough this way. But first let me say this, when people say, I am an open innovation person, what they mean is that I'm open to all kinds of ideas. Give me all your ideas, and I will benefit from those ideas, and I'll incorporate them into my models. That is not open innovation. There's a clear distinction between that concept of being open to all ideas and what we define it here. It is not only the purposeful inflows of knowledge, but also outflows. What Henry Chesbrough is saying in open innovation is, an open innovation is something, the value that you create need to be shared or incorporated into other people's business models. So they may create value for themselves as well as you, because you get some licensing income. Or you create what we call an ecosystem of more friends. So open innovation is knowledge coming in, because not all the smart people work for you, and you need outside knowledge. But you also need to take your ideas, the value you create, to become valuable to other people. And incorporate them into other people's business models. So, in order to illustrate this, I have the same funnel that you've seen before. It's on the side. It's broader at the start, and it narrows down, it's like a gun. But it has three targets, not just one. It has the market that the company is in or your company is in. But we also established two more. One is, a new market that you can potentially get into. And the third target is other people's markets and other firm's markets where you can share this value or you can license the value you create with them. So in order to do this you need a new process. The old process of closed innovation, of one way one way out doesn't work. You need to first drill holes into this funnel. It means there are many ways in and many ways out. Knowledge is flowing in every direction, it comes and it goes, it pollinates it empowers and it just stimulates growth. So the way this works is I'm going to give you, several examples. One is, see that these are the ideas that are birthed inside the funnel and they go out. And it's relevant to our product and the product is developed and launched and it's a success. The second area would be an idea that is birthed inside the funnel, like Xerox had cooked up a lot of its ideas. But it's not relevant to your product, but it's relevant to someone else's business. So you license it. So the knowledge flows out rather than to sit on the shelf and collect dust. Here's another idea that is birthed, and we realize we can create a new market. We have the talent, we have the people's talent, we have the resources, we have the partnerships to create a new market. So it's not collecting dust. The other one is, this is not even our idea, it's not even birthed inside the funnel, it is someone else's idea. And so we borrow that idea, because maybe, due to several reasons, maybe that company does not have the resources that you do. So you borrow those ideas, to bring it into the funnel, you work on it, and you launch a new market, or even get into your current market. That is the potential where outside knowledge comes in, and it just is not wasted, and your strengths and the other company's strengths are put to use. Here's another one, the last one here is called a boomerang. It is an idea that is birthed inside the funnel but you get stuck. You only have say 15 or 20 scientists, but the world out there has millions of people who can add ideas and value. So you put it out, so the global brain goes to work, and people come in and take these ideas and develop them further. And at some point when it's viable, you bring it back in, and you launch a new market. So the idea of open innovation is that when knowledge is created, it should flow. It should not sit and collect dust, it should flow. That value is created.
