Support : eNewsletters : Eye on Innovation : Issue 2, May 2012

Open Innovation: An old revolution in a new century?

"There are a lot of smart people out there, but most of them don't work for you." — Henry Chesbrough

Open innovation—what is it, how does it work, who is using it, what benefits can companies using this approach realize? We'll answer all of these questions and more in this issue of Eye on Innovation.

Open innovation isn't a new phenomenon. Examples of open innovation date back to the 18th century.

• The first Oxford English Dictionary was an open-source project: editors solicited the participation of hundreds of amateur volunteer readers.
• Cornish pumping engines in the 18th century and blast furnaces in northern England during the 19th century are examples of information sharing and innovative intellectual property arrangements.
• A challenge in 1919 by Raymond Orteig, a French hotel magnate, offered $25,000 to the first aviator to fly non-stop from New York, to Paris. Charles Lindbergh won that prize.
• Software was distributed free of charge during the 1950s.
• Wikipedia, the collaborative online encyclopedia, has brought this old concept to the fore.

What is Open Innovation?
Open Innovation is a term promoted by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at the University of California, Berkeley. The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (i.e. patents) from other companies. In addition, internal inventions not being used in a firm's business should be taken outside the company (through licensing, joint ventures or spin-offs).

A wide number of diverse industries have initiated an open innovation approach. Companies that are spending money on R&D with little return and those that want to increase their return on R&D are prime candidates for open innovation. Why? Open innovation represents an "opportunity to solicit input and solutions for any problem from thousands of great minds whether they come from academia, private laboratories or small, entrepreneurial companies.

Dialog Sources: European Journal of Innovation Management, Organization Science, Research Technology Management

Open Innovation and Social Media: Partners in Innovation
"If you cannot share, you cannot multiply." – Ron Nuwenhof, Dupont

The world is full of brilliant people with brilliant ideas, and companies are constantly looking for new ways to tap into this potential by working with partners who have fresh, serious approaches to developing innovative new technology. Smart collaboration with partners gives both parties the freedom to do business in new and exciting ways – creating shared value along the way. It brings together the expertise and experience of our sustainable innovation capability with new thinking and creativity from partners, creating new business models in which ideas flourish.

Social media can help
Open innovation has been gathering force in recent years, thanks to the Internet as a global information-sharing network and because of the volume of data being generated, processed, and stored by a wide range of enterprises. Shorter product life cycles and quickly changing customer behaviors need better, faster and cheaper business output.

Social media can help by being the enablers, the infrastructures for faster, better and cheaper knowledge sharing between the many participating entities, within a company or globally.

• Faster. Help organizations to aggregate and make sense out of fragmented global knowledge and expertise in order to be more agile and adaptive. Engagement is key to find and involve relevant stakeholders.
• Better. Enable continuous understanding of customer anxieties, needs and behaviors that can be used as direction and validation for market-driven innovations. Better ideas can arise by tapping into niches and specialties of collaborators to cross-pollinate knowledge—attracting the right people to the right challenges.
• Cheaper. Provide the infrastructure to quickly and effectively collaborate throughout the process—virtually. And, time-to-market diminishes as collaborators act as advocates for co-created solutions.

Thus, insights from online conversations can validate, direct and inspire market-driven innovations, both locally and globally. By spotting unmet needs and concerns, success rates can increase by bringing validated or even co-created innovations to markets.

Dialog Sources: Marketwire

Organizations using Open Innovation

"We build too many walls, and not enough bridges." — Isaac Newton

Increase business, reduce negative environmental impact, increase positive social impact, these are goals of nations globally. Food, energy and protection are huge worldwide issues. Not one company, country, nor industry is going to solve them. Partnerships, where members collaborate and are open to new ideas outside the organization, are vital to successful innovation. We only have to look at the chemical industry to find examples of several ways open innovation is being used among companies, companies and individuals, and through facilitating companies who bring together the right expertise for the right project.

In 2011 alone, DuPont launched more than 1,700 new products and invested 22 per cent of its $1.7 billion research and development budget on new chemistry and materials to reduce dependence on fossil fuels. DuPont also had a record-breaking year with 910 new U.S. patents granted in 2011 – an increase of 8 percent over the previous year. DuPont patent filings in 2011 mirrored the company's R&D investment and the pursuit of more nutritious and healthier food, reducing global dependence on fossil fuels and protecting people and the environment. Results depended upon collaborative work among their scientists, expert patent team and marketing teams.

Other chemical companies who participate in open innovation include: Dow Chemical, BASF and Air Products, Avery Dennison, Abbott Laboratories and Procter & Gamble.

Company facilitators
A new type of firm uses Internet Web sites to aid potential partners in finding each other. These organizations help to identify companies seeking to buy or sell technology and include: yet2.com, NineSigma and InnoCentive.

• yet2.com
  An investment consortium of Procter & Gamble, Dupont, Bayer, Honeywell, Caterpillar, Siemens, and NTT Leason founded yet2.com. The Web-based firm offers services that bring buyers and sellers of technology together enabling each to maximize the financial return on their intellectual assets. The firm's clients are said to represent over 40% of the world's R&D capacity and include companies in the chemical, pharmaceutical, and biotechnology industries.
• NineSigma
  NineSigma delivers connections to sources all over the world to meet its clients' technology needs, managing strategic open innovation programs for more than 40 industry-leading companies. Clients include Honeywell UOP, DuPont, PolyOne, Avery Dennison, Kraft, Abbot Laboratories, Unilever, Kohler, Battelle, and Case Western Reserve University. Clients comprise two categories: technology buyers called innovation managers and technology suppliers called solution providers. Small businesses are often technology suppliers.
• InnoCentive
  Web-based InnoCentive was founded by Eli Lilly's Ventures unit. "InnoCentive's mission is addressing the R&D challenges of leading, global companies by connecting them to the world's brightest scientific minds. Among the users are chemical firms, such as DuPont. "Seeker" companies can post their toughest R&D challenges to more than 120,000 scientists and researchers in 150 countries worldwide. Challenges are placed on the InnoCentive Website for all to view.
  
  For example, Procter & Gamble wanted a "smart" detergent that would reveal exactly when the correct amount of soap had been added to a sink full of dirty dishes. In-house researchers were stumped. P&G submitted a challenge that was solved by Italian chemist Giorgia Sgargetta, who has a Ph.D. in chemistry and works for an agrochemicals firm in Abruzzo, Italy. She pioneered an entirely new kind of dye that turns dishwater blue when a certain amount of soap has been added. She was awarded $30,000, and her name and the discovery were referenced on the patent application that P&G filed.
  
  Another example illustrates a cross-discipline solution. Colgate-Palmolive needed a more efficient method to get fluoride powder into toothpaste tubes without its dispersing into the atmosphere. Within minutes an electrical engineer reading the challenge used an efficient application of basic physics that the scientists at Colgate-Palmolive had not considered to solve the problem. It was a physics solution to a chemistry problem. With open innovation, Colgate-Palmolive was given access to a network of solvers with a diversity of intellectual expertise.
• YourEncore
  P&G and Eli Lilly recognized the need to utilize the expertise of their retirees. Fourteen other companies have joined YourEncore. Over the past 2 and half years more than 80 projects have been completed using approximately 110 YourEncore personnel. The overwhelming majority of YourEncore people working for Lilly are from other companies. This helps enhance the diversity of solutions. One of the big advantages of open innovation is the increased diversity of the thought processes used and the solutions arrived at.
• Green Chemistry Campus
  In March the Green Chemistry Campus was founded by SABIC IP (one of the six top petrochemical companies in the world and the largest company in the Middle East); REWIN West-Brabant (a regional development authority), Province of North-Brabant (Netherlands) and the municipality of Bergen op Zoom. Through the campus' open innovation with other companies, it is able to produce and market more renewable products more quickly.

Dialog Sources: Chemical Business NewsBase, Pharma Japan, Chemical and Engineering News, Fiber Optics Weekly Update, Strategic Direction

Has Europe found its niche?
Europe boasts a world-leading chemical and biotechnology sector that will make a substantial impact on future growth and job creation. A number of projects recently undertaken foster open innovation.

• The European Technology Platform for Sustainable Chemistry (SusChem), a forum that unites industry and academia, already is a well-known European network for research and innovation. SusChem announced plans to evolve into a Europe-wide network that captures the full benefit of Europe's strengths in research and a well-connected network for innovation in the chemical and biotechnology industries.
• Dutch regional development agencies are involved in more open innovation centers enabling the chemical industry to continue as a leading sector in generating wealth and jobs in the Netherlands. The East Netherland Development Agency (OostNV) is investing in the Polymer Science Park (PSP), an open innovation regional, national and international business location for educational institutions, research organizations and government in the field of plastics and coatings, as well as the Open Innovation Center Advanced Materials (OICAM) and the ThermoPlastic Composite Research Center (TPRC), dedicated to research and development of thermoplastic composites.
• Unilever has a long record of collaborating with partners to develop products, but it's the first time that its research projects have been shared so publicly in an open forum. They have published a list of key areas in which the company is seeking help.

Dialog Sources: MIT Sloan Management Review, Gale Group Newsletter Database™, Chemical Industry Notes

Will your company open its door to the world?

Will cross-collaboration go further? Will innovation and collaboration within industries such as chemical and biotech, expand to include engineering? Several pioneering companies, such as Procter & Gamble, Dow Chemical, IBM and Hewlett-Packard, have strongly profited from pursuing open innovation strategies. Following these successful examples, managers have focused on the need to establish open innovation strategies based on active collaborations with external partners.

For open innovation to succeed, the corporate culture must change to emphasize teamwork and network building outside the organization. The positive performance effects of some open innovation strategies show that a successful implementation of inbound and outbound open innovation processes can be beneficial.Open innovation will continue to be valuable because the pace of innovation is so great that it will be exceedingly hard for companies that don't work in an open environment to keep up. Moreover, because of the increasing complexity of knowledge, more and different kinds of partners are often needed to achieve a certain goal, including partners from other industries, universities and public research organizations, as well as competitors. The need for implementing open innovation is expected to gain further importance in the future — because a focus on internal innovation only will not be a viable option. Is your company on the path to open innovation?

top of page