Henry Chesbrough is considered the expert on open innovation. He’s written the book on it and regularly lectures about it. He defines open innovation as: “a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.”

It sounds a bit confusing! We scoured the Internet and think P&G Connect and Develop defined it in a way that’s easier to grasp: “the practice of accessing externally developed intellectual property in your own business and allowing your internally developed assets and know-how to be used by others.”

The idea behind open innovation is that to keep up with the competition, companies can no longer afford to rely solely on their own internal R&D. Back in 1990, Bill Joy, of Sun Microsystems said, ‘No matter who you are, most of the smartest people work for someone else.’ Much like open source, there is cooperation voluntarily undertaken by members of the public.

A quick comparison between four common terms:

Outsourcing: a task is completed by a specific body outside of company walls. example: Thoughtworks

Crowdsourcing: a task is outsourced to an undefined public either an individual, or a group. example: Netflix

Open source: a task is completed by an undefined public and openly shared. example: Linux

Open Innovation: a company chooses to share assets and know-how in exchange for gaining access to IP developed outside of company walls. example: P&G Connect and Develop

If you would like to learn more about Open Innovation, you can read Henry Chesbrough’s book, appropriately titled Open Innovation.