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Open Innovation

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Alden Luis M. Salcedo

on 1 April 2013

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Transcript of Open Innovation

CONCLUSIONS Contrasting Principles of
Closed and Open Innovation Open
Innovation Closed
Innovation Three Primary Areas of Open Innovation Funding Innovation Commercializing Innovation 2nd Myth PEOPLE LOVE NEW IDEAS 3rd Myth YOUR BOSS
KNOWS MORE THAN YOU 4th Myth THE BEST IDEAS ALWAYS WIN Factors for the decline of Closed Innovation Firms commercialize external (as well as internal) ideas by deploying outside (as well as in-house) pathways to the market Fear of new things Authority ≠ Talent · Subjective value
· Meritocracy fraud
· Conformism and naivity By: Henry W. Chesbrough SLG 2 Creation or modification of a product or idea, and its introduction into a market. Companies must generate their own ideas that they would then develop, manufacture, market, distribute and service themselves. Firms that can harness outside ideas to advance their own business while leveraging their internal ideas outside their current operations will likely thrice in this new era of Open Innovation. Open Innovation Fantastic Bank Alden Luis M. Salcedo
Gordon Ho
Rao Peng Previously on Fantastic Bank... - Protag and Sidekick meets with Mr. Vabes (branch manager)

- Microfinance officer to work alongside Mr. Vabes

- "What's in it for me?" Episode 8: False Positive or False Negative? -Donors are coming/international donors interested
- Imaginistan’s minister of economic development gave praises
-People swarming into the branch to see MFO
-Mr. Vabes less pleased
-Antag – "media hype" Fast forward: September 2013 - Microfinance officer decides on the number of MF loans to be given in a quarter.

- Process:
- MFO performs appraisal of loan applications, organizes groups of borrowers (following the group lending methodology). - Appraised loan applications go to a committee for final approval. The committee includes the branch manager, the microfinance consultant and the MFO.

- Apart from accessing small loans, borrowers will be encouraged to save with the branch as well.

- The branch manager and the MF consultant has the responsibility to randomly visit clients as a due diligence measure. - Interest rates - 10% per annum flat.

- Loan repayment periods - from 6 months to 1 year

- Repayment frequency is to be fortnightly.

- Beak even in one year’s time per business plan.
> Loan default will stay below 2% of the microfinance loan portfolio
> Cost of operations stay below 9% of the portfolio. Innovators are willing to invest in finding the next new thing and tend to do better in changing industries. - Latin word in (into) + novus (new)

- Introduction of new things or methods Generating Innovation
1. What kind of open innovation Fantastic Bank, under Protag’s leadership, might initiate in its microfinance programme? You can consider the ‘open innovation principles’ given on page 37-38. Questions: 2. What are the factors that may help or hinder open innovation conducted by Fantastic Bank? Clearly identify both. You may use the real case studies provided on blackboard to generate ideas. (p.40-41) 3. Is microfinance a possible ‘false negative’ or a ‘false positive’ for Fantastic Bank (p. 37)? How can the bank handle either of those situations using the open innovation principles? 4. Can you identify ‘innovation investors’ and ‘innovation benefactors’ (p. 38) that Protag may target to further develop its microfinance programme within the bank? Can you imagine how those investors and benefactor may be able to further develop microfinance in the bank? 5. Is Fantastic Bank/Protag potentially an innovation explorer, merchant, architect or missionary? (p.39) Explain why? Thank You! Innovation investor Innovation benefactor - The original is the corporate R&D budget

- New types: venture capital(VC) firms, angel investors, corporate VC entities and private equity investors

- Capital helps move ideas out of corporations and universities and into the market, typically through the creation of startups - Focus on the early stages on research discovery and provide new sources of research funding

- Some companies are devoting a portion of their resources to playing the role of benefactor Innovation explorers Innovation merchants Innovation architects Innovation missionaries - specialize in performing the discovery research function that take place within corporate R&D lab - will explore and innovate but only with specific commercial goals in mind - provide a valuable service within complex technology and create value for customers - consist of people and organizations that create and advance technologies to serve a cause
- the mission is what motivates them
- do not seek financial profits from the work Innovation marketers One-stop centers - selling profitably market ideas to customers
- focus on developing a deep understanding of the current and potential needs in the market - provide comprehensive products and services

- provide the best solution to its customers at competitive prices -Innovation marketers

-Securing cooperation with the state for rights to distribute microfinancing operations

-Import ideas from other banks that are successful in microfinance(Compartamos, SKS) when appropriate

-Tap the expertise of NGO’s for help

-If we make the best use of internal and external ideas, we will win. Help
- Rise of specialized intermediaries to create market
3.MFO (microfinance officer)
4.Other banks
5.NGO and governmental cooperation Hinder
- Dependence on external sources of funding
1.Society at large
2.Too dependent on
3.Imaginistan legal system with regards to IP
4.Poor risk management -False Negative
i.At first it is seen as charity work

ii.But needed incentives as well as proper funding to work out in the right kind of system – group lending, etc… help/advice from NGO’s, the state and other factors

iii.Importing of ideas from other successful microfinance institutions and modifying it -Investors – Global Bank, NGO(IPAF)

-Benefactor – other banks, perhaps even Grameen, Mexican Compartamos, SKS India, Imaginistan internal development ministry -Merchant.
-Ideas – innovating approaches towards microfinance/finance industry as a whole
-Marketplace of ideas(industry) The Era of - dramatic rise in the number and mobility of knowledge worker

- growing availability of private venture capital
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