Related Topics Collaborative Innovation New Product Development Open Innovation Description Open-Market Innovation applies the principles of free trade to the marketplace for new ideas, enabling the laws of comparative advantage to drive the efficient allocation of R&D resources. By collaborating with outsiders?including customers, vendors and even competitors?a company is able to import lower-cost, higher-quality ideas from the best sources in the world. This discipline allows the business to refocus its own innovation resources where it has clear competitive advantages. The company is also able to export ideas that other businesses could put to better use, raising cash for additional innovation investments. Methodology Open-Market Innovation requires corporations to: Focus resources on core innovation advantages. Allocate resources to the highest-potential opportunities in order to strengthen core businesses, reduce R&D risks and increase innovation capital. Improve innovation circulation. Build information systems to capture insights, minimize duplication of efforts, improve teamwork and increase the speed of innovation. Increase innovation imports. Access world-class ideas, complement core innovation advantages and strengthen the company?s cooperative abilities and its reputation. Increase innovation exports. Establish incentives and processes to objectively assess the fair market value of innovations, raise incremental cash and strengthen relationships with trading partners. Common Uses Companies use Open-Market Innovation to: Clarify core innovation competencies; Maximize the productivity of new product development without increasing R&D budgets; Decide quickly whether to pursue or sell patents and other intellectual capital; Increase the speed and quality of new product introductions. Related Bain capabilities Product management Revenue Enhancement Selected References Bean, Roger, and Russell Radford. The Business of Innovation: Managing the Corporate Imagination for Maximum Results. AMACOM, 2001. Chesbrough, Henry William. Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business School Press, 2003. Christensen, Clayton M., and Michael E. Raynor. The Innovator?s Solution: Creating and Sustaining Successful Growth. Harvard Business School Press, 2003. Linder, Jane C., Sirkka Jarvenpaa and Thomas H. Davenport. ?Toward an Innovation Sourcing Strategy.? Sloan Management Review, Summer 2003, pp. 43-49. Prahalad, C.K., and Venkat Ramaswamy. The Future of Competition: Co-Creating Unique Value with Customers. Harvard Business School Press, 2004. Rigby, Darrell, and Chris Zook. ?Open-Market Innovation.? Harvard Business Review, October 2002, pp. 80-89. von Stamm, Bettina. The Innovation Wave: Meeting the Corporate Challenge. John Wiley & Sons, 2003. Wolpert, John D. ?Breaking Out of the Innovation Box.? Harvard Business Review, August 2002, pp. 76-83.