In ambitious new book, Henry Chesbrough shows how to get results from open innovation

Adj. Prof. Henry ChesbroughWhen Adj. Prof. Henry Chesbrough, PhD 97, was researching open innovation in the pharmaceutical industry, he found one pharma that had 7,000 scientists working on tens of thousands of compounds. But the company only licensed out less than one a year, shelving the others.

Although some of those shelved compounds may have succeeded in the marketplace, companies may fear they’ll look bad if a product they passed on thrives externally—a phenomenon he calls “Fear of Looking Foolish” or FOLF. “Our interview subjects admitted to us that FOLF was a major constraint to overcoming this,” Chesbrough writes.

It’s been 16 years since the publication of Chesbrough’s Open Innovation launched a new paradigm for bringing new technologies to market, spurring companies to embrace the power of collaborative business models.

Open Innovation Results book coverChesbrough is back to close the loop with his most ambitious work to date. Open Innovation Results: Going Beyond the Hype and Getting Down to Business (Nov. 2019, Oxford University Press) offers a clear-eyed view of the challenges that limit organizations’ ability to create and profit from innovation and practical tools for overcoming those challenges.

The book also provides a roadmap to restore productivity and economic growth for society as a whole—in the U.S. and globally.

David Teece, the Thomas W. Tusher Professor in Global Business, says Open Innovation Results breaks new ground. “It links open innovation not only to enterprise performance but to national economic growth as well,” he says. “There are important insights into the difference between ‘open’ and ‘free’ innovation, along with insightful characterizations of China’s use of open innovation practices and policies.”

Open innovation centers on the idea that companies stand more to gain from making use of external ideas and sharing their own innovations through licensing, sales, partnerships, and spinoffs than from trying to do it all themselves. A famous example: IBM’s development of the PC.

“We wanted to do something small and fast…so it was critical to IBM’s success that we partnered with Intel and Microsoft and created the PC industry together,” said Jim Spohrer, Director of Cognitive OpenTech at IBM and a member of the Berkeley Innovation Forum, a group created by Chesbrough to help corporate managers involved in innovation.

Has the promise of innovation been overhyped?

Chesbrough opens the book with an “exponential paradox” that’s at the heart of our current global economic situation: While new technologies are emerging faster and faster—some say exponentially—economic productivity is slowing. Has the promise of innovation been overhyped?

The real problem, Chesbrough argues, is that promoters of innovation too often chase after “bright and shiny objects,” focusing on the initial stage of development and neglecting the rest of the process. Innovation results depend on what you finish, not on what you start, he says.

“In order to advance prosperity, we must not only create new technologies, but we must also disseminate them broadly and absorb them, which means having the knowledge and skills to put them to work in our business,” Chesbrough says. “Only then do we really see the social benefit of these new technologies, and only then will these measures of economic productivity catch up again.”

Chesbrough shapes these three facets of innovation—generation, dissemination, and absorption—into a new paradigm for managing R&D and bringing new technologies to market. Rooted in two decades of extensive field research, the book is packed with real examples of successes and failures from companies such as Procter & Gamble, IBM, Intel, General Electric, Bayer, and Huawei.

Carlos Moedas, the European Union’s Commissioner for Research, Science, and Innovation, says the book’s complex concepts are easily relatable. “[It’s] a must-read for politicians, policy-makers, and business leaders who want to make a difference by designing the right policies that drive not only the generation of new ideas, but…their broad dissemination and adoption by society,” he says.

About Henry Chesbrough

Henry Chesbrough is widely known as “the father of open innovation”. He has built an international reputation for his insights into the innovation process. The author of six books (translated into 12 languages) and numerous articles, he has received 70,000 citations to his work on Google Scholar. He has appointments at both UC Berkeley’s Haas School of Business and at Esade Business School in Barcelona.

Prof. Chesbrough founded and organizes two external groups of companies that each meet twice a year to discuss challenges in managing innovation: the Berkeley Innovation Forum (32 member companies) and the European Innovation Forum (20 member companies). He has taught at the Haas School of Business for the past 14 years, at Esade Business School for the past 7 years, and taught previously at Harvard Business School for 6 years. He also serves as the Faculty Director of the Garwood Center for Corporate Innovation at Berkeley Haas.

Open Innovation Results is available for pre-order on Amazon.

Prof. Aaker’s new book shows the power of story

In Creating Signature Stories, emeritus marketing professor David Aaker explains why storytelling is essential for brand marketing.

Back in 1984, Zhang Ruimin was promoted to lead a struggling Chinese refrigerator company that would later become Haier. When a customer brought in a defective fridge, he went through an inventory of 400 units to find a replacement; unfortunately, he found that 20 percent of them were also faulty. Zhang promptly ordered all of the defective units to be brought to the factory floor and gave the employees sledgehammers, inviting them to destroy them.

Prof. Emeritus David Aaker's new book explores the power of Signature Stories.
Prof. Emeritus David Aaker

“That dramatic story led to a change in the firm’s quality culture that is a foundation of Haier today,” says David Aaker, emeritus professor of marketing strategy. “Asserting that the firm was going to have a quality-first culture would not be noticed or believed. But the story penetrates.”

Aaker uses that example in his new book, Creating Signature Stories: Strategic Messaging that Energizes, Persuades and Inspires, to show how effective stories can be in creating an organizational culture or managing a brand’s image. “It is so difficult today to cut through the clutter and engage a disinterested and skeptical audience,” Aaker says. “Stories are enormously powerful, and can be much more impactful than facts.”

“Father of modern branding”

Author of 100 articles and 15 books who has been called the “father of modern branding,” Aaker is currently vice chairman of the brand consultancy Prophet. He was inspired to write the book by conversations with his daughter, Jennifer Aaker, a behavioral psychologist at Stanford Graduate School of Business. Stories work, studies have found, because they engage the emotions, allow listeners to deduce the logic for themselves, and are much more difficult to argue against than facts. “There are hundreds of studies that demonstrate the power stories have,” says Aaker.

For businesses, stories can be helpful in engaging both employees and customers. “There is a whole cadre of young employees who will not work for companies they are not proud of,” says Aaker. “If you want to compete for the best people, you need to have a higher purpose, and the way to communicate that is with a story.” At the same time, a small but meaningful subset of customers are looking for authentic engagement with a brand. “Even if this percentage of the market is small, it can still be the difference between making money and losing money.”

Creating a signature story

Creating Signature Stories by David Aaker book coverFor companies looking to find or create a “signature story,” Aaker first recommends they hone the strategic message they are trying to communicate. Then, he suggests that they focus on a protagonist who can exemplify that messages—whether it’s a customer, an employee, a leader, or a product. L.L. Bean company founder Leon L. Bean, for example, had a stitching problem with the first 100 boots he sold that made them less than watertight. He refunded every customer’s money, though it nearly put him out of business. Nordstrom often repeats the story of an employee in Alaska, who—when a customer brought in a pair of tires to return—gave him a full refund even though the store didn’t sell tires.

If a company doesn’t have a ready-made story of their own, they can borrow a story from elsewhere. In the 1990s, incoming Columbia CEO Peter Guber faced a dysfunctional workplace of competing departments. He united them with the story of Lawrence of Arabia, who famously united warring Arab tribes to capture the strategic city of Aqaba. He presented executives with pictures of actor Peter O’Toole playing Lawrence in the eponymous Columbia film, and made “Aqaba” a rallying cry in the company.

Authenticity is key

While there is “no checklist of elements a signature story has to have,” Aaker says it helps if it is intriguing, authentic, and engaging. Generating and testing such stories can take serious investment by companies, some of which have hired editors, videographers, and social media experts, and even chief story officers to make up a storytelling team. After creating a signature story, it can become an art in itself to disseminate it and keep it alive over time. To this day, Haier has a sledgehammer on display at its corporate offices in China.

One of the most effective signature stories that Aaker describes in his book is Lifebuoy soap, which has worked to educate children in developing countries on the importance of handwashing to prevent disease. The company has created a series of videos of parents and children in India as part of its “Help a Child Reach 5” campaign—in one of them, for example, a mother is dancing joyously by a tree. It turns out that the custom in the village is to mark a child’s birthday on the tree, and she was celebrating the fact that her child turned five, in a place where many don’t reach that milestone. “Compare that with any effort to explain why Lifebuoy bar soap was better than others, or even to factually describe the hand-washing program,” Aaker says.

Making the story effective required a real commitment on the part of Lifebuoy, which has set a goal of changing handwashing for 1 billion people by 2020. But that commitment has paid off: to date, the videos have had more than 44 million views. By learning how to tell those kind of authentic and emotionally engaging signature stories, companies can assure that their employees and companies associate them with a higher purpose, creating loyalty to the brand for years to come.

David Aaker will talk more about Signature Stories at his Dean’s Speaker Series at 12:30 pm Tuesday, Feb. 13, in Chou Hall’s Spieker Forum. The paperback goes on sale March 8 (Kindle version now available).