So what exactly is open innovation?

We were at an EIRMA conference last week at Manchester Business School called 'Open Innovation – How does it work in practice?' Present were Unilever, Nestle, EDF, L'Oreal, Solvay and many university tech tranfer people. This confirms the pull of the open method, despite such basic practical questions still being asked.  Some of the other themes which emerged during the day were:

-Isn’t OI just another word for collaboration orpartnership? If it is not then what is the difference?

-What kind ofsoft skill is needed by an organization to be successful in OI? What kind ofpeople do we need to hire to enable an organization to be successful in OI?

For now, I'll confine myself to addressing the first and often asked question concerning the definition of open innovation. The others are key cultural issues which we have investigated elsewhere.     

In 2003, Dr.Henry Chesbrough coined the term open innovation to describe the ways in which companies include external ideas to create innovations aswell as exploit external paths to market in order to advance their own technologies.

What's interesting is what this misses out.  Yes this concept covers collaboration and as such programmes like Dell's ideastorm would qualify as open innovation. But does it cover partnership? As Wikipedia note, "According to Dell Ideastorm's Terms of Services, a posted idea willgrant Dell royalty free license to use and implement it (withoutcompensation to the originator). Participants should be beware of thisbefore posting any ideas." 

What we've discovered in programmes like the P&G Open Innovation ChallengeOracle Open Alchemy and VJAM with Virgin Atlantic is that you do indeed have to move beyond collaboration towards a true business partnership.  In each of these cases there have been new commercial relationships developed between very unequal partners and in order for these to prosper and make sense there has been a very clear sense that the ideator retains rights to the IP.   This is why to our eyes, the Ideastorm and many similar 'open' initiatives don't make the grade.  They're great for producing insight, feedback and new ideas but in terms of business relationships they are, essentially, free research.

Because open innovation is usually between those with much power (corporates) and those with little (SMEs, consumers, suppliers) this distinction is not trivial.  Real, sustainable open innovation needs to properly share the risk and the rewards and must therefore create a trade between the partners.

There are many types of partnership that can be created. Virgin Atlantic now have consumers who have become suppliers.  P&G licences many proprietary technologies from small companies.  Oracle is entering new innovative partnerships with its corporate customers. Tesco, through TJAM, are co-innovating with programmers through their API.

One of the learnings from NESTA's corporate open innovation programme therefore is to 'start at the end'. Before you embark, investigate what sort of business relationships you are aiming for and what sort of commercial basis your partnership will have.  In this way, real lasting value will be created in spite of the many barriers there are to this emerging method.  

Comments

  1. Good point. But trying selling “collaboration” to your board. Try getting journals to publish academic papers on this “new phenomenon”. Try writing those neat Nesta reports using old-hat terminology.
    Using a new label for an old phenomenon has the advantage in making people step back in rethink what they are doing.
    For example, lean manufacturing only became a phenomenon when it got a shiny new label.
    Another good example of collaboration is BAA’s approach to the management of Terminal 5. Hardly Open Innovation, but effective all the same.

  2. Hi Michael, I agree that the BAA example is a good example of a more open approach but I was trying to make the point that open innovation is more than ‘just’ collaboration, it’s a deeper innovation partnership, what’s more between those with unequal amounts of power. Open Innovation is indeed a shiny new thought but I do think it is substantively different because collaboration in innovation often becomes about who owns what rights to an invention.

  3. OI, in my opinion, is a building block from which a structure of IP and copyrights must be improved and updated for the current technologies and avenues of distribution.
    Commercial success will come when collaborators become more like a part of the distribution chain, linked to various other organizations benefiting each other, instead of having to look over your shoulder all the time to cover your IPs or other assets.
    Thanks

  4. Hi Ben, your vision of a more equitable supply chain is one I for one sign up to! A lot of OI is about building up trusting and mutually dependent relationships. Sometimes IP is important to this, especially in protecting the smaller party though.

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