The Equation of Open Innovation: A + B = C

I stumbled over an interesting paper, Sourcing External Technology for Innovation, by the Alliance Management Group which has developed lots of great content including the below Want, Find, Get, Manage framework.

• Want: What external resource(s) does the firm want to access from the outside world to meet its strategic intent?
• Find: What mechanisms will the firm use to find these external resources?
• Get: What processes will the firm use to plan, structure and negotiate an agreement to access the resources?
• Manage: What tools, metrics and management techniques will the firm use to implement the relationship?

The article focuses on the Want element of this framework and what I in particular liked is the equation: A + B = C.  I have inserted the below snippets from the article in order to introduce you to the equation.

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We will define our terms. The variable A represents the firm’s existing ‘assets’ including its production equipment, core capabilities, intellectual assets, resources and perhaps even its market presence. The variable B represents assets that are complementary to the firm’s resource base and are only available externally. The variable C represents the new product or market offering that goes beyond what the firm is able to deliver utilizing its existing ‘assets’ alone.

C is a more valuable commercial result that comes from combining the firm’s existing ‘assets’ (the A) with those sourced externally (the B). This simple equation makes a simple point. If the firm does not access external technology (i.e. there is no B) then C will be limited to what can be achieved using existing capabilities and assets. In other words, C is determined by A.

The goal of the A + B =C equation is to find new value that the firm cannot identify using traditional planning processes. Internal resources (A) retain their prominent role and integrate with external resources (B) to enable a visionary market offering (C) that was unthinkable just yesterday.

When the organization purposefully moves in this direction, senior executives require project managers to redefine C as a variable, enabled by A and B. This is an uncomfortable change for some managers because C is ill defined, the variable B is fuzzy and A is the only known quantity.
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I believe open innovation is about bridging internal and external resources and to identify and execute on the opportunities that arise on this interaction. I like how The Alliance Management Group turns this into an equation and I wanted to share this with you.

Don’t forget to read the full article: Sourcing External Technology for Innovation