Open Business Models

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Open Business Models by Henry Chesbrough deals with how companies can make money in a new era of “open innovation” (the name of Chesbrough’s previous book, as it happens)—the process of devising new ideas in collaboration with other businesses or individuals to enhance existing products or invent completely new ones. There are two main ways that companies will do this: “outside in” or “inside out”.

Companies that take in ideas from the outside generate value by bringing ideas to a wider audience than they may otherwise have found. Procter & Gamble is a good example of a company that does this, where several products, such as Swiffer have either been licensed in or acquired outright. Following the success of the initial few products via this scheme, Procter & Gamble evidently now has a large number of people actively scouting for technologies and products that it can put it’s resources behind.

The other way a company can generate value is by allowing others to utilise their unused ideas. IBM is an excellent example of this, where not only do they license unused patents, but also (after some internal struggle) now license their technologies too. This helps those who license the patents because now they can also gain insight as to how those patents are applied.

The first half of the book is largely the theory behind Chesbrough’s ideas, and the second half is more practical, along with an excellent case study of IBM struggle to reinvent itself during the 1990s. Although the ideas are definitely geared towards large-scale companies who can afford to invest in research and not do anything with the end results, I enjoyed the book and the stories of how these companies are putting ideas to work: both their own, and those of others. But then, I’m a bit of a geek like that.