Issue 18 winter 09

PDF Downloads This article All articles in issue 018 Create 'My eIQ' Email send via email Contact EIRMA send us a message Diagrams You can simplify open innovation by first defining the assets each party brings to the collaboration, and what will happen to the results

Links Professor Henry Chesbrough Phil Gamlen Manchester Institute of Innovation ResearchEIRMA meeting on open innovation Prof Jeremy Howells InvetechBiqualys Solvay Free Pintyet2.com Wageningen University Manchester UniversityDaresbury Science & Innovation Campus Daresbury Laboratory Cockcroft InstituteNorthwest Regional Development Agency Science and Technology Facilities Council Liverpool UniversityLancaster University Article on communities of practice in innovation Viewpoint by Jane Davies of Manchester Science ParksUniversity of Warwick Science ParkHigh Tech Campus EindhovenViewpoint by Frans Schmetz of High Tech Campus Eindhoven Intellectual property article Background knowledge in IP

It’s six years since Professor Henry Chesbrough of the University of California Berkeley published Open Innovation: The New Imperative for Creating and Profiting from Technology. The book crystallised what many practitioners already knew – that innovation was becoming more of a team sport than a solitary pursuit. But what sets open innovation apart from the partnerships that have been happening for years?

Phil Gamlen, senior fellow in executive education at the Manchester Institute of Innovation Research at the Manchester Business School, worked in research management with UK chemicals company ICI. He told a recent EIRMA meeting that during his ICI career he had, among other things, dealt with group technology strategy, managed the company’s university collaborations and been involved with some communications and public relations work.

“I've now discovered that what I was doing was open innovation,” he said.

Chesbrough defines open innovation as ‘a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology’.

Gamlen argues that this definition falls short. “Open innovation happens in a broad range of categories, from close long-term relationships through to straightforward sub-contracting. Government and public engagement with open innovation also has different boundaries.

“The innovation ecosystem is now quite different to where we were 20 years ago,” he added. “For example, the UK regional development authorities now have innovation vouchers to bring technology to market from small companies. Not-for-profit organisations are also playing an increasingly important role, especially in issues related to climate change.”

What’s really new about open innovation

Prof Jeremy Howells, director of the Manchester Institute for Innovation Research, says that open innovation means “moving from partnerships on a one-to-one basis to more complex relationships where you might have two industrial partners and a couple of academics”.

This means these relationships have greater scope and complexity and, in work with academics at least, perhaps more balance.

“It used to be very one-directional. A company told a university what it wanted and the university would come back with an answer,” he said. “Now there's more symmetry in these relationships.”

John Baxter, head of business development for Invetech, an Australian automation products company, said: “We’re moving away from task orientation. Now it is more of a sharing of objectives.”

Jeroen van der Leijé, CEO of Biqualys, a chemical analysis company, said: “It's about trust. We have reworked deals so that they did not require confidentiality agreements. Open innovation is more to do with mutually beneficial arrangements, a joint commitment.”

Brigitte Laurent, group innovation champion at Solvay, says there are four levels of open innovation, defined by the depth of collaboration. The first is inward facing, in which innovation is largely handled internally. The second is an outsourcing relationship with suppliers and customers. The third is co-development, working with partners on a joint development. The fourth is co-creation, working with partners on joint discovery.

“As you progress between these levels you are increasing your capability,” she said, “but reducing your control  - and increasing the work for the IP people to do.”

Putting the pieces in place

We’ll come to the lawyers later. First we need to explore the role of location in enabling open innovation. Gamlen pointed out that rivers and ports became important during the first Industrial Revolution, because they were places where goods, people and ideas were concentrated, enabling the formation of local and international value chains and innovation loops. The same is happening today, although the location of today’s hubs and clusters may have more to do with the flow of ideas or money than of water. And they may not be physical places, either.

The rise of the Internet and social networking is making it ever easier for ideas to flow between companies, academics, customers, regulators, and interested third parties. This is creating virtual spaces that companies can use to find or develop ideas. One key mechanism is crowd-sourcing, the idea that a large mass of people may together have better insights into an issue than one or two experts, whose outlook is necessarily limited. While you might not want to put the merits of crowd-sourcing to the test when it comes to deciding on your next medical procedure, it might be a very valid approach to deciding on the design of next season’s training shoes.

“Crowd-sourcing is probably the most significant thing that has emerged in innovation recently,” said Gamlen, “and it is as a direct consequence of two things: one is the emergence of the Internet; and the other is the development of software to process the flood of inputs.”

IBM has made great strides with the approach, using internally developed software to ask its employees, their families and key commercial partners for ideas. It helped that IBM committed $100m to fund the ten best suggestions.

Similar things have happened in other ways. US veterans of the Iraqi war began blogging about their dissatisfaction with the prosthetic limbs with which they were provided and eventually decided to get together to design limbs that would suit them better.

“There's no company structure, no legal structure - it is just individuals’ passions making it work,” said Gamlen. “An innovation has taken place that would not have been possible without the web.”

One of the keys to crowd-sourcing is trust.

“Hidden agendas destroy the trust that makes crowd-sourcing work,” said Gamlen.

Virtual places

There are more formal online hubs and clusters that act as virtual places in which open innovation is expected to flourish. Some, such as Free Pint are peer-to-peer arrangements, in which people help each other out with small problems. Others are fully formed businesses that offer to act as brokers for companies seeking to buy or sell technological solutions.

“10 years ago it was all about ‘Rembrandt in the attic’: the idea that companies could make money from anything they had lying about,” said Emma Hughes, European director of online technology brokerage yet2.com. “It’s a very different story now.”

Hughes argues that online brokerages can be a useful part of an open innovation strategy, providing a way to mediate between different organisational cultures, timelines and expectations. They can also be helpful in broadening your search.

“Restricting your technology search to your own network keeps it within your language,” she said. “Brokers are not a replacement for your network. They are just going to get a different set of responses.”

Hughes also makes the point that open innovation is not just about scouting for new technology: it is about changing your organisation to make it possible to take advantage of other people’s work.

“You should look at open innovation as part of an overall strategy: it's a business model,” she said. “You have to do a lot of internal work before you are ready to collaborate externally.”

Industry-academic relationships

A lot has been written on the evolving relationship between industry and academia. One of the keys to making a success of these relationships is to recognise that the two sides have different agendas, attitudes, timelines and measures of success. Gamlen said: “There are always asymmetries, for example in how long people involved in the project remain in their roles on each side of the deal. This means you need to get relationships with people at the right level within companies, where the rate of turnover is less, if you want to sustain the industrial side of the project.

“You need to recognise that industrialists and academics have different roles. People working in industry will work in teams while academics are often acting as individuals. So you should be cautious about expecting a team response from universities.

“You also need to recognise that academics have different drivers. They're more interested in where the next grant is coming from than where the output is.

“There are also different attitudes to time, for example with unaligned budget cycles. You can tackle these issues by creating a joint collaboration space and using cultural measures to understand the backgrounds and expectations of team members from each side of the divide.”

Howells goes further, arguing that there are two types of academic ‘soul’: the ‘professional’ soul, and the ‘producer-class’ soul, each of which has a different attitude to industrial collaboration.

“Often the objectives of industry and academia do not align well,” he said. “Academia may lack a professional approach and there can be misunderstandings and a lack of precise aims on both sides. Collaborative work with industry may be given a low priority by academics more interested in working on the cutting edge.”

Whatever the potential pitfalls though, Howells says that a recent study in which he has been involved show that working with academia benefits industry.

“It turns out there's the probability of a real benefit to industry in collaborating with universities,” he said.

Transitional places

To return to the issue of place, some innovators are now trying to work in ‘transitional’ spaces, which are neither purely industrial nor purely academic, in a bid to find a better balance between the demands of the two sides of these relationships.

Biqualys is a Wageningen University spin-out, formed as a way of creating a business as well as updating some vital nuclear magnetic resonance equipment. The research team spent five years waiting for the government to provide money to buy the equipment. Eventually a company was formed to buy the equipment and sell access to it to the researchers, and offer analytic services to industry. Apparently a lot of invoices now fly back and forth between Biqualys and the University in order to track the value that each is extracting from the equipment.

“By supporting the University research it creates results and methods that can be redeployed in the company. The university focuses on the results. So the two together can co-create and do not compete on expertise.”

There are various ways these deals can be set up, such as through subcontracting or funded research projects.

“But we can always come out with a nice combination that respects the different qualities of each side,” said van der Leijé.

There can be anomalies, though: “You can get into strange situations in which technology transfer offices move from being friends of start-ups to becoming competitors. And despite our partnership with the University, it is as hard to sell to them as to any other customer.”

Manchester University is involved in another project to create a place for innovation that is not overly influenced by either side of the industry/academic divide. The Daresbury Science & Innovation Campus is home to the Daresbury Laboratory, the Cockcroft Institute, and around 100 companies. It is backed by the Northwest Regional Development Agency, the Science and Technology Facilities Council, the local council and the universities of Liverpool, Lancaster and Manchester.

“At Daresbury we’re trying to create a partnership for ideas,” said Howells. “Communities are important in open innovation and we can create a new kind of organisation where community engagement can create precursors to formal arrangements. Daresbury is being used as a neutral space that is not within companies and not within universities.”

“You also need communities of practice,” Howells added. Manchester is trying to adjust its academic assessment criteria to make it easier for these communities to develop.

“One of the issues for an academic is promotion, which is still about publications,” Howells added. So Manchester is trying to include a measure of its academics’ work on technology transfer, especially at Daresbury, in its assessment scheme “so there is an option to get promotion through knowledge transfer work.”

Real places

Howells says that despite the power of online communities, putting people together in a physical place still has value.

Jane Davies, chief executive of Manchester Science Parks, agrees.

“There's a growing recognition of the importance of urban density as a home for the kind of tacit, or unspoken, knowledge that nourishes the relationships of trust that are necessary precursors to successful collaborations,” she said.

Bill Taylor, project manager of European technical marketing at the University of Warwick Science Park, says a science park like his can offer physical space, and some slightly more abstract advantages such as brand credibility, atmosphere and permanence.

“You need a brand identity to establish who you are,” he said. “Atmosphere is important when someone turns up with an idea that that you need to help form into something more attractive.”

Frans Schmetz, managing director of High Tech Campus Eindhoven, agrees about the importance of brand: “I think one very strong point about the success of Cambridge, England, as a technology hub is its brand, and people’s pride in that brand. We want to establish that sort of pride here, in the Campus and also in the Netherlands.”

Taylor argues that a science park can also help overcome some of the barriers to innovation, such as the cost and time it takes to get a project started.

“A lot of the work that we do with small and medium-sized enterprises is uneconomic, at least in the short-term,” he said. “It's true that most innovation products take twice as much money and twice as much time as you expected.”

The Park has various ways to move technology from the university into companies and between companies, including corporate venturing, start-up schemes, micro-clustering, project staff, and networking operations. In micro-clustering the Park acts as a broker, bringing together companies with a combination of complementary skills. The technique tends to work better with new industries such as media and ICT.

“We created a micro-cluster in the media industry and at the end of the second meeting they were exchanging data that I wouldn't have exchanged if it were my company, things such as charging rates, intellectual property and so on,” said Taylor.

Success with other approaches has been mixed. Warwick Ventures, set up to harvest innovation from the University through business development managers, hasn't been as successful as hoped. But a £100 prize for information on potential innovation ideas has worked well.

“One of Warwick University’s most successful [open innovation] actions was to publish a directory of academics’ interests,” said Taylor. “Being open for business in this way is vital, but it is hard in the beginning because you get a lot of rubbish to start with.”

Lawyers and IP

Intellectual property issues can cloud open innovation projects: as one IP expert puts it “IP has always been a major issue in collaboration because for a long time it has been used as a wonderful tool for not sharing”.

Jean-François Serrier, intellectual assets general manager, Solvay, says the opposite.

“IP is not a roadblock - it is an enabler. Researchers don't like anarchy. People need to know what they can do and what they can say.”

He argues that this works if you can clearly define the background knowledge that each partner is bringing to the project  - “when you get married it is standard to know who is bringing what to the relationship” – and educate staff throughout the company about its attitudes to IP.

“You need to encourage internal IP staff to be business oriented, and to take risks based on proper assessments.”

He’s pretty sure what doesn’t work: “I don't want any more clauses in contracts which say that we own everything, can do anything we like and don't have to pay any more, because then the other party has no incentive to do anything. It's not a collaboration.”

He also warns against joint ownership of IP, because it is cumbersome, although the approach cannot be entirely ruled out.

Gamlen points again to the asymmetry in open innovation relationships, this time in the understanding of IP and in the ability to pay for it: “The partners have to have a relationship of trust. The larger partner has to instil trust in the validity and fairness of the contract.”

Heikki Kallasvara, head of research and innovation services at the University of Finland, said: “The key is the attitudes to IP and how we come to the table. Do we come to the table with our boxing gloves on?”

He defended the reputation of American technology transfer offices, which some see as driving themselves out of business because of the onerous IP terms they want to include in contracts: “American technology transfer offices get a lot of criticism, and probably with good reason, but on the other hand universities can't leave it all on the table.”

Serrier added: “The comfort of the IP department should not be the priority in the outcome of the collaboration.”

What next for open innovation?

Open innovation is, apparently, not the same thing as the kind of partnerships that Gamlen ran for years at ICI. Instead open innovation is characterised by more complex relationships between a more complex group of potential innovation partners. Open innovation also implies a tension between partners with differing agendas, timelines and success measures; and between notions of control and openness, certainty and trust.

So what’s next? According to Howells, academics are already looking at new forms of collaboration and new ways of working, perhaps relying on hybrid forms of knowledge worker, and new forms of relationships.

For Taylor, the anarchic collaboration that he has seen in his micro-cluster of new media companies is creating new models for the delivery of innovation that will soon start infusing other industries.

Gamlen sees a strong future for open innovation because of governments’ belief in its importance in tackling Grand Challenges such as climate change and an ageing population. But although open innovation relies on more intense communication and collaboration, enabled in part by virtual and physical places, he doesn’t think it’s an approach that can be left to luck: “Open innovation is not serendipity [luck], chance meetings in bars. It needs organisation and structure. It requires time and it requires resources and it relies on people more than it does money.”

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