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Open Innovation

Open Innovation

 

Roopen Roy

 

In an inter-connected world “connected thinking” is old hat. It no longer changes the world. Instead, the world we live in has changed. Here, scientists and research teams seldom work in a shroud of secrecy behind locked doors. They are no longer paranoid about intellectual property rights being purloined by rivals  employing industrial spies.

 We are now in a world of collaborative innovation generating the best ideas from customers, academia, unknown individuals and even competitors and taking them to the market is the new game in town. Welcome to the world of “open innovation.” Open innovation is a term coined by Henry Chesbrough in 2003. He is now a professor at the Haas School of Business, UC Berkeley. He had taught at the Harvard Business School from 1997 to 2003.

Open innovation is a new paradigm. It is premised on the core belief that we must leverage internal research as well as  ideas generated outside the enterprise. The boundaries between an enterprise and the external entities have become fuzzy and blurred. In a world of widely distributed knowledge, enterprises cannot afford to rely entirely on their own in-house research.  They should instead buy or license processes or inventions (e.g. IPR or patents) from others.  In addition, internal inventions not being used in an enterprise's business should be leveraged outside the enterprise (e.g., through licensing, joint ventures, spin-offs).

Let us look at an example of  open innovation. It is a great story narrated to me by my friend Dr Shekhar Mitra who is the Senior Vice President of Global R&D for Procter & Gamble (P&G).  A Japanese monk visiting a sake brewery noticed that the brewery workers had extraordinarily soft and youthful hands. Even an elderly man with pronounced wrinkles on his face possessed the silky smooth hands of a young boy. After a series of experiments, a team of skincare scientists discovered the secret; a clear, nutrient-rich liquid that could be extracted during the yeast fermentation process. They named the liquid 'Pitera' which, over time, has become  the secret  ingredient for anti-aging products of P&G.

P&G has adopted a model of Connect +Develop. It is a true mingling of ideas and innovations. It allows P&G to access externally developed products for its own markets and allow internally developed ideas, knowledge and assets to be used externally. It has a website www.pgconnectdevelop.com that covers packaging, trademarks, marketing models, engineering and technology transfers. P&G extensively uses four inter-connected resources with great effect:

1. Nine Sigma (http://www.ninesigma.com)   is one of the firms created by P&G which connect enterprises that have science and technology problems with universities, governments, private labs, consultants and other enterprises  to develop solutions.

2. InnoCentive (http://www.innocentive.com)was actually founded by Eli Lilly which connects enterprises with contract partners across multiple disciplines.

3. YourEncore (http://www.yourencore.com) was spawned and incubated by P&G.  It  helps to connect scientists and engineers providing  their clients with proven experience to help accelerate their pace of innovation.

4.Yet2.com (www.yet2.com)  has a  mission  to help enterprises to identify and capture the full value of its intellectual assets. It really serves as an online market for intellectual property exchange.

The goal set by the CEO of P&G is to capture as much as 50% of the innovation externally. Two executives of P&G wrote an article in Harvard Business Review on open innovation in action and this was their advice,   “ Don’t postpone crafting a connect-and-develop strategy, and don’t approach the process incrementally. Companies that fail to adapt to this model won’t survive competition.”Today, the list of companies who have embraced Open Innovation is a long one. They include BMW (Virtual Innovation), Campbell, Cisco , Colgate-Palmolive, Dell (IdeaStorm), Ericsson ,HP (Open Innovation Office), IBM (Collaboration Jam), Huawei, Intuit, Johnson Controls, Kraft, LG, Medtronic, Nestle, Netflix, Nokia, Pepsi (Refresh), SAP, Sara Lee, Shell (Game Changer), Siemens, Starbucks and Unilever (Collaborative Innovation).

 

There is one invisible roadblock that impedes the adoption of open innovation and collaborative research. It is neither the “not-invented- here “  syndrome nor lack of  top management commitment . Many CEOs are from a wiser and older generation. Their war stories are firmly rooted in the real world. They cannot switch  between  the real world and the virtual world with equal panache and blend them with ease. Successful  companies are using  social  networking tools  like Facebook, LinkedIn, Twitter and they set up projects Wiki-style. It is ,therefore, important to involve younger people and individuals of the older generation who are tech savvy, have youthful curiosity  and are au fait with Web 2.0 tools like  Facebook.

In my view, there are two impactful applications of open innovation that are most attractive to developing nations.

Firstly, open innovation can be very powerful if  research organizations of the developed world collaborate  with  various entities of the developing world to solve problems that are gnawing at the vitals of poorer economies. Here is an example: GlaxoSmithKline (GSK) has announced an ‘open innovation’ strategy to help deliver new and better medicines for people living in the world’s poorest countries. It announced earlier this year the establishment of the first ‘Open Lab’ to act as an engine room of scientific innovation for neglected tropical diseases.  Initially, GSK has created capacity for up to 60 scientists from around the world to have access to the ‘Open Lab’ which will be based at the company’s research centre at the Tres Cantos Campus, Spain.  The Tres Cantos Campus is a GSK-owned and operated facility dedicated to the research and development of new medicines for diseases of the developing world.

Secondly, open innovation deployed thoughtfully can have immense impact on sustainability.   A consortium has launched  GreenXChange  to bring the network efficiencies of open innovation to solving global problems of sustainability. No single nation or community standing alone can solve the problems of greenhouse gases, energy, water and toxicity. Innovation in these areas must transcend all boundaries and speed up innovation and adoption of new technologies and open innovation is clearly the way forward.

 

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