Internal and External Innovation
Research and report on two companies. Pick one which has always adhered to a policy of internal
innovation and a second which has acquired technology several times through external means as
detailed in our prior units. Compare and contrast the two approaches from the context of:
�Overall Portfolio Management
In the marketing arena as far as companies are concerned, it have been mentioned that,
the key behind the development and growth of companies that are able to withstand a continuous
increase of profits is innovation. Most of the business enterprises have invested a lot in
innovation and not just innovation but open innovation. The aim of investing in this innovation is
that, when an organization gives their innovation a second thought, it is able to yield a
significance innovation results. Organizations are trying to explore on how it can be easier for
them to connect with one another and mainly come up with a way that they will be able to
comprehend between high and low technology and how they should develop to further
innovations. With this in mind, companies are changing the innovations plans from internal
innovation to open innovation, (Drucker, pg. 87, 2014). This method is given a hand shake in the
service industries, where stiff competition and advanced technological are mostly depended on
Internal and External Innovation 3
for future innovative processes. It should be noted that, any kind of innovation should not
interpret on how companies should govern their innovation. Every company vary differently
from the other.
Facebook limited is a company that adhered to internal innovation. This has been
there culture as they believe they should give their internal resources including their
employees an upper hand to give there entrepreneur opinion. Facebook does encourage
each and every person from the top management to the junior level to cram by creating.
For it to happen, even the Chief Executive Office Mark Zuckerberg together with his vice
president of the products Christopher Cox, are involved. They all become a part of
concept and engineering of their products. In Facebook, the top management are viewed
as great thinkers. With them been in the team, their innovation procedure get less of the
approval and more of the great team of thinkers to participate. Facebook have come up
with a new mobile strategy, (Berchicci, pg. 127, 2013).
The strategy has been implemented because in the recent study, it is believed that more
user are trying to get contact with Facebook on their mobile phones. This has challenged the
company and they have shifted to become a mobile organization. The organization has spurred
on the mobile innovation. They have taken a different direction when there user are accessing
Facebook through their phones. For this to happen, the company aims at giving their user
something that is relevant, interesting and at the same time be in a position to come up with a
new exposure where they are able to take act at an impulse. To do this internally, Facebook has
come up with an internal mobile design think tank. Also, they are operating on the reengineering
of the experience obtained from the “contextual sharing”. It means that they are able to offer
Internal and External Innovation 4
information which can be comprehended, answered or even questioned while the user is still on
the phone, (Feitelson, Frachtenberg, & Beck, pg. 17, 2013)
On the other hand, the Alliance Management Group believes that outsourcing for
innovation require the employee to change on how they perceive things. They believe that what
has not been invented in their company may or might be invented anywhere else. In the Alliance
Management group, the top management whore are responsible for company biggest project do
collaborate, share and be in charge of projects with their partners. For this to take place, the
company needs to review their development process as far as the products are concerned. Also,
the strategic planning, supply chain management, technology procedure, reward system and
other organizational system for the benefit of incorporating innovation should be changed.
Leaders in this company have created a cultural trend that hand shank external innovation. They
have set a frame work that do encourage the employees to think global and be in a position to see
new marketable places and idea when they use or apply the external resources, they will achieve
what they want. To put this into action, the leader has created a reward system where they are
able to reward those employees that use external resources. In addition, they have created a
platform to maintain the activity. The company deal with three approaches of dealing with the
sourcing of technology in the firm.
The first on is recognized as traditional strategic planning activities. It normally deals
with the inventory inside the firm and by this they are able to develop a plan if they are given
those assets. In this context, what is missing for the company is the external inventories that the
organization is in a position to get them. Through the use of external assets, the company top
management team are able to develop new customers from different market target. This is
generated from the unimagined perspective of view that could not have been obtain from the use
Internal and External Innovation 5
of only internal assets. To obtain all of this, the leaders or the top management have to
restructure the strategizing process by including all the firms available resources. Also they
should encourage employees to be able to identify external assets that will help them and the
company at large to obtain the company vision and mission as quickly as possible and also at a
minimum hurdle rate, (Cheng, & Huizingh, pg. 1215, 2014).
Facebook is the best known site in the social media. It recent innovated and invested in
the mobile platform where its user can be able to access information without posing or at a go.
With this innovation, it has been able to make a significance turning point. Facebook was able to
get revenue that amounted to 69% of its total revenue generated only from the mobile devices.
This was a great return for the Facebook since not many people could have used laptops or
computers at a go an access to their services. According to their data, it is evidenced that through
the fiscal year 2014 to 2015, they experienced a significant rise of 24% to 745 million. Through
the use of the mobile platform, they have been able to make a significance step on
advertisements. This will help them to allocate little cost to their projects and in return
experience a huge return from the projects. For example in 2014, it was able to generate revenue
amounting to 12,466,000 dollars and a net income of 2,925,000 dollars as compared to other
According to Facebook, threat is not or no longer a threat to them. They take a reputable
advertising as the main threat for them. Failing to advance in advertisements they might be in a
position to make a significance loss and that might be a boom to the company.
According to the alliance management group, it is based on the basis of controlling and
overseeing the portfolio of innovation. The company has been able to create a very stable
foundation that has help it to manage the portfolio of companies. It does mainly back it up with
Internal and External Innovation 6
overseen and taking into consideration what might be of a big challenge or threat to them. To
implement this, it involve the group collaborating with the members of the group and coming up
with a good corporate governance procedure that goes beyond the company long term goal but at
the time be a key knot toward the firm short term and long-term strategic plan, (Woo, Bae,
Kang, & Chu, pg. 14125,2014).
The implementation of internal and external innovation depends or is influenced by the
external and internal factors that are within the business environment. For Facebook, it becomes
difficult for them to use open innovation opt to source technology to boost up their services. This
is because, they are facing a challenge of coming up with an informed decision procedure that
they should undertake when implementing innovation that has been sourced from anywhere else.
As we saw earlier, the company is at an easier position to make a good decision on what
entrepreneur approach they should take since the top management are part of the internal
innovation. Also, Facebook cannot be able to use or to source technology because, the business
external factors are very cautious on the firm’s management as far as innovation is concerned. It
is because, the external factor are used to decide what time the organization is in a position to
refigure or rethink about managing their innovations. Also, Facebook key external sources and
also the internal factors that govern the business operation are able to control on how the firm
will be able to apply outsourcing approach to the company. This approach of outsourcing is at
stake since it can easily affect the culture, communications and the architecture of the firm’s
On the other hand, the Alliance Management Group, is better off with the sourcing of
external resources. This is because it is able to bring together the innovative ideas into the firm
which are congruent to the firm’s internal procedures, incentives and also the metrics. This are of
Internal and External Innovation 7
a great significance to the implementation of the company long term strategies that are been
generated from the use of external resources of technology. The use of this will help the
company to bring together both the external and internal approaches into the big picture and the
company system that will enhance the business approaches that will eventually require
redesigning and the use of the organization innovative system. The use of open innovation or the
external innovation require a great overlook on the basis of creativity and the process of
innovation. It is because it maximizes the difficulty that is aligned with the control process of
innovation. This technique of outsourcing requires that the top management are in a position to
manage between internal and external factors that may be affecting the organization, (West, &
Bogers, pg.814, 2014).
From the above, it can be concluded that both companies work best from their point of
innovation. Whether they follow insourcing of technology or the outsourcing of technology to
further their company long term goal, what matter most is how they are able to implement and
control innovation keeping both internal and external factors that affects businesses. Also, it can
be mentioned that, the top management team in both companies has the overall mandate to
control their innovation procedures. This is because, it become very important for them to give
and upper hand and encourage their stakeholder both internal and external to embrace innovation
since it will be able to maintain a significance performance in the field of innovative
management. With no support from the top management, the company innovative processes will
have little or no impact on the company projects.
In addition, the top management are the primary contributors to the internal performances
of the organization. When a new innovation has been launched, they should foster on a variety of
internal ways on how they should adhere to the changes, (Zhang, Chen, & Li, pg. 669, 2013).
Internal and External Innovation 8
This will take effect when the employees are able to bring together and take in to action the new
methods induced in the process of innovation. Encouraging innovative culture as Facebook does
will create an environment where the entrepreneur ideas and risks are encouraged and the holder
of them is rewarded as a way of motivation. This will be able to create a case where the
development of new products are based on a good and thorough research that will be measured
as part of a credible innovation and that will help the company to sustain very high profits in a
given fiscal years. This will creative a positive feedback on the basis of innovation culture that is
expected to yield positive and curtained results. With this, it can me summarized that the
implantation of any kind of innovation, whether insourced or outsourced do vary from one
company to another. This is determined by the internal or external factors that affect a business
Berchicci, L. (2013). Towards an open R&D system: Internal R&D investment, external
knowledge acquisition and innovative performance. Research Policy, 42(1), 117-127.
Feitelson, D. G., Frachtenberg, E., & Beck, K. L. (2013). Development and deployment at
Facebook. IEEE Internet Computing, (4), 8-17.
Woo, H., Bae, J., Kang, R. R., & Chu, Y. (2014, January). Effects of a Portfolio Company’s
Alliance Formation on the Market Returns of Its CVC Firm. In Academy of Management
Proceedings (Vol. 2014, No. 1, p. 14790). Academy of Management.
Cheng, C. C., & Huizingh, E. K. (2014). When is open innovation beneficial? The role of
strategic orientation. Journal of product innovation management, 31(6), 1235-1253.
West, J., & Bogers, M. (2014). Leveraging external sources of innovation: a review of research
on open innovation. Journal of Product Innovation Management, 31(4), 814-831.
Internal and External Innovation 9
Zhang, J., Chen, Y., & Li, T. (2013, July). Opportunities of innovation under challenges of big
data. In Fuzzy Systems and Knowledge Discovery (FSKD), 2013 10th International
Conference on (pp. 669-673). IEEE.
Drucker, P. (2014). Innovation and entrepreneurship. Routledge.