A new breed of innovation-open innovation-is forcing firms to reassess their leadership positions, which reflect the performance outcomes of their business strategies. It is timely to juxtapose some new phenomena in innovation with the traditional academic view of business strategy. More specifically, we wish to examine the increasing adoption of more open approaches to innovation, and see how well this adoption can be explained with theories of business strategy. In our view, open innovation is creating new empirical phenomena that exist uneasily with wellestablished theories of business strategy. Traditional business strategy has guided firms to develop defensible positions against the forces of competition and power in the value chain, implying the importance of constructing barriers to competition, rather than promoting openness. Recently, however, firms and even whole industries, such as the software industry, are experimenting with novel business models based on harnessing collective creativity through open innovation. The apparent success of some of these experiments challenges prevailing views of strategy.At the same time, recent developments indicate that many of these experimenters now are grappling with issues related to value capture and sustainability of their business models, as well as issues of corporate influence and the potential co-option of open initiatives. In our view, the implications of these issues bring us back to traditional business strategy, which can inform the quest for sustainable business models. If we are to make strategic sense of innovation communities, ecosystems, networks, and their implications for competitive advantage, we need a new approach to strategy-what we call "open strategy."Open strategy balances the tenets of traditional business strategy with the promise of open innovation. It embraces the benefits of openness as a means of expanding value creation for organizations. It places certain limits on traditional business models when those limits are necessary to foster greater adoption of an innovation approach. Open strategy also introduces new business models based on invention and coordination undertaken within a community of innovators. At the same time, though, open strategy is realistic about the need to sustain open innovation approaches over time. Sustaining a business model requires a means to capture a portion of the value created from innovation. Effective open strategy will balance value capture and value creation, instead of losing sight of value capture during the pursuit of innovation. Open strategy is an important approach for those who wish to lead through innovation.
The Insights and Limits of Traditional Business StrategyBusiness strategy is a wide and diverse field. The origins of the concept hearken back to Alfred Chandler's seminal Strategy and Structure, where he presented the first systematic and comparative account of growth and change in the modern industrial corporation.1 He showed how the challenges of diversity implicit in a strategy of gr...