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The corporate boundaries that matter today are the boundaries that define and contain the corporation’s innovation searches. This article examines how innovation can be extended outside the traditional corporate boundary. After identifying several factors that are driving extended innovation ‐‐ and, in so doing, changing the value‐creating nature of the firm ‐‐ the authors present extended innovation strategies for companies in either mature industries (where the industry structure is established( or emerging opportunity spaces (where the competitive structure and industry dynamics have yet to crystallize). In mature industries such as retail, new ideas are most likely to be found in the “white spaces” between companies. Companies should pursue these opportunities through cross‐company alliances that recombine assets and competencies. In emerging spaces such as biotechnology, where the locations of opportunities are unknown, companies should pursue explorative collaborations that emphasize low‐cost probing and learning.

For all the rhetoric – and hype – about open innovation, the reality is that few corporations have institutionalized open innovation practices in ways that have enabled substantial growth or industry leadership. This paper aims to explain how open innovation can achieve its potential in most companies.

Three cases of companies that practice various types of open innovation are discussed. The principles of establishing an organizational environment for open innovation are outlined.

The ability to move into and out of different industries by capitalizing on ideas and concepts from inside and outside the organization – open innovation – has tremendous value.

Without the appropriate mindset and, ultimately, operational structure in place, the promise of open innovation cannot be realized.

For corporate leaders, the paper identifies a key first step – to deliver on the promise of open innovation an organization must start by making the change from a competition‐focused, market‐share mindset to a competence‐based mindset.

While the open innovation concept proposed by Henry Chesbrough a decade ago has had some striking successes, the myriad options for engaging external partners can be daunting, so leaders need a guide for getting started that matches the needs of their firm. This paper aims to address this issue.

The paper identifies that innovation processes involve three stages during which the business model elements are conceived and elaborated: idea‐generation, idea‐development, and commercialization. The question for leaders is: “In which of the three stages could your growth efforts benefit from an infusion of external ideas and expertise?”

The open‐innovation approach does not require a company to replace all its current research and development (R&D) efforts. But it does change the primary question leaders should be asking to “How can my company create significantly more value by leveraging external partners to bring many more innovations to market?”

The article shows executives how they can systematically assess an innovation process, understand where new venture business models are weakest, and select the points at which open innovation could add some needed spark.

The article leads executives through two‐step process for introducing a customized open innovation program: step one, assess where your company's innovation process would benefit from external input by using five key questions; and step two, learn how to manage external relationships.

The authors of this paper contend that too many firms' innovation initiatives are shackled with archaic budgeting and planning methodologies that are intended to protect managers from the embarrassment of blown budgets, missed deadlines, or market flops but instead suppress learning and adaptability, both critical to achieving successful commercialization of unique ideas. This paper aims to address this issue.

The authors propose that the first step to rid myopia and rigidity from the stage‐gate approach is to re‐conceive it as an assumption‐driven process centered on learning, rather than simply a sequence of activities marching towards a pre‐determined outcome.

The authors suggest that firms should adopt assumption‐driven learning in a series of sequential divergent‐convergent cycles – one cycle per stage – each centered on testing the major assumptions for that stage.

Continuous learning and unlearning is essential to the process of developing raw ideas into viable commercial applications. The key to success is to test assumptions through real‐life experiments – for example, market assumptions should be tested in‐market, manufacturability assumptions should be tested in production.

Firms should adopt assumption‐driven learning in a series of sequential divergent‐convergent cycles – one cycle per stage – each centered on testing the major assumptions for that stage.

During the past year, the authors have built a framework for a suite of metrics that senior managers can customize to track and promote innovation success in their companies.

Senior executives can use the suite of metrics to assess their company's innovativeness over time and hence combat the insidious strategy decay that often afflicts a company's business.

The framework combines three views on innovation – resource, capability, and leadership – providing the perspective to develop a suite of metrics for assessing and developing a company's capacity for innovation.

The optimal selection of metrics and the optimal value or “sweet spot” of any particular metric will vary from company to company.

As more firms develop strategic innovation metrics and a database that validates their relevance, top managers will learn to assess and guide a company's innovation capability more effectively.

This is the first strategic guideline for building a customizable system of innovation metrics.

This paper posits that by selectively applying open innovation, companies can enrich their stock of valuable ideas, effectively manage product development and upgrade their emerging businesses without wholesale changes to their innovation initiative.

This is a case study of the open innovation process at Whirlpool Corporation written by two Strategos consultants who have worked with the firm.

Whirlpool has developed a set of questions and discussion guides that help to inform the decision to go “open” or not at each step of the innovation process.

Whirlpool believes that open innovation is really about building and maintaining relationships and alliances. These relationships are managed by “relationship managers” as part of the new business development activities.

By changing the context to competences within any organization, not just Whirlpool, the company is now considering and pursuing a number of opportunities that would have previously been rejected, and Whirlpool is successfully expanding its business to adjacent spaces through the help of open innovation partners.

In 1991, aged 29, Park Byeong Yong of South Korea applied to numerous banks for a loan to start up a business. He did not come from a family of business leaders and neither did he have his degree from one of the top universities. Perhaps needless to say, his loan applications did not get far. Determined, however, Park raised cash from friends and personal savings and went ahead with his venture. Just over ten years on his company, Pantech, is the third largest mobile manufacturer in South Korea, and has successfully established itself as a key player within both the home and overseas markets. Park is clearly doing something right.