Guest post by Wim Vanhaverbeke.
Open Innovation (OI) has long been anchored in the simple metaphor of the porous R&D funnel: ideas flow in from outside to boost new product development (outside-in), and unused technologies flow out to find commercial life elsewhere (inside-out). But, by clinging to this structure, have we inadvertently narrowed our understanding of OI’s real strategic potential? Wim Vanhaverbeke asks in this guest post.
In my recent work (Vanhaverbeke and Gilsing 2024), I argue that it is time to move beyond these classic assumptions. The old lens of strategic outside-in and financial inside-out innovation overlooks new, unconventional uses of open innovation that are becoming increasingly important in practice.
To capture these developments, I introduce two critical shifts: recognizing the financial motivations behind outside-in OI, and the strategic power of inside-out OI. More radically, I propose a new category altogether: “outside-out” open innovation, where firms pursue strategic goals through ecosystem orchestration without taking final ownership of the resulting technologies.
Together, these insights broaden the managerial toolkit for open innovation, allowing firms to think and act more creatively when navigating today’s complex innovation ecosystems.
Financial Gains from Outside-In Innovation: Beyond Product Development
Classically, firms absorbed external knowledge mainly to drive strategic new product initiatives. However, outside-in OI can also serve much more operational and financially driven goals, especially in areas like process innovation.
Process innovation, traditionally seen as an internal activity, is increasingly benefitting from external collaboration. Firms are opening up to outside knowledge not to launch new market-facing products, but to enhance productivity, reduce operational costs, and improve manufacturing efficiency. Empirical research shows that companies tapping into external sources for process improvements – ranging from suppliers to technology providers – see faster productivity gains than those relying solely on internal R&D.
This reframes open innovation as not only a strategic play to enter new markets, but also as a pragmatic tool to boost financial performance. It also shifts the attention from tech giants and product innovators to operationally excellent firms like Foxconn and Zara, which achieve competitive advantage through process excellence supported by open innovation. Admittedly, the boundary between monetary and strategic objectives is porous, as a sustained outside-in OI focus on cost reductions may ultimately lead to cost-based strategic leadership.
Strategic Power of Inside-Out Innovation: More Than Monetization
The inside-out model of OI has long been associated with licensing, spin-offs, or selling unused intellectual property to generate revenue. While still valid, this view underestimates the strategic potential of outbound innovation.
Consider companies using inside-out OI to influence industry standards, accelerate complementary innovations, or strategically shape ecosystems. Firms may selectively reveal technologies to stimulate partners to build around them, effectively creating a market for complementary solutions. Others license or selectively disclose knowledge not for immediate financial gain, but to steer industry dynamics in a direction that strengthens their competitive position. This is of course not entrirely new, but these practices have received very little attention.
The case of major oil companies supporting technological innovation among their service suppliers illustrates this strategic use of inside-out OI. By developing and “pushing” technology into the ecosystem, they address bottlenecks among partners that would otherwise limit the their operational capabilities. Here, the goal is not financial revenue from IP licensing, but ensuring the vitality and innovativeness of critical networks of suppliers and complementors.
Outside-Out Open Innovation: A New Strategic Frontier
Perhaps the most radical extension is the notion of “outside-out” open innovation. Here, a company instigates and shapes an innovation initiative, but deliberately does not take ownership of the resulting technologies. Instead, it orchestrates an ecosystem where others develop, own, and commercialize the innovations.
Two recent cases make this tangible. Carlsberg, the Danish brewer, faced pressure to reduce its environmental footprint. Recognizing that 40% of its emissions came from packaging, it initiated the “Green Fiber Bottle” project. Lacking in-house expertise in sustainable materials, Carlsberg partnered with start-ups, universities, and packaging firms to co-develop a biodegradable bottle. Crucially, Carlsberg did not seek to own the technology. Instead, it acted as a key user and supporter, encouraging others to invest, scale, and commercialize the innovation across industries.
Similarly, KLM, the Dutch airline, helped establish SkyNRG, a start-up aimed at creating a sustainable aviation fuel (SAF) market. While KLM had strong incentives to ensure the availability of SAF to meet its CO2 targets, it had no capabilities nor strategic desire to produce fuel itself. Through SkyNRG, KLM orchestrated a multi-stakeholder ecosystem including technology developers, regulators, financiers, and airport operators, aligning incentives to build a new market from scratch.
These examples illustrate a profoundly different role for firms in open innovation. Rather than acting as developers (innovators) or owners (benefactors) of technology, companies like Carlsberg and KLM position themselves as instigators and ecosystem shapers, leveraging external innovation to achieve strategic objectives. They deliberately refrain from seeking direct ownership of the technology, as it depends on capabilities and business models that lie outside their own industry domain. Open innovation is no longer confined to new product development; it has become an integral part of a firm’s strategy.
A New Managerial Playbook for Open Innovation
This broadened perspective has important implications for management practice.
First, open innovation should not be confined to R&D or new product development. Managers can apply OI to operational improvements, cost reductions, and other financial performance levers by sourcing external ideas and technologies.
Second, outbound innovation strategies should be evaluated not only on licensing revenues, but also on their ability to shape strategic ecosystems, influence standards, and accelerate complementary innovations.
Third, firms should recognize when their strategic goals are best served not by owning technology, but by enabling others to develop and commercialize it. This demands new capabilities in ecosystem orchestration, partner alignment, and incentive design.
Finally, innovation managers must embrace a broader strategic mindset: OI is no longer just a method for boosting internal innovation pipelines. It is a way to proactively engineer the environment in which a firm operates, often with transformative effects on competitiveness.
Conclusion: Redrawing the Map of Open Innovation
Open innovation practices have evolved far beyond the simple funnel metaphor. OI now encompasses a wider range of strategic and operational objectives, new roles for firms, and deeper engagement with ecosystems. Financial motivations can drive outside-in innovation; strategic goals can shape inside-out moves; and outside-out approaches open entirely new possibilities.
Managers willing to rethink their assumptions about OI will discover powerful new levers for growth, resilience, and impact. Open innovation is no longer just about tapping external ideas — it’s about reshaping the strategic landscape in which those ideas create value.
Original chapter
Vanhaverbeke, Wim, and Victor Gilsing (2024). Opening Up Open Innovation: Drawing the Boundaries’, in Henry Chesbrough, and others (eds), The Oxford Handbook of Open Innovation, 51–64, https://doi.org/10.1093/oxfordhb/9780192899798.013.4
Festschrift 2026
Wim is one of the collaborators on a Festschrift to honour Henry Chesbrough’s contribution to Open Innovation.
