ABSTRACT INCREASING COMPETITIVE CONDITIONS AND CHANGING ENVIRONMENT CIRCUMSTANCES HAVE FORCED MANY OF TODAY’S FIRMS TO RETHINK THEIR INNOVATION MANAGEMENT STRATEGIES. TO ADDRESS THE CHALLENGES THEY HAVE CHOSEN TO MOVE FORWARD TO A MORE OPEN INNOVATION APPROACH BY USING EXTERNAL SOURCES.
THE CONCEPT OF OPEN INNOVATION IS A RELATIVELY NEW AND UNEXPLORED AREA WITHIN INNOVATION MANAGEMENT. THEREFORE THIS PAPER WILL EXPLORE HOW THE LITERATURE DESCRIBES THE KEY ASPECTS OF OPEN INNOVATION AND HOW THE ASPECTS SHINE UP IN THE PHARMACEUTICAL INDUSTRY.
IN THE END, THE AIM IS TO DETERMINE WHETHER THE PHARMACEUTICAL INDUSTRY WILL MOVE FORWARD TO A MORE OPEN OR CLOSED INNOVATION APPROACH. Table of content Organization of Innovation Term paper – spring 2013 Organization of Innovation Term paper – spring 2013 1. INTRODUCTION 1. 1 Research problem Today, innovation is identified as one of the most important drivers for companies to succeed with, prosper and sustain continued growth and high profitability.
The emphasis usually lies on how to innovate and how the innovation processes can be managed. An often used approach within innovation is the Closed Innovation (CI) approach, where a company controls the creation and management of an idea based upon the philosophy that “we should control our intellectual property so that our competitors do not profit from our ideas”. However, the increasing competitive conditions and changing environmental circumstances such as shorter product life cycles and growing costs of R&D, forces today’s firms to rethink their innovation strategies (Chesbrough, 2007).
To address the challenges, many firms have chosen to move forward to an open innovation approach by using different external sources in their innovation activities. Nevertheless, the concept of Open Innovation (OI) is a relatively new and unexplored area.
Hence, it is first of all interesting to explore how the literature describes the key aspects of OI. Secondly, the question is how the aspect of OI shines up in a specific industry like the pharmaceuticals and if this particular industry will move to a more OI approach in the future? 1. 2 Research questions The above mentioned problems lead to the following research questions: 1. What are the key aspects of an ‘open’ innovation approach? 2. What is characteristic about innovation in the pharmaceutical industry? 3. Will the pharmaceutical industry move more forward to an open or closed approach?
1. 3 Thesis statement In this term paper, it is intended to provide a concise overview of the key aspects of OI. In continuation of this, the next will be to describe how these different aspects shine up in an industry like the pharmaceutical industry using a case study of an ‘open’ innovation approach Organization of Innovation Term paper – spring 2013 within that particular industry. The paper will end up with a discussion on why or why not the pharmaceutical industry will move more towards an ‘open’ innovation approach and what challenges this approach may have. See the figure below for at detailed overview.
FIGURE 1 – STRUCTURE OF THE PAPER (OWN WORK) STRUCTURE OF PAPER TO ILLUSTRATE THE OUTLINE 1. 4 Research streams The main emphasis will lie on the statements and articles of Henry Chesbrough, the father and originator of OI theory. Henry Chesbrough has brought revolutionary insights for restructuring the world of R&D and in particular innovation strategy.
Besides this, the paper will be supported by articles, journals and empirical research material relevant to the specific topics of OI, innovation within the pharmaceutical industry and OI in the pharmaceuticals in the future. 1. 5 Delimitations.
The concept of innovation reaches very far and affects almost every industry around the world. Thus this paper will be focusing on only a few specific aspects within that area: OI in the pharmaceutical industry. The focus on OI is chosen due to the fact that the topic has gained increasing recognition in the field of innovation within the recent years. Meanwhile the pharmaceutical industry has experienced a crisis of increasing R&D costs and decreasing productivity which has demanded a new approach to innovation management.
This paper is Organization of Innovation Term paper – spring 2013 therefore limited to what OI means for the pharmaceutical companies, like in the case of GlaxoSmithKline. 2 KEY ASPECTS OF OPEN INNOVATION Lately, increasing attention has been dedicated to the concept of OI, both by scholars as well as the real business world. Chesbough, who invented the term OI, describes in his book “Open Innovation: The New Imperative for Creating and Profiting from Technology” (2003) how firms have shifted from so-called CI methods towards a more OI approach. 2. 1
From closed to open innovation By tradition, development of new businesses and marketing of new products took place within the boundaries of the firm (see figure 2) as part of the CI approach. Here the idea/project only entered in one way, from the beginning, and were only able to exit in one way, into the market (Chesbrough, 2003).
FIGURE 2 – THE CLOSED INNOVATION MODEL (CHESBROUGH, 2003A) According to Chesbrough (2003a), companies have historically invested in large R&D functions to encourage innovation and thereby gain profitability. The CI approach creates successful innovation by the use of control. Thus firms must generate their own ideas and hereafter develop, build, market, distribute and support them on their own.
However, several aspects have eroded the view of CI. Stated by both Chesbrough (2003a; 2007) and Elmquist et al. (2009), the changes in society and in different industries together with shorter product life cycles and growing costs of R&D all have challenged the view of the CI approach.
The result is that Organization of Innovation Term paper – spring 2013 firms today look for alternative ways to optimize the effectiveness of the innovation approach (see figure 3). FIGURE 3 – THE OPEN INNOVATION MODEL (CHESBROUGH, 2003A) Now firms actively search for new technologies from outside the firm, both through cooperation with competitors and suppliers.
They further develop or out-licensing their technologies if they do not fit with the strategy of their firm. The OI paradigm thus can be understood as the antithesis of the CI model and can be described as follows: “(…) THE USE OF PURPOSIVE INFLOWS AND OUTFLOWS OF KNOWLEDGE TO ACCELERATE INTERNAL INNOVATION AND EXPAND THE MARKETS FOR EXTERNAL USE OF INNOVATION. ” (CHESBROUGH, 2012: 1) According to Chesbrough (2003a), many industries have been or will be shifting to a more OI approach. Still, we have both totally open and totally closed industries.
The nuclear industry is a good example of a closed industry, while an industry like Hollywood – which depends a lot on network and alliances – have been an open innovator for quite some time. 2. 3 Key aspects of open innovation Going through the main theory within the subject of OI, the aim with this section is to derive the most characteristic aspects concerning OI and to emphasize why firms should/would choose a more open innovative approach in the future. Organization of Innovation Term paper – spring 2013 Firstly, it would be interesting to take a look at what specifically differs between a CI approach and an OI approach.
Chesbrough (2003a) has provided us with a clear overview: TABLE 1 – PRINCIPLES OF OPEN INNOVATION (CHESBROUGH, 2003A) The overall statement of table 1 is clear. Companies focused too internally (a CI approach) are likely to miss out on a number of opportunities caused by the absence of external technologies to unlock their potential. Thus the emphasis lies upon openness in every principle.
However while the figure provides us with an overall perspective about the main principles of the OI approach, it does not reveal much about what incentives a firm could have for utilizing from the different OI principles in the figure.
In a strategic analysis of a firm’s strengths and weaknesses, it would be obvious to use a model like the value chain to determine the future strategic planning. This would be a useful tool for future actions and possible profiting within the industry. Illustrated by this example, it is essential to be more specific why a firm should act on these principles and what they potentially would gain from it. Stating that a firm will win by making the best use of both internal and external ideas, does not provide the firm with promises of cost minimization or higher profitability (which otherwise would be a great incentive).
Thus it would be interesting to explore what the literature reveal about the more concrete incentives/key aspects or even needs for utilizing the use of an OI approach. This will be further elaborated in the following. OPTIMIZING THE USE OF INTELLECTUAL PROPERTY (IP) Organization of Innovation Term paper – spring 2013 Both Chesbrough (2003a) and Herzog (2011) state that the firms should profit from others’ use of their IP and vice versa. To mention IP and OI in the same sentence seems contradictory as IP normally is associated with the CI model while OI aims towards making ideas accessible for other actors.
In the modern business world, there are many kinds of IP rights such as trademarks, copyrights, trade secrets and of course patents, which are heavily used by the pharmaceutical industry to exclude competitors (see more in section 3. 2. 1). Still, Chesbrough suggests that IP and OI should not exclude each other, but instead give inspiration to a freer market for trade and be a motivation for innovation, as innovation in itself is too costly for one firm to manage. Thus the OI approach delivers a rational justification for why companies should be both active buyers and sellers of IP which changes the way of using, managing and generating IP.
CREATING A NEW BUSINESS MODEL According to Chesbrough (2003) and Lichenthaler (2011) it has also been proven that other companies in the supply chain, such as suppliers, have obtained a more important role in the innovation processes of firms. This means, that firms are forced to collaborate with these supply chain firms to be successful in innovation. Said in another way, the firms need to create value by managing and actively seeking people and firms from both inside and outside the walls of the firm to offer the business model the knowledge needed.
MOBILITY OF WORKFORCE
Different authors (Chesbrough, 2003; Elmquist et al. , 2009; Herzog, 2011) states that highly educated people have become more mobile and accessible which means that a huge volume of knowledge exists outside the large companies’ R&D departments. The result is growing knowledge flows when employees are changing jobs and taking their knowledge with them. This means, that if the firm is successful in finding and holding on to the right people, it will have higher chances of success.
USE OF NETWORKS In continuation of the above mentioned mobility of workforce, Talaga (2009) indicates that transforming to and using the OI approach actively, is all about trying to work within Organization of Innovation Term paper – spring 2013 different degrees of networks.
When talking about OI as a whole, this seems as a very obvious approach, since OI is all about creating a systematic in- and outflow of knowledge within a particular firm. This could be seen as the counterpart to the current very popular topic of networking, which is crucial for obtaining success in the business world of today. NEW FINANCIAL STRUCTURES The above mentioned authors (Chesbrough, 2003; Elmquist et al. , 2009; Herzog, 2011) also indicates that these new market conditions have made it easier for firms to access venture capital making it possible for promising technologies and projects to be further developed from outside the firm.
The projects can thereby go to market in many ways besides through the company’s own marketing and sales channels, for instance through licensing or a spin-off venture company. This demands a clear plan delivered from the firm from the start. OVERCOMING THE COMPLEXITY OF TECHNOLOGY PROCESSES Herzog (2011) similarly states, that innovation processes have become more and more complex due to the increasing intensity of technology.
This has ultimately had a vital impact on different industries as they have to struggle with a lot a complex processes themselves – making it more costly and time consuming for the individual firm to innovate. The solution is the same as earlier mentioned: The firms need to emphasize the use of more network collaboration.
2. 4 Summarization of key aspects In this last section a concise overview of the key aspects of OI will be provided before going further into depth with innovation in the pharmaceutical industry. TABLE 2 – SUMMERAZATION OF KEY ASPECTS (OWN WORK) Author Year Key aspect Chesbrough Herzog 2003a 2011 Optimizing the use of Intellectual Property (IP).
CHESBROUGH LICHENTHALER 2003 2011 CREATING A NEW BUSINESS MODEL CHESBROUGH ELMQUIST ET AL. HERZOG 2003 2009 2011 Mobility of workforce Organization of Innovation Term paper – spring 2013 Talaga 2009 Use of networks CHESBROUGH ELMQUIST EL. AL HERZOG 2003 2009 2011 New financial structures Herzog 2011 Overcoming complexity of technology 3. INNOVATION IN THE PHARMACEUTICAL INDUSTRY Pharmaceuticals has a strong focus on growth and R&D and is therefore interesting to investigate in the light of innovation management.
Thus, in the following sections, the characteristics of the industry and use of innovation are elaborated, which will result in a view of whether the use of innovation within the industry is related more to the closed or open approach. 3. 1 The characteristics of the pharmaceutical industry Since the mid-20th century pharmaceuticals has supplied the world with significant products to minimize human diseases and strengthen the worldwide health. The industry is complex, driven by inflexible government directives and have the past years faced a growing cost structure of drug production and compliance.
The pharmaceuticals has a size of $700 billion per year and is geographically concentrated in the US (48 % of total), Europe (29%) and Japan (11%). A couple of large firms are holding a dominant position throughout the world and the industry in general have experienced a strong growth in sales (an annual rate of 8,4%), which is stronger than the overall world economy (Hashemi, 2011). The tendency since the 1980s has been the merging between the pharmaceutical firms by corporate takeovers and partnerships, which had given rise to very large firms called Big Pharma. The Big Pharma is firms with earnings that exceeds $3 billion or with R&D costs above $500 million.
The pharmaceutical industry is characterized by different biotech and biopharmaceutical firms (investment in R&D) and Big Pharma (capital strong firms) working together and taking advantage of each other. This shows that the big pharmaceutical firms have not succeeded in maximizing their own know-how when it comes to biotech. Yet, Big Pharma is able to make more efficient use of own resources and of those of the biotech company by exploiting the knowledge of the latter (Hashemi, 2011). Organization of Innovation Term paper – spring 2013.
3. 2 The characteristics of innovation in the pharmaceutical industry Innovation has shown to be a major driver for growth within the pharmaceutical industry offering key improvements for patients and society (Schmid and Smith, 2005). Seen from this perspective, it would be interesting to examine the characteristics of innovation in the industry. Pharmaceuticals started out by focusing on curing deceases but have, as time has progressed, become more and more a question of core business.
The complexity of the industry has emerged from the moral dilemma between profit maximization and the wish of developing helpful medicines to people, who really need it. Still, profits and return of investment are fundamental for any given company wanting to stay in the business, which also applies to the pharmaceuticals (Hedner, 2012).
However, while the business environment for pharmaceutical companies has changed dramatically in the past decades, the pharmaceutical business model that served the industry well over the past decades has not kept pace (Hedner, 2012). Here are some of the reasons why: 3. 2. 1 THE PROBLEM OF BLOCKBUSTERS Historically, the pharmaceutical industry has been known to be knowledge intense which has resulted in long and expensive R&D periods before bringing a new drug to the market.
The R&D periods have involved long development phases, resource-demanding approval processes, regulatory requirements and the use of sophisticated technologies. From idea to market launch, a medicine product has on average taken about 12 years to develop and has involved investments from $800 million to $4 billion.
This means that no less than 20% of the revenues in the industry has been spend on the R&D of new drugs. In addition to this, the R&D expenditures have increased about 6% per year since 1995 (Hedner, 2012). To support the significant R&D costs and protect the industry from products being copied, the patenting of drugs has logically been of great importance to the industry.
A pharmaceutical patent is known to last about 17-20 years (Danish Patent and Trademark Office, 2013) after the registration, which means that the costs of the investment have to be covered in the remaining 5-8 years of the patent offering only a limited time for the developers to exploit the Organization of Innovation Term paper – spring 2013 full potential of the product. Naturally, the concept of patenting has created a crucial business model for the pharmaceutical firms, also called the blockbuster model.
The blockbuster model is simple: The firm targets a huge population (e. g. people with diabetes), develop and patent a drug marginally better than those of the competitors and earn billions exploiting the patent. A lot of significant and profitable blockbusters have been developed using this model.
A good example of this is Prozac, which has generated $500 million-$1 billion in sales annually since its development (Chesbrough, 2011). Nevertheless, the blockbuster model faces a severe problem. Within the next couple of years, drugs with sales of more than $50 billion are losing patent protection, which means that a lot of pharmaceuticals are losing billions in sales to generic competitors.
Despite massive spending in R&D, only a few couple of drugs look like they will replace the ones coming of patent (Chesbrough, 2011). As a result of this development in the pharmaceutical market, many firms within the industry have declared their commitment to research driven solely by medical need to find the most optimal drug for the right patient, regardless of market size (Chesbrough, 2011). 3. 2. 2 LOW PRODUCTIVITY Meanwhile, it also turns out that productivity has not followed the growth of the R&D expenditures.
As a result of the increased time that it takes to bring a drug to market compared to earlier, the industry has experienced some sort of revenue stagnation (Hashemi, 2011). Schmid and Smith (2005) acknowledge this problem but contribute with an alternative view of the problem. Their study shows that a general increasing innovation trend can be distinguished when observing the number of drug approvals the last 60 years. This stands as a direct contradiction to the previous view that the pharmaceutical industry is not as innovate as it should be.
Nevertheless, the study points out that the industry since the mid-50ties has continuously developed increased numbers of new products proved to be of theoretically important advantage. This implies that even though the number of developments has not risen proportionally, the number of useful and important innovations has developed in a positive direction. Organization of Innovation Term paper – spring 2013 According to Schmid and Smith, the reason for this positive development must be found in two key drivers for innovation within the industry. First of all, the improvement of the biological sciences over the past 20 years has been remarkable.
The introduction of molecular biology in pharmaceutical R&D combined with investments in high-throughput screening (HTS) has shown to be critical for the industry. Secondly the economic emphasis of the major pharmaceutical firms has shown to be fruitful. Earlier, patent expirations of blockbuster drugs was a big dilemma to the firms as more than one new product had to be marketed to maintain revenues from expired drugs. This problem has evoked a tightening of the R&D performance and a focus of new ways to further innovate while reducing costs (Schmid and Smith, 2005).
To sum it up, the number of new product developments in the pharmaceuticals is affected by the long time of development and has faced some sort of stagnation even though larger investments are observed and important products have been developed. At the same time, the power of blockbuster drugs also prevents the utilization of innovation within the industry despite the fact that the need for new innovation has never been stronger. Naturally, the situation has led internal and external stakeholders to question the innovative competences of the industry (Schmid and Smith, 2005).
In the following section, a company case from the industry will be reviewed to see how the different aspects of innovation shine up in the industry. 3. 4 Innovation at GlaxoSmithKline GlaxoSmithKline (GSK) is a science-led global healthcare firm with headquarters in the UK. The firm researches and develops a wide-ranging series of innovative drugs and brands and has a main focus on vaccines and consumer healthcare. GSK’s success depends the firm’s R&D performance and on making their new innovative products accessible to as many people as possible. In 2012 the firm spent around ? 4 billion in R&D in search for new drugs, vaccines and innovating consumer products (innovation.gsk. com, 2013).
With the aim of reaching its overall objectives – to improve global healthcare – GSK looks outside company walls and creates networks to be able to collaborate with partners in academia, industry and government. GSK wants to share expertise to encourage innovation as Organization of Innovation Term paper – spring 2013 innovation is one the most important aspects of the company’s business and future profitability.
Likewise, GSK has been aware of the harsh reality of rising challenges in the surrounding economic environment and finds it necessary to contribute to future healthy biotechnology companies by supporting them with venture capital. It is clear, that GSK like other large companies in the industry is moving more towards an OI approach.
As stated in an article from BioPharm International (2012), GSK has the past couple of years been undergoing “fundamental” changes to its business model. The aim has been to open up the innovation processes, and to share intellectual property (IP), resources and knowledge. One of the most obvious signs of a move towards the OI approach at GSK is the establishment of the “Open Lab” in 2010.
The laboratory was created to focus on stimulating innovation and to allow independent researchers to access the firm’s facilities, resources and knowledge. Healthcare Engagement Strategy also points out, that GSK wants to encourage external innovators to create partnerships for product development by setting up an external sourcing model on the consumer healthcare side. The program enables GSK to connect with potential partners and has a dedicated OI team to develop ideas into products (Wilson, 2012) 3. 3 Which aspects are related more to the closed or the open paradigm?
As described in the previous sections and in the case of GSK, the pharmaceutical industry has historically been dominated by the CI model – a model which still grips many of the firms today (Chesbrough, 2011). Traditionally, most of the large pharmaceutical firms have done everything from R&D through commercialization themselves.
They have invested in long R&D processes involving development phases, approval processes, regulatory requirements and the use of refined technologies. Thus, the industry has used the vertically integrated approach to innovation, where all the key activities are performed in-house which historically has been an effective process leading to many blockbusters.
The firms have simply targeted a huge population, invented and patented a drug for the population and finally made billions of it. But, as earlier mentioned, the CI approach has limitations too. The most significant limitation is the high fixed costs attached to the model. All product failures are part of the process and all the abandoned products are just part Organization of Innovation Term paper – spring 2013 of the cost of innovation. Together with the weakening pipelines, it is becoming increasingly difficult for pharmaceuticals to justify the use of the traditional innovation methods (Chesbrough,2011).
As Schmid and Smith (2005) also have emphasized, the problem of expiring drug patents has already forced some of the firms within the industry to rethink their innovation approach. Consequently, the industry have experienced a move towards a more OI approach where firms collaborate on biomedical research and drug discovery – as opposed to centralized innovation and R&D facilities. The use of OI in the industry will be further elaborated in the next section. 4 THE FUTURE OF OPEN INNOVATION IN PHARMACEUTICALS This fourth section will be divided into two parts:
The first will contain a review of OI in the pharmaceuticals, where the question will be whether OI in the pharmaceutical industry is something new or something that has existed for a long time already, while the second will contain of three discussions on the future directions for OI in the pharmaceutical industry.
The discussion of challenges within OI in the pharmaceuticals will mainly draw upon the key aspects derived from section 2. 4. 1 Open innovation in the pharmaceutical industry For many years, the business model adopted by most pharmaceutical companies was the traditional CI approach in which ideas were developed internally by the use of vertically integrated internal resources.
The main concern was to protect all intellectual property (IP) to guard firm interests and prevent rival exploitation (Hunter, 2010). The traditional R&D methods generated blockbuster drugs allowing firms to regain the costs of development by patenting the developments properly. Altogether, the different firms within the industry did not have the need of cooperating with each other – as long as the firms were able to invent blockbusters, the traditional innovation concept could be justified.
Lately, however, the efficiency of this model has been challenged as technology has developed and the external environment has changed (Hunter, 2010). One of the most critical challenges is the blockbuster model, which has raised questions about how the Organization of Innovation Term paper – spring 2013 innovation models for discovery and development in the industry can be optimized and how the decision making process can be improved to realize realistic project management (Hedner, 2012).
According to Chesbrough and Crowther (2006) the concept of OI can – and already is – about to change this progress. OI is already applicable to mainly high-technology industries, with examples that include 3Com, Lucent, IBM, Intel and the pharmaceuticals.
It is shown, that the role of OI decreases the lead times and costs of R&D and that OI is suitable for pharmaceutical firms not wanting to bare all costs alone when inventing products for diseases such as malaria with only little profit potential. Senderovitz (2009) supports the view that OI could reinvigorate the pharmaceuticals with fresh R&D opportunities. He states that the pharmaceuticals is struggling in the current situation and questions the variability of the present blockbuster model.
By this he is also indicates that the industry has been using the traditional CI model for decades but needs to change this to exploit the opportunities of the OI model. At the same time, however, Senderovitz emphasizes that until now there are only few examples of OI in pharmaceuticals, such as Pfizer Incubator and Lilly’s Phenotypic Drug Discovery Initiative. This highlights the fact that the OI concept is still in the early beginnings of overtaking the pharmaceutical industry.
Having said all this, it is clear that the industry has been and will be undergoing some sortof t ransformation from a traditional approach to an OI approach. Due to the harsh reality of higher R&D costs, fewer blockbusters and lower profit, the industry has been forced to open up their innovation processes to collaborate with their surroundings. Only by doing so, it is possible for the firms to survive in the long run. However, one may assume that the development of the industry would have been somewhat the same without the labeling of OI (see more in next section).
4. 2 Discussions of future directions The three last sections in this paper will be discussions of the OI concept as a trend, challenges of OI in pharmaceuticals and future directions of the pharmaceuticals – carried out to determine whether the industry will be moving forward to a more open approach in the future.
Organization of Innovation Term paper – spring 2013 4. 2. 1 IS OPEN INNOVATION JUST A LABEL FOR AN EXISTING INNOVATION TREND? The matter of whether OI can be characterized as a new paradigm for managing innovation or can be considered as being a label for a trend that has been increasing in the past years is still debated in the literature (Chiaroni et al. , 2009).
This debate must be said also to be relevant for the pharmaceutical industry as well, as there is a development in the direction of the OI approach as stated in the earlier sections. On the one hand, some authors (Ortt and van der Duin, 2008; Broring and Herzog, 2008) suggests, that OI basically characterizes an evolution of the so called fourth generation innovation management model presented by Niosi in 1999. The model simply suggests, that practices for accessing the knowledge of users, competitors and suppliers and exploiting internal knowledge are making R&D more flexible.
Likewise, these authors see OI as a holistic approach to innovation management only inspiring to gain access to external sources. According to the critics, support to this particular point of view is given by empirical evidence collected in technology intensive industries (such as the biotechnology industry), where the open approach to innovation is mainly shared (Powell et al. , 2002). This critical view of the concept of OI is also shared by Trott and Hartmann (2009). In short, they believe that the concept is old wine in new bottles and that the pioneering work in the field of R&D (specifically in this area) more than 30 years ago must be credited to Alan Pearson and Derek Ball.
Similarly, the authors argues that the network model was already designed by Rothwell and Zegveld (1985) more than 20 years ago emphasizing the need for external linkages within innovation management. Trott and Hartmann (2009) also argue that the OI approach is principally a variation on the well-known stage-gate model (Cooper and Kleinschmidt, 1996) – just without any feedback or feed-forward mechanisms. The only difference is that ideas (knowledge, technologies) can Organization of Innovation Term paper – spring 2013 easily “fly in” and “fly out” of the funnel that runs from opportunity scanning to market launch in the OI model.
Altogether these arguments indicate that the change in the pharmaceutical innovation approach is more a natural development rather than a new innovation paradigm and should instead be seen as an evolution of the fourth generation innovation management model. On the other hand, Chesbrough and several other authors (Chesbrough et al. , 2006; Perkmann and Walch, 2007; Lichtenthaler and Ernst, 2007) advocate that OI covers for the anomalies within innovation management (Chiaroni et al. , 2009) and thus should be recognized as an entirely new.