100%Open 2013

INSEAD Presentation

Roland Harwood, 100%Open

2 October 2013 1

100%Open 2013 Open Up

2 October 2013 2

“No matter who you are, most of the smartest

people work for someone else.”

Bill Joy, Sun Microsystems

100%Open 2013 2 October 2013 3 Two Models of Open Innovation

• Starts with ‘what’ question: an innovation

brief detailing a specific unmet need

• Is a competitive marketplace amongst

customers, suppliers or users

• The innovation process is mediated by a

Trusted Agent

• Innovations are extracted through a

linear process

• Tend to be internal routes to market (e.g.

license deals)

Discover

• Starts with a ‘who’ question: finding

partners to explore a broad opportunity

• Is a cooperative community & process ,

with customers, suppliers or users

• The innovation process is facilitated

through a Catalyst

• Innovations are built using an iterative

process

• Tend to be external routes to market (e.g.

joint ventures)

Jam

100%Open 2013 Open Innovation

2 October 2013 4

Innovating with partners

by sharing the risks

and the rewards.

100%Open 2013 100%Open Process

2 October 2013 5

Explore Extract Exploit

Identify Interesting Questions

A shortlist of partners and solutions

Taking investable propositions to market

100%Open 2013 Explore > Extract > Exploit

2 October 2013 6

“Open innovation is a

U-Shaped Process.” Paul Vanags

100%Open 2013 Open Business Models

Co-Creative

Collaborative

Cooperative

Closed

Crowd- Sourcing

Joint Ventures

Open Source

Open Ecosystem

Co- Branding

IP Acquisition

Peer to Peer

Revenue Share

Strategic Alliances

Strategic In-sourcing

100%Open 2013 Case Study – Novartis

2 October 2013 8

Novartis gains skill in orchestrating many different business models by open calls to „opportunities‟ rather than pre-designating what roles partners must occupy

100%Open 2013 9 Novartis Value/Model

2 October 2013

Superior Information Flow • Extends reach into consumer-facing and service-

based businesses (wholly alien to the historical business model), plus geographical reach

• Relies on „the outside‟ to suggest what might be possible

Trust = Power to Influence • Demonstrating „citizenship‟ behaviour in the early-

stage markets, letting others spot the win-wins, builds confidence about „perils‟ of dealing with a big beast

Fitness • Business model diversity/experimentation– positive

negotiation towards “the art of the possible”, alliance building and „business model innovation‟ become core capabilities

• Learning how to learn, through working closely with others with different core competitive advantages– places firm well to act quickly as industry changes/develops

Novartis

Products Ideas Propositions

Partners

Revenues Data

Deals

100%Open 2013 10 Case Study 2 – P&G

2 October 2013

P&G have a target to source 50% of their new products and services from outside and to systematically gather needs and push out through networks and partners.

100%Open 2013 11 P&G C&D Value/Model

2 October 2013

Superior Information Flow • Helps avoid the „limits to inter-organisational

knowledge acquisition‟ (Dushnitsky & Shaver 2009)

• In-house and existing designer relationships are based on past product successes– more diversity should result in more „appropriate‟ fit and knowledge from other cutting edge projects

Trust = Power to Influence • Product designers who know that their P&G

relationship is ongoing will make choices about other projects to pursue partly based on prospective partnership opportunity. More transparency from P&G = better chance of designers making accurate investment choices

Fitness • Avoiding path dependence, building more flexible

„docking points‟ for outside techs • Speeding „search‟ and creating a beacon

Connect &

Develop

Unmet Needs

Brokers

IP

Product Acquisition

Internal R&D

P&G

JV

Unis

Brands

Customers

Insights

Business Units

SMEs

100%Open 2013 Case Study - McLaren

2 October 2013 12

McLaren‟s predictive F1 software allows air traffic controllers to predict how aircraft are likely to act at airports, overcoming costly and dangerous uncertainty.

100%Open 2013 13 McLaren Value/Model

2 October 2013

Superior Information Flow

• Finding partners outside the normal course of business with unusual information

Trust = Power to Influence

• “Distance” of technology from partners‟ core

business and status as a non-competitor allows trustful relationship/alliances

Fitness

• ROI on projects high due to sunk cost in original

development of technology • Future McLaren tech development considered with

modularity, „re-purposing‟ in mind • Unbranded experiments with lead users from other

industries

McLaren Applied

Technologies

IP

F1 McLaren

JV

Brands

Insights

Lead Users

Revenues

Insights

Co-Branded Prototyping

Un-Branded Prototyping

100%Open 2013 14 Case Study – The LEGO Group

2 October 2013

The LEGO Cuusoo community (280,000+) is a design competition where qualifying ideas that attract 10,000 votes get produced, and 1% revenue shared with originators

100%Open 2013 15 LEGO Cuusoo Value/Model

2 October 2013

Superior Information Flow • Rather than relying on only obvious and famous

sources of IP, the question „will anyone want this‟ is answered in advance of development investment

• Takes Lego into previously unknown niches in a low-risk manner, helps prevent the „gravitational pull‟ of past hits dominating the future.

• Additional barrier to entry to competitors– flow of “best” ideas coming to Lego

Trust = Power to Influence • Pre-formed community, grateful to Lego for

producing set (potentially even accepting of design compromises) and evangelising for it

Fitness • Superior cycle time

LEGO

1% Revenue Share

New Product

Promotion & Marketing

Cuusoo Community Platform

Customers/ Fans Design

Ideas

10,000 Votes

100%Open 2013 16 Case Study - Orange

2 October 2013

Orange run innovation challenges with entrepreneurs for big near-market-ready propositions and avoid IP contamination through an Innovation Airlock.

100%Open 2013

Orange

17 Orange Airlock Value/Model

2 October 2013

Superior Information Flow • gaining access to ideas earlier in their lifecycle

than the previous norm • including access to ideas that probably would

have failed for lack of distribution before growing to scale and the „notice‟ of the team

• access to ideas that are really just ideas not fully developed commercial propositions = cheaper to acquire, though perhaps higher risk

Trust = Power to Influence • Orange already „owned‟ the cutting edge of MNO

customer relationships with Orange Wednesdays-- creating a community of content provision SMEs reduces the risk that the next brilliant version of this will go to the competition

• In Game Theory, costly signals are credible signals. Self-denying ordinance sends the right message to the whole community of designers.

Fitness • Outside orientation by managers decreases pull of

legacy France Telecom culture on innovation

People

License Deal

Reject, Archive, Feedback IP Reverts Back

Protection Proposition

Fast-tracked

Airlock

Acquisition

Ideas & IP Submission

Challenge

Pitch Decision 90 days

Expert Review Panel

Build Network

Competition Launch

© 100%Open 2012 Case Study – ARM Holdings

ARM Holdings' model for driving ecosystem co-operation gives a near monopolistic position by creating value up and down the value chain.

02/10/2013 18

100%Open 2013 19 ARM Holdings Value/Model

2 October 2013

Superior Information Flow • Creating flows of information up and down the

supply chain, including end user information and client technology trajectories

• Being more aware of information than anyone else in the market and even more than divisions of their clients aware of each other

Trust = Power to Influence • ARM philosophy– „we would never disadvantage a

client‟ • Focus on the non-core, „foundation‟ level of their

customers‟ technology offerings allows trustful relationship/alliances, with clients giving up some autonomy

Fitness • Synthesising multiple clients‟ requirements

provides the best possible defence against competition-- appropriate product for market, with low cycle time

• Relationship management is superior to all others– “engineers with client-facing skills”

ARM

Unmet Needs

Ideas

Revenues

Data

PR

Product Partner B

Partner A

Fast cycle speed with Suppliers = Smoother transitions

Design Collaboration with Customers

100%Open 2013 Open Business Models

Co-Creative

Collaborative

Cooperative

Closed

Crowd- Sourcing

Joint Ventures

Open Source

Open Ecosystem

Co- Branding

IP Acquisition

Peer to Peer

Revenue Share

Strategic Alliances

Strategic In-sourcing

100%Open 2013 Lesson’s Learned

1. Give > Get

2. Aggregate Needs

3. Create Safe Space for Collaboration

4. Host Cross Cutting Networks

5. Open Up

2 October 2013 21

© 100%Open 2012 And finally

22 02/10/2013

“Innovation is a by-product

of engaged networks.” Verna Allee

100%Open 2013

Thank You

2 October 2013 23

Roland Harwood Co-Founder & Partner

100%Open | Somerset House | South Building | London | WC2R 1LA Phone: +44 (0)20 78133 1006 | +44 (0)7811 761 435 Email: roland@100Open.com Web: www.100Open.com Twitter: @100Open