paTTerns 110 open business Models Open innovation and open business models are two terms coined by Henry Chesbrough. They refer to open- ing up a company’s research process to outside parties. Chesbrough argues that in a world characterized by distributed knowledge, organizations can create more value and better exploit their own research by integrating outside knowledge, intellectual property, and products into their innovation processes. In addition, Chesbrough shows that products, technologies, knowledge, and intellectual property lying idle inside a company can be monetized by making them available to outside parties through licensing, joint ventures, or spin-oΩs. Ches- brough distinguishes between "outside-in" innovation and “inside-out” innovation. “Outside-in” innovation occurs when an organization brings external ideas, technology, or intellectual property into its development and commercialization processes. The table opposite illustrates how companies increasingly rely on outside sources of technology to strengthen their business models. “Inside-out” innovation occurs when orga- nizations license or sell their intellectual property or technologies, particularly unused assets. In this section we describe the business model patterns of fi rms that practice open innovation. External Technology Base Technology Base Technology Internal Technology Base Technology Base Technology Our CURRENT market Our NEW market Other fi rm's market bmgen_final.indd 110 6/15/10 5:38 PM