ISBN: 0470905743
Author: Henry Chesbrough
Review: The book introduces the concept of Open services innovation, which "shortly" means that every activity that a firm undertakes to create economic value should transform product or service-oriented business into service-oriented one, in order to avoid the commoditization trap and achieve new growth and renewal.
This, as you can imagine, can be very hard to reach for industrial firms whose core business is selling products.
Henry Chesbrough starts the book with the conversation he had with Paul Horn former IBM R&D VP, and his answer - that intrigued Henry and stimulated him to start investigating this area - to the question “what is your biggest problem today?”
Paul Horn said that most of his department activities are geared to support IBM to make computer products and software and now most of the revenues are coming from services not from products. “I cannot sustain significant research activities that contribute for less than the half of IBM revenues going forward!”
The Four key concepts
Henry Chesbrough introduces four concepts and practices that are critical to leverage this open services innovation concept:
- Think of your business as a service, regardless if you offer products or services, in order to sustain profitability and achieve new growth
- Co-creation with customers to create more meaningful value propositions
- Use open innovation to speed up services innovation and shorten time to market
- Business model innovation to stimulate effective services innovations
In order to succeed in this open services innovation concept Henry Chesbrough proposes to re-write Porter’s Value Chain, “Porter’s Value Chain, while very helpful when it came out in 1985, is now a roadmap to a dead end.”
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| Porter's Value Chain, 1985 |
This is definitely true if you start looking at your business as a service business. Porter’s Value chain contains a small activity for “services” at the end of the value chain. In Porter’s Value Chain, the product is the king. Thinking of your business as a service changes this focus entirely. The customer is central throughout the process of innovation.
“You don’t get all the customer’s needs identified at the outset, and then freeze them there for the rest of the process. Instead…. you create offers to invite customers into the process, and work iteratively and collaboratively to arrive at innovative outcomes.”
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| Open Services Value Chain |
Part 1: A framework to spur innovation and growth
Probably the most interesting part of the book, where Henry Chesbrough lays out his 4 key concepts framework for open services innovation, Business as a service, Co-creation, open innovation and business model innovation.
Part 2: Open services innovation in practice
Through all the book, Henry Chesbrough provides several examples supporting his thinking, like Motorola’s Razr and Nokia. Several interesting cases are explained like KLM, Amazon, etc…
Conclusion:
Excellent book. Excellent 4 key concepts framework. Food for thoughts for firms who are still struggling to achieve new growth. I liked!
The book is valuable because it discusses innovation in areas where many firms are only getting started - innovation in processes, services, business models and customer experiences. So in that regard, a firm or individual new to innovation can pick up the book and learn a fair amount of innovation in services, business models and experiences, which is equally valuable and in fact is probably best suited for many firms.
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