Concept, Structures, and Decision Factors of Open Innovation
5.6 The Difference in Open Innovation Depending on Whether a Firm Is Modular or Not
5.6 The Difference in Open Innovation Depending
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role in understanding the relation between parts and in adding new architectures.
Under the interdependent architecture like this, specific parts industries want their parts to occupy an important position and to control and manage the whole system, and they try to do so.
But more valuable architecture makes it possible for other subjects (industries) to utilize their expertise and to have an opportunity to participate in the system, diminishing the interdependence and decreasing the complexity between architec- tures. A need for effective connection implies that the industries cooperate and com- pete with other industries in the system. As the technology advances, however, and as the function and characteristics of the technology become clear, the availability of the technical management also increases, and then the industries try to limit and clarify the function and boundary of the product.
In addition, as for each vendor providing parts, they can more easily add them- selves as a vendor to provide specific parts according to whether it meets their requirements and expectations or they may drop existing vendors. Furthermore, with the advancement of modular architectures, intermediate markets also develop, industries that produce parts relating to specific parts of the architecture emerge,
System
Component B
Component A Component C
Fig. 5.10 Interdependent architecture model (Source: Chesbrough (2003, p. 60))
System
Component B
Component A Component C
Fig. 5.11 Modular architecture model (Source: Chesbrough (2003, p. 61))
5 Concept, Structures, and Decision Factors of Open Innovation
and external technology competes with partitions of existing architecture (Chesbrough 2003, p. 61).
In this well-established modular architecture, it becomes possible for hundreds or thousands of firms to pursue various technical innovations without worrying about the possible impacts of their improvements on the other parts of the system.
Industries pursuing open innovation find it easier to actively innovate in modular architecture and to reflect it as a new part of the system, and they voluntarily take part in intermediate markets in modular architecture (Chesbrough 2003, p. 62).
Therefore, in modular architecture, it becomes possible for the industries to save time and expense and to make more innovative products by purchasing specific parts from outside rather than making them independently.
While the prior research on products and technology regarded specific product technology as isolated and independent, most of the current research shares the technology including intellectual property by connecting suppliers, consumers or competitors on the value chain (Chesbrough 2006, p. 87). The technology connec- tion shown in Fig. 5.12 can lead to another form of patent infringement problem regarding intellectual property due to customers’ or suppliers’ standpoints other than industries’ themselves.
As described in Fig. 5.12, most technology-based products, particularly modular architecture products, are supplied with technology including IP following the value chain, and in the case of industries producing intermediate goods, open innovation
Supplier Company Consumer
Technology 1 Technology n Technology 1 Technology n Technology 1 Technology n
High IP Medium IP Low IP
Fig. 5.12 A patent map of the value chain (Source: Chesbrough (2006, p. 87))
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inevitably occurs, which in turn provides their technology to other customer indus- tries. With regard to modular architecture products, as it is possible for them to optimize technical innovation through open innovation on the value chain while minimizing the influence on other parts in the system, they pursue outside-in open innovation from industries whose technology and ideas are superior.
Meanwhile, individual technology or technological systems have a life cycle as shown in Fig. 5.13. That is, starting from the merging stage when the technology appears for the first time, it goes through a growth stage, maturity stage, and declin- ing stage.
The emerging stage, just before the dominant design appears, is when the various technical feasibilities are being tested. Taking the automobile for example, this is when the gasoline engine of the automobile fought fiercely with the steam engine and electric engine to obtain the status of dominant design (Chesbrough 2006, p. 91). The growth stage is when the technology is rapidly progressing after the dominant design has been set and this is when Ford’s model T and A were explo- sively produced and sold. The maturing stage is when the technology is well known and the use of that technology reaches its peak; an example is when sports vehicle and mini-vans were produced and supplied through segmentation of the automobile market. The declining stage is when alternative products to existing products are being made and established in the market with the turnover of existing products declining; the decline of existing car tires in the USA due to the advent of European car tires is a good example (Chesbrough 2006, pp. 91–92).
Emergin
Growing
Maturing Cl
Decreasing
Time
Performance Modular
Interactive
Fig. 5.13 The match between TLC, and modular or interactive architecture (Source: Chesrough (2006, p. 90) modified)
5 Concept, Structures, and Decision Factors of Open Innovation
In modular architecture, it is possible for companies to provide parts based on optimal technology of the module. Namely, in modular architecture, it is possible for companies to achieve an optimal innovation effect through outside-in open innovation. Accordingly, the open innovation effect appears to be far greater in the modular-based industry than in independent architecture-based industries. As the technology matures, interdependency between parts decreases, and independent architecture is transformed to modular architecture. In the meantime, while the combustion engine-based automobile industry is currently in the mature stage after passing through the emerging and growth stages, the smartphone industry is main- taining a rapid upswing.
5.7 The Difference in Open Innovation According