1 How to make Open Innovation work for your R&D *** For the graphical layout please have a look at the formatting ideas / requests below *** PART 1 – INTRODUCTION THESE ARE THE STANDARD PARTS ACCORDING TO THE IM TEMPLATE THIS IS A MAJOR SECTION All sections headlines have some short text pieces to give the reader an idea of what he should be expecting in this section. This is a headline within a section It helps the reader who just wants to skim the material to get an idea of what is going on. It helps the in-depth reader to get a summary of the next 2-5 paragraphs This is a call-out box *** End of the formatting ideas / requests ***
Transcript
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How to make Open Innovation work for your R&D
*** For the graphical layout please have a look at the formatting ideas / requests below ***
PART 1 – INTRODUCTION THESE ARE THE STANDARD PARTS ACCORDING TO THE IM TEMPLATE
THIS IS A MAJOR SECTION
All sections headlines have some short text pieces to give the reader an idea of what he should be expecting in this section.
This is a headline within a section
It helps the reader who just wants to skim the material to get an idea of what is going on. It
helps the in-depth reader to get a summary of the next 2-5 paragraphs
This is a call-out box
*** End of the formatting ideas / requests ***
2
Contents
PART 1 – INTRODUCTION .......................................................................................................... 3
ABOUT THIS TOOL .................................................................................................................... 3
ABOUT THE AUTHOR ................................................................................................................. 4
WELCOME TO THE FORUM ........................................................................................................ 4
THE KNOWLEDGE IN BRIEF ........................................................................................................ 4
THE KNOWLEDGE IN PRACTICE .................................................................................................. 5
PART 2 – UNDERSTANDING THE THEORY AND BACKGROUND ....................................................... 6
Open Innovation on the agenda ........................................................................................6
Innovation management is getting harder .................................................................6
‘Old School’ results often disappoint .........................................................................6
OI in the spotlight .....................................................................................................7
Do not confuse OI and Open Source ........................................................................7
Why OI matters .................................................................................................................8
OI: The benefits ........................................................................................................8
Six forces impacting innovation management ...........................................................8
PART 3 – METHODOLOGY AND PRACTICE INSIGHTS .................................................................. 10
Where the firm should innovate openly ...........................................................................10
For many firms, innovation gets harder and harder. At the same time the results of the existing innovation management are disappointing. For these reasons, more and more firms are turning to open ap-proaches to innovation.
INNOVATION MANAGEMENT IS GETTING HARDER
In most industries, the innovation environment is getting tougher. The forces at work may
vary among industries, but when business leaders talk about their main innovation challeng-
es, the list of issues usually includes:
- Increased demands from customers and shareholders
- Increased competition
- Increased demands for efficiency
- Shorter product life cycles
- Increased complexity of innovation
- Increased costs of innovation
- Stricter environmental and safety requirements
In an innovation management context, firms have had to cope with innovation in products,
services, user experience, business models, channels and processes and in order to realize
these firms have invested significantly in implementing and fine-tuning innovation manage-
ment systems. Today, in many firms one finds clearly defined metrics, transparent structures,
IT solutions, detailed standard plans for innovations, specified processes for eliminating
‘false positives’ and portfolio approaches for deciding on the best resource allocation in
place.
‘OLD SCHOOL’ RESULTS OFTEN DISAPPOINT
In practice however, these classic (or ‘Old School’) innovation management systems often
yield disappointing results. Many Board members complain that the number of innovations is
too low, that innovation is mostly of an incremental nature and that the large proportion of
innovations is not successful in the marketplace.
‘Old School’ innovation management also is likely not good enough for tomorrow’s business
world. Samuel Palmisano, CEO of IBM, remarked recently that: ‘The way you will thrive in
[tomorrow’s] business environment is by innovating constantly – innovating in technologies,
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innovating in strategies and innovating in business models. At the same time, the nature of
innovation has changed. It’s no longer individuals toiling in a laboratory, coming up with
some great invention. It’s not an individual. It’s individuals. It’s multidisciplinary. It’s global. It’s
collaborative.’
OI IN THE SPOTLIGHT
A few years ago, Professor Henry Chesbrough observed that leading firms, such as IBM and
Procter&Gamble, were radically reshaping their innovation management. In studying these
firms, he coined the term ‘Open Innovation’ for ‘a paradigm shift under which firms use exter-
nal ideas as well as internal ideas and internal as well as external paths to market as they
look to advance their technology’.
Chesbrough’s definition addresses two generic forms of Open innovation:
- Inside-out Open Innovation, i.e. firms looking for new sources of revenue by exploiting
their IP Intellectual Property (IP) and technologies within and outside their core markets;
- Outside-in Open Innovation, i.e. firms actively looking for external know-how to in-
crease their innovation productivity. External expertise can come either from existing in-
novation partners or potential new partners.
In other words, the innovation funnels in Open Innovation firms have permeable walls,
through which innovations can easily transfer inwards and outwards, which reflects the net-
worked business and society of the industrialized world.
Open approaches to innovation are not new: every firm employs some. The key observations
made by Chesbrough related to the intense rigor that the firms applied to searching for new
external innovation impulses and to changing the mind-sets of internal innovators to ensure
that external ideas were as much appreciated as ideas generated within the firm.
In other words the absorption of ideas, concepts and solutions from academia, suppliers and
technical experts (in this tool called R&D-driven Open Innovation (OI) can be seen as the
rigorous practice of unearthing and leveraging external technological expertise. OI is not
about outsourcing R&D; rather it is about in-sourcing the technological expertise of the world.
DO NOT CONFUSE OI AND OPEN SOURCE
I have taken part in quite a number of discussions on OI where it was stated that Open Inno-
vation means ‘giving away precious Intellectual Property’. People taking on this viewpoint
confuse OI with the related yet fundamentally different concept of Open Source.
Open Source has become famous in the software industry, perhaps most notably with re-
spect to the operating system Linux. Both concepts, OI and Open Source, are based on col-
laborative innovation. But there are two major differences between them:
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- OI has a business model. In OI, external co-innovators contribute something based on
the perspective of receiving something in return (e.g. a supply contract or a funding of a
joint development). Open Source has no business model – although there may be some
business models constructed around Open Source (such as Red Hat Linux).
- The innovation networks differ fundamentally. In OI, the firm innovates by searching
for knowledge outside its walls and hence it ‘owns’ the problem to be solved. Conse-
quently, all interaction lines lead to the firm – which results in a hub-and-spoke network
structure. In Open Source, the problem is the central focus so the members of the prob-
lem-solving community all connect to each other rather than working through one central
hub.
Why OI matters
There are two reasons why firms need to open up their approaches to innovation: OI offers significant benefits – and if the firm does not reap them, its competitors will. Also, innovation management is being changed fundamentally by six megatrends.
OI: THE BENEFITS
A firm with a fully open approach to innovation has significant competitive advantages in
terms of innovation agility, performance, effectiveness and exposure to risk. Measurable
benefits from OI include:
- More ways of solving scientific and technical problems
- Faster / shorter time-to-market
- Reduced innovation risk
- Lower upfront fixed development costs
- Increased chances of successful radical innovations (‘Game Changers’)
- Multiplied innovation resources
- Fixed internal R&D costs transformed into variable costs
- Extended firm supplier base.
SIX FORCES IMPACTING INNOVATION MANAGEMENT
Opening up the approach to innovation is an opportunity not just for achieving competitive
advantage. In many industries this is necessary to remain in business since the nature of
innovation management is in a process of changing fundamentally. Six megatrends are cre-
ating new realities for innovation managers:
- Explosion of knowledge: According to Derek De Solla Price, 80% to 90% of the scien-
tists that have ever lived are alive today. This leads to an explosion of knowledge. For
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example, statistics from the World Intellectual Property Organization show that the num-
ber of patents annually grew at a CAGR of 2.1% over the 20th century, at a CAGR of
2.8% since 1960 and at a CAGR of 3.5% since 1990.
- Globalization of knowledge: A large number of Asian universities and corporate cam-
puses are ranked among the best globally. This trend will prevail in the future, driven by
the huge number of students in Asia being awarded engineering degrees (there are 1.2
million new engineers annually in India and China, compared to 40,000 in Germany) and
the willingness to absorb knowledge in Western countries – the World Migration Report
ranks Asia first for students studying abroad.
- Shorter product life cycles: In most industries the average life-span of new products is
shorter than the life-span of the previous product generation. This obviously increases
the need for higher innovation performance.
- New scientific boundaries: New scientific disciplines (e.g. nanotechnology) and the
merging of established disciplines (e.g. electronics / material sciences) is creating oppor-
tunities and threats. In order to benefit the firm needs to absorb complementary
knowledge. Due to shareholder value considerations this usually cannot be done by in-
creasing the firm’s headcount.
- Convergence of industries: In many cases the boundaries between industries are ‘blur-
ring’, driven by converging value propositions and markets. Examples of industry conver-
gence include Food / Pharma, Telecom / Media and Automobile / Energy. From an inno-
vation perspective, industry convergence urges firms to co-innovate with firms from other
industries to develop ‘complete’ solutions.
- Internet-based social networks: The rise of Web-based social networks (Web sites that
enable individuals to build online social relations with others with the same interests) is a
megatrend in our society. For example, Facebook (currently the largest social network)
has more than 600 million members with an average age of 38. When these ‘digital na-
tives’ will become innovation leaders, they will apply the networked lifestyle to the innova-
tion management approach of their firm and enable them to ‘increase both their learning
and their flexibility in ways that would not be possible within a self-contained hierarchical
organization’, as Julia Liebeskind found in a study on how New Biotechnology Firms in-
novate.
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PART 3 – METHODOLOGY AND PRACTICE INSIGHTS
Determining the best OI approaches for your firm can be done through a well-organized
thought process:
Make an inventory of all OI approaches that your firm already is pursuing;
Analyse the fields where OI potentially could add value to your firm;
Look for OI benchmarks in the fields identified in step . Add these approaches to the
list made in step ;
Filter out the most suitable approaches by applying four testing questions.
The process can be depicted as shown in Chart 1.
Chart 1: Process for determining the firm’s OI portfolio
Where the firm should innovate openly
Leading firms have a clear view of where they want to inno-vate openly – and where they prefer to innovate in a closed way.
Leading firms are very clear about in which fields they innovate openly and in which fields
they deliberately apply a closed innovation model. They identify opportunities for innovateng
openly by analysing four dimensions.
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TECHNOLOGY FIELDS
The firm’s product and process innovations are based on a limited number of technology
fields. Technology fields usually are differentiated by specific expertise in research, devel-
opment and production. For example, one of my FMCG clients has identified 150 technology
fields in which it operates. These include analytical chemistry, biochemistry, computational
modelling, microbiology, perfumes and flavours, packaging, prototyping, polymers, structured
substrates and toxicology.
To determine in which of these fields innovation should be open one should analyse technol-
ogy attractiveness and the relative strength of the firm. Good candidates for OI are technolo-
gy fields that are very attractive but where the firm’s relative strength is limited.
In practice, the results of this thought process can be visualized in a portfolio diagram. Tech-
nology attractiveness (measured e.g. by the breadth and versatility of applications of a spe-
cific technology field, the assumed potential for further development and the compatibility
with other technologies) is depicted on one axis. The other axis shows the firm’s competitive
strength in this technology (measured e.g. by a subjective assessment and / or a technology
audit and the potential for development of internal know-how and skills) .
Every technology field can then be allocated on the portfolio diagram. Additional information
such as the resources invested or the number of projects can be added and represented by
different sized bubbles.
Chart 2: Finding suitable technology fields for OI
Good candidates for OI are in the upper left quadrant. Innovation in technology fields in the
upper right quadrant should be done in closed mode. Decisions on opening up innovation in
technology fields in the lower half of the portfolio diagram should be made on a case-by-case
basis.
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MARKET SEGMENTS / BUSINESS FIELDS
New business fields should be considered for open approaches to innovation in order to in-
tegrate complementary expertise for shortening the time-to-market. This applies also to exist-
ing business fields where success factors are changing rapidly and significantly or to busi-
ness fields in converging industries (see above, ‘Six forces impacting innovation manage-
ment’). Finally the firm should look for business fields that are shaped by co-opetition.
Consider the Bluetooth Consortium. In 1998, Ericsson IBM Intel, and Nokia formed the Blue-
tooth consortium. In 1999 3Com, Lucent Technologies, Microsoft and Motorola joined. Most
recently, Nintendo has decided to use Bluetooth for communication between the remote con-
trols and the console of its Wii play station. Now the individual firms involved are ‘competing
collaborators’, trying to create a dominant design and future business opportunities, but are
competing on applications.
TIME SLICES
Reaping the the benefits of OI requires the search for appropriate external knowledge, the
identification of the most promising proposals and the integration with currently running inno-
vation projects. This takes time – and so it is clear that OI provides only limited value in inno-
vation scenarios with rather short time horizons.
OI is a powerful lever for increasing innovation performance if there is time to conduct the
activities described above and the potential benefit of an external proposal is large. In prac-
tice, OI is used most for innovation topics with a timeframe of 6 to 24 months. Chart 3 shows
a methodology for finding suitable time slices that has proved its value in quite a number of
projects.
Chart 3: Finding suitable timeslices for OI
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VALUE CHAIN
Firms implementing OI usually start with core R&D functions. Leading firms will extend their
open approaches to the whole value chain, e.g. into Engineering / Production departments
(e.g. semiconductor firms) or Sales (e.g. energy firms).
Looking at the whole value chain usually generates a large number of potential open ap-
proaches to innovation.
Chart 4: Finding suitable slots in the main business processes for OI
Best practice examples from other firms
After determining where the firm should innovate openly a list of potential open approaches
to innovation in the identified fields should be compiled. This list should contain the OI ap-
proaches that the firm already practices and additionally best practices from other firms.
Chart 5 depicts 20 different OI approaches from leading firms. These can serve as the basis
for discussion. In order to provide a structure they are visualized in a portfolio diagram where
the horizontal axis represents the number of external innovators involved and the horizontal
axis represents the amount of technical detail provided to the external innovators.
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Chart 5: Open approaches to innovation, practiced by leading firms
(figures refer to numbers in text below)
01. Supplier innovation workshops
Innovation workshops are often used to absorb the innovation potential from suppliers.
Leading firms have set up a rigorous, disciplined and formalized scheme for conducting
innovation workshops.
Example: Henkel conducts one-to-one workshops with its most innovative suppliers
several times a year and a one-to-many workshop with less innovative suppliers once per
year.
02. Supplier integration
Close integration of suppliers in the design and development phases is important to ex-
ploit the supplier’s expertise for breakthrough features. This approach may be comple-
mented by a decision to invest in a key supplier’s production capacities in order to secure
future supply.
Example: Apple is executing a well-crafted strategy in LCD displays. Apple not only in-
volves the LCD manufacturers intensively in the product development process, it also in-
vests heavily in selected vendors and dedicated display production facilities. This is done
to secure Apple’s leadership in advanced low-temperature polysilicon display technology
(which provides extremely high resolution in small displays).
03. Supplier innovation network
Leveraging the innovation impulses from a large base of suppliers can be done in a pro-
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prietary, Web-based hub-and-spoke innovation network set up and managed by the firm.
In a confidential and protected environment the firm sends out Requests For Ideas, Re-
quests For Concepts or Requests For Solutions to the members of its proprietary innova-
tion n in which existing suppliers as well as new innovation partners which may become
Setting up a cross-industry and/or cross-science innovation hub is an interesting way to
explore the opportunities in nascent but promising – and at the same time risky – tech-
nologies.
Example: InnovationLab is a hub owned by BASF, Merck, SAP, Roche, Freudenberg,
Heidelberg Printing Machines and the Universities of Heidelberg and Mannheim. It is fo-
cused on the emerging industry of Organic Electronics – an industry that is expected to
grow by a factor of 300 within the next 20 years.
18. High-tech campus
A well-managed concentration of high-end knowledge and facilities will produce consid-
erable on-site interaction among the innovators which will lead to knowledge sharing and
mutual inspiration and hence to a significant boost in innovation capacity.
Example: DSM’s Chemelot industrial park is one of the largest multi-company communi-
ties in Europe. On an area of ca. 8 square kilometres more than 80 companies are co-
innovating in intelligent chemical materials. Another example is Philips Semiconductor’s
MiPlaza, where an ecosystem of global companies, start-ups, research institutes and en-
trepreneurs share a joint infrastructure (ranging from basic cafeterias to cutting-edge
labs) and form a cradle of innovation and business creation.
19. Competitive innovation race
Competitive innovation races are an approach to actively source long-term innovations
from pre-selected innovation partners. Within a competitive scenario the best firms re-
ceive invitations to enter joint development.
Example: German car maker Volkswagen has conducted more than 20 competitive in-
novation races with more than 100 suppliers through its ‘Forum Innovation’. Its subsidiary
Audi follows a similar approach which it calls ‘Audi Value Management’.
20. Supplier in residence
An interesting way to co-innovate with suppliers and to absorb their technological exper-
tise is to invite scientists from a particular supplier to work on a particular technical / sci-
entific issue with the firm’s scientists in a lab on the client’s premises.
Example: Global skin care leader, Beiersdorf, has ‘Incubation Labs’ and ‘Project houses’
to co-innovate with suppliers at early and later stage phases of the innovation funnel.
Finding the most relevant OI approaches
In defining the most relevant open approaches to innovation the firm needs to evaluate the
list of potential OI approaches. This list, as described above, should include approaches al-
ready being used by the firm and relevant best practice from other firms.
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Four questions can be used to filter out the most suitable open approaches to innovation out
of this list.
- Question 1: Are the approaches aligned to the innovation strategy?
In order to contribute fully to the firm’s innovation performance, the firm’s OI approaches
need to be aligned to its innovation strategy. If the firm has a detailed innovation strategy,
this is the yardstick to measure the relevance of a particular OI approach.
Frequently, the existing innovation strategy is not detailed enough. In this case a rough
model will provide sufficient guidance. Abernathy and Clark point out that firms are pursu-
ing four generic innovation strategies. Depending on whether the firm pursues a market
leader strategy (i.e. conquering all relevant market niches) and / or a technology leader
strategy, its innovation strategy can be positioned in a corresponding portfolio.
Chart 6: Testing question 1 to select the best OI approaches
If the firm is pursuing an ‘Efficiency leader’ strategy, an Academia / Start-up innovation
network will not be beneficiary. If the firm is pursuing a ‘Market leader’ strategy it will be
of limited value to arrange for VC-based technology in-sourcing; on the other hand in or-
der to open up new market niches systematically building up Go-to-market Joint Ventures
and nourishing the firm’s ecosystem of complementary products and service providers
may have a large benefit.
- Question 2: Is there a clear focus on the innovation drivers?
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Within the fields where innovation should be open the firm needs to analyse which play-
ers are driving the innovation: Customers, suppliers, academia or business partners. The
firm should focus its OI approaches to the ones that target the innovation drivers. For ex-
ample, a cosmetics company analysed that in key technology fields innovation is driven
by suppliers – and consequently is investing in OI approaches that leverage the innova-
tion capacities of suppliers.
- Question 3: Is the firm attractive to the innovation drivers?
The firm should conduct a critical self-assessment of its attractiveness to the innovation
drivers identified in the preceding step. For example, OI approaches such as ‘Proprietary
innovation network’ or ‘High Tech campus’ may not be a realistic option for medium-sized
firms.
However, it might be an option to consider joining forces with other firms to increase the
firm’s attractiveness and establish sufficient clout. In the German food industry, for in-
stance, several relatively small firms are pooling their OI approaches to set up a shared
supplier innovation network.
- Question 4: Is the number of OI approaches rightsized?
Laursen and Salter analysed the sources of information and knowledge for innovation in
British manufacturing companies and found that a ‘medium number of innovation part-
ners’ with ‘a significant intensity of collaboration’ adds most value to the firm’s innovation
efforts. In other words the firm should be careful not to over-extend its portfolio of OI ap-
proaches – unless the approaches are taking place in separate areas of the firm.
Implementing OI
Once a suitable mix of OI approaches has been defined the imple-mentation needs to be organized. Based on case evidence the cogni-tive aspects (the ‘hard facts’ side) can be structured fairly easily.
Once the firm has defined its OI portfolio it needs to organize implementation. Usually there
are a lot of questions requiring answers during implementation.
Preparing for implementation should be done in a solid framework to ensure that all the
questions that emerge are collected and transferred in an efficient and effective project man-
agement structure. One framework that has proved its value in quite a number of OI imple-
mentation projects has ‘four cornerstones’, i.e. four major dimensions that an OI implementa-
tion needs to address.
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Chart 7: Framework for organizing OI implementation
These four cornerstones are (illustrated by some of the key questions):
- Strategy (Where should innovation be open, where should it be closed? How will OI be
integrated into the innovation strategy process?)
- Processes / IT (How should the relevant processes be designed? What are the most
suitable IT solutions supporting the processes?)
- Organisation / Management (Which roles and responsibility areas are required? How
should the OI business process be managed?)
- Culture / Change
Each OI implementation will involve a specific set of questions – but case evidence shows
that they will always match with one of these cornerstones. In other words, the primary struc-
ture (i.e. the sub-project level) for the OI implementation project plan can be structured within
the four cornerstones, and the secondary structure (i.e. the work package level) can deal
with specific questions.
A typical project plan for OI implementation might have 5-8 sub-projects and be structured as
in Chart 8:
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Chart 8: Generic structure of an OI implementation program
A typical project team taking over responsibility for the ‘Hard Facts’ (i.e. the first three of
these four cornerstones) will include key players from R&D / Innovation management, IT,
Legal Affairs, Procurement, Patents and communication experts.
IS YOUR ORGANIZATION READY?
Before the firm launches a major initiative to define its OI portfolio and start its implementa-
tion it is helpful to check on the readiness of the organization. The questions below may help.
Is the innovation performance of the firm seen more and more criti-cally?
In many cases firms started opening up their innovation when shareholders questioned
the innovation performance (measured e.g. by new products additional revenue per R&D
Euros). In many situations the rising costs of R&D and declining number market suc-
cesses are seen as indicators that the firm’s innovation operating model has reached its
limits and a more open approach is needed.
You should prepare for these discussions by looking at OI strategies of global bench-
marks, of competitors and of firms from similar industries in order to get an understanding
of the opportunity space and potentially relevant approaches to OI.
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Are your firm’s existing OI approaches good enough?
Firms embarking on OI do not usually start from zero – they have usually taken certain
steps. Usually there are also some functions that are working on an open model of inno-
vation. It is important to recognize these, but it is also important to analyse whether the
firm’s ‘installed base’ is good enough.
In order to fully exploit the potential of OI you should take an unbiased look and bench-
mark your firm. You should also analyse which of the existing open approaches to inno-
vation produces a significant and value-adding inflow and look at the efficiency of the cur-
rent processes to absorb external knowledge.
Does your firm have a broad view of OI?
More and more firms from different industries are increasing the openness of their inno-
vation by implementing OI on a large scale. A number of firms have found that impulses
and ideas for OI approaches came from industries with similarities in terms of research
structures, innovation funnels, consumers, sales channels and supply chains. A FMCG
firm, for example, found that the approach of a Pharma firm to attract academia into its
innovation ecosystem had many elements that could be transferred.
Within your firm you should install a system for monitoring OI approaches in other indus-
tries, (using e.g. a corporate Wiki in the Intranet). It is a good idea to arrange cross-
company / cross-industry workshops on best practice, with companies from other indus-
tries and especially where there are no major concerns regarding confidentiality.
Are your aware of your competitors’ initiatives to build the best in-novation network?
A key competitive advantage for the firms is its innovation power. In the context of OI this
means in particular the innovation networks built and managed by the firm. Once leading
business magazines portray your firm’s competitors as prime examples of OI it may al-
ready be too late since then external innovators may choose these competitors as prima-
ry innovation partner.
Your firm should actively build innovation networks and use suppliers, academic experts
and industry experts as listening posts to find out about competitors’ OI approaches –
and those of firms in comparable industries.
Are internal processes in place to support OI?
Apart from new processes such as ‘partnering’ which include the identification new inno-
vation partners and managing the firm’s innovation ecosystem, a range of already exist-
ing processes needs to be aligned with a more open approach to innovation. These sup-
porting processes include management of portfolios and prioritization of innovation pro-
jects through Stage Gates.
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Your firm should look critically at these processes, exploiting external expertise such as
consultants or benchmarking partners from other companies.
CONCLUDING REMARKS ABOUT THE TOOL
Companies that want to embrace OI will need to find solutions and implement them. This
To define your OI portfolio the list of OI approaches already implemented by other firms are a
good starting point. In order to define a particular OI approach for your firm you might want to
use the four cornerstones model of Strategy, Processes / IT, Organization / Management
and Culture / Change.
This should ensure that your OI implementation programme will be targeted, effective and
efficient – and hence will have a high chance of success.
THE MISTAKES I LEARNT FROM
I learned a lot from two mistakes I made along the way. These are points you should watch
for in order to avoid the same mistakes and to speed up implementation.
I learned that learning cycles are key to convincing R&D staff. In one of my first OI implemen-
tation projects I originally followed a fairly straightforward approach, but noticed then that the
organization members did not understand it. In order to make sure that everyone understood
the plan I installed learning cycles that enabled larger and larger internal groups to under-
stand and buy into the concept.
I learned that a common understanding about OI needs to be established before meaningful
discussions on structures and processes can be conducted. For one project, I held a work-
shop to discuss with the firm’s R&D Top Management whether an ‘OI department’ was
needed. I worked under the false assumption that the managers involved had a shared view
of OI. In the course of the workshop the discussion turned to fundamental questions such as
‘What should the R&D organization look like in 5 years’ time?’
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PART 4 – USING & IMPLEMENTING THE KNOWLEDGE
1 Judge whether your existing innovation approach is good enough
Generally there are two motivations for opening innovation. The first is dissatisfaction with the results of the existing management of innovation (measured by e.g. the revenue share of new products, the innovation level of the most recent new products, or the time and re-sources needed to develop and commercialize new products).
The second is the strategic decision to shape the way that innovation is conducted in the firm’s industry respectively respond to changes in the innovation environment.
QUESTIONS FOR THE READER:
How sure are you that the way your firm innovates now will be good enough to sustain your innovation position in 3-5 years’ time?
2 Be clear about where the firm should innovate openly – and where it should not
OI is a powerful lever for increasing innovation performance in the firm. It improves agility, performance, effectiveness and the risk position. However, there must be a conscious deci-sion about where to innovate openly. In areas where the firm is a global leader it would be unwise to share valuable insights.
To determine the areas where OI would increase the firm’s competitive position you should examine the firm’s technology fields, business fields and value chain.
QUESTION FOR THE READER:
Do you have an unbiased view of the competitive position of your firm in its technology fields, business fields and business processes? Are you clear about where complementary external expertise would be helpful? What time horizon would be most suitable for OI in these areas?
3 Assess the firm’s existing open approaches to innovation
OI is not new. Every firm has open approaches to innovation. However they may not be good enough. Frequently these approaches are based on old decisions, existing networks and organizational inertia –not unbiased assessment and a green-field approach in the context of the current and expected innovation environment.
Your team should make an inventory of the firm’s existing open approaches to innovation. As mentioned in step 2, this inventory should span all technology and business fields and the whole value chain. You may then want to critically assess this inventory and judge the agility, effectiveness and risk position of your firm’s existing open approaches to innovation.
QUESTION FOR THE READER:
Do you have a complete list of your firm’s existing open approaches to innovation? Are you convinced that every approach is adding enough value with respect to improved agility, effec-tiveness and risk position?
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4 Be inspired – Look for proven OI approaches and exchange experiences
After your team has compiled the list of the firm’s OI approaches you should look around for proven approaches outside the firm. This will usually involve looking beyond the boundaries of your firm’s industry. Part 3 of this tool mentions 20 best practice examples – these could be a good starting point for your search.
It may be helpful to engage in practitioner networks that discuss practical experience. There are a number of these practitioner circles, usually involving OI managers from firms in vari-ous industries. Some of these networks require paid membership. The author has set up a free Open Innovation expert circle whose current 30 participants belong to leading firms (e.g. SAP, Lufthansa, Bosch, Beiersdorf) and smaller but highly innovative firms. This expert circle meets several times a year to discuss key factors for success in Open Innovation.
QUESTION FOR THE READER:
Do you have an open mind about your search for proven open approaches to innovations that may be relevant for your firm? Are you participating in cross-industry expert circles where practical experience is discussed among the practitioners?
5 Select the most suitable approaches
Once you have set up a list of potential open approaches to innovation you should determine those most appropriate for your firm.
To identify the most suitable open approaches to innovation the 4-step process described in this tool might be helpful. The most appropriate approaches can be found by examining the firm’s innovation strategy and the drivers of innovation within the defined areas for Open In-novation and at the fit and number of approaches.
QUESTION FOR THE READER:
Do you have a clear and strict thought process for identifying the best open approaches to innovation out of the many practised by firms in industries around the world? Do you have an open mind about adapting these approaches to your firm’s situation, e.g. setting up a shared supplier innovation network with other firms?
6 Plan for a professional implementation
Finally, after establishing your firm’s OI portfolio (i.e. the suitable open approaches to innova-tion) you should plan for a timely and efficient implementation. Usually implementing a spe-cific open approach to innovation will raise questions about strategy, processes / IT, man-agement and culture / culture change. Similar questions will arise if you implement several approaches simultaneously.
In practice it is helpful to allocate the individual issues that emerge from the detailed planning to appropriate areas. This will provide a Work Breakdown Structure that can become the basis for assigning responsibilities and hence will provide guidance during implementation.
QUESTION FOR THE READER:
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Do you have a detailed plan for implementing your firm’s Open Innovation portfolio? Do you have in place a robust Work Breakdown Structure with corresponding responsibilities?
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SUGGESTED READING
Chesbrough, H.: Open Innovation: The new imperative for creating and profiting from tech-
nology; Harvard Business School Press, 2003
This is the ground-breaking book in which Henry Chesbough laid the founda-
tions of the Open Innovation concept.
Huston, L. and Sakkab, N. ‘Connect and Develop: Inside Procter & Gamble's New Model for
Innovation’, Harvard Business Review, March 2006
This case study gives an in-depth insight into how a leading firm is innovating
openly and how it mastered the challenges along the way.
Additional reading
Abernathy, W. and Clark, K. ‘The new industrial competition’, Harvard Business Review,
September 1981, pp. 68-81
Argyris, C.:’Teaching smart people how to learn’, Harvard Business Review on developing
leaders, June 2004
Katz, R. and Allen T. ‘Investigating the Not Invented Here (NIH) Syndrome’, R&D Manage-
ment 12(1)
Kirschbaum, R. ‘Open Innovation in Practice’, Research Technology Management 48(4)page
nos
Laursen, K. and Salter, A. ‘Open for Innovation’, Strategic Management Journal 27(2)
Liebeskind, J. et al. ‘Social Networks, Learning, and Flexibility: Sourcing Scientific
Knowledge, New Biotechnology Firms’ Biotechnology Studies, 2004
PDMA (Product Development and Management Association) Primer on Open Innovation;
2006
Schein, E. H. Organizational Culture and Leadership, John Wiley & Sons, 2004
van de Vrande, V. and Vanhaverbeke, W. ‘Choosing Governance Modes for External Tech-
nology Sourcing’, R&D Management 36(3)
Watzlawick, P. The Language of Change; Basic Books, 1978.
Witzeman, S. and Slowinski, G. ‘Harnessing External Technology for Innovation’, Research
