Strategy for R&D Driven Open Innovation (OI)

Transcription

1 Strategy for R&D Driven Open Innovation (OI) Dr. V. G. Dhanakumar Director Indian Institute of Plantation Management (IIPM) Bangalore (An Autonomous Organization of the Ministry of Commerce & Industry, GOI) Successful Innovating Organizations Sense all Impulses that could lead to innovation Thinkers (Generate Ideas) Vs. Innovator (Determine >> ways to Realize) Exercise Entrepreneurship (extra-preneur): as Innovation Leader Creativity in Totality -- employees Vision: World Best at Enriching Lives through Innovation 1

2 Successful Innovating Organizations Project-based approach & Management Cooperation with external experts Employees Motivation & RateofRisk-taking Continued education/training Finance for innovation 3 Conditions to be Innovator 1. Innovation means work hard, concentrated and thorough work. {Otherwise, no use for the big talent, cleverness (or) knowledge} 2. Successful innovations must build on your strong points 3. Innovation must focus on a market, must be controlled by the market (market-pull) 2

3 R&D Supply Chain Management (SCM) Suppliers Supplier R&D Value Chain Customers Customer Novel Ways to Create Value? Suppliers Purchasers Production / Processors Distribution Market Customers Stakeholders Chain How to Create Substantial New Value to Customers & Organization About New Value, Not New things Customer decides work of Innovation by-voting-wallets Innovation by Do It Yourself to Underserved Customer All aspects of Business with a valuable end-user application 3

4 R&D Innovative Performance Use of External Knowledge The majority of R&D firms do not incorporate external knowledge in their products, Processes and services R&D Innovative Performance Use of Patents A large amount of patents is not used and remains on the shelf 4

5 Closed Innovation: An Assumption Traditionally, R&D development processes and marketing of new products took place within R&D boundaries. Beginning twentieth century, universities, R&D Centre and government were not involved in commercial application of science. Created their own (R&D) to new product development (NPD) cycle inside. The Current Paradigm: A Closed Innovation System Science & Technology Base The Market Research Investigations R Development D&E New Products & Services 5

6 R&D Innovation Traditional Approach For years companies/r&d Units innovated using a Closed Innovation perspective Contrasting Principles: Closed VS Open Innovation Closed Innovation Principles Smart People in our field work for us Excellence from R&D, we must discover, develop and ship it ourselves. If we discover ourselves, we will get it to market first. If we are the first to commercialize an innovation, we will win. If we create the most and best ideas in the industry, we will win. We should control our intellectual property (IP) so that our competitors don t profit from our ideas. Open Innovation Principles Not all smart people work for us*: We must find and tap into the knowledge and expertise of bright individuals outside R&D External (3PL) R&D can create significant value; internal R&D can claim a portion of that value We don t have to originate the research in order to excel or profit from it. Building a value-based business model is better, than getting to market first If we make the best use of internal and external ideas, we will win. We should profit from others use of our IP and we should buy others IP, whenever it advances our own business model * Bill Joy of Sun Microsystems over a decade ago. See for example, 6

7 What is Open Innovation Open Innovation is a potential mechanism to source and share expertise through alliances and collaborations within a strong intellectual property framework. What is Open Innovation Open innovation has been defined as: use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. - Chesbrough,

8 Open Innovation Process 1. Ideas are investigated at the research stage and the best and most promising of these make it to development and commercialisation phases 2. Less promising ideas are dropped 3. In a open innovation process, R&D s boundaries become permeable/porous to allow in & out 4. Under closed innovation process all the invention, research and development is kept secure and confidential until the end product is launched Open Innovation Process A diagram illustrating an open innovation process. The boundaries of the firm, represented by the dashed lines of the funnel, are permeable and allow ideas and technologies (the mauve and green circles) to pass in and out of the firm. 8

9 The Open Innovation Paradigm Licensing Other Firm s Market Internal Technology Base Technology Spin-offs New Market External Technology Base Current Market R Technology Insourcing D Open Innovation Other firm s market Licence, spin out, divest Our new market Internal technology base Internal/external venture handling Our current market External technology base External technology insourcing Stolen with pride from Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27,

10 Open Innovation New Approach Companies revise their innovation strategy by moving towards an Open Innovation model. Open Innovation: Four Implementation Challenges Source: Tutkimusraportti Research Report

11 P&G s Global Innovation Network (Sakkab, 2002, 40 R&D Investments/revenue during the period of Largest R&D expenses were in IBM 11

12 Intangible Assets as Percentage from Total Assets during the period of P&G has a largest percentage of intangible assets (almost 40% of its assets are intangible in 2005) Feature of Open Innovation Knowledge is not anymore proprietary to the organization. It resides in employees, suppliers, customers, competitors, and universities. Combining internal and external ideas as well as internal and external paths to market to advance the development of new technologies. 12

13 Advantages of Open Innovation Shorter time to market Find new technologies Access to additional competence Shorter time Find to new market ideas Cost reduction + cost efficiency Access to new + other markets Influencing innovation in an ecosystem Access to vital information for decision making Flexibility of skills Exploiting technologies from inside Increase of quality Open Innovation Enablers Support from Top Management (culture-related factor) Create an OI Culture (culture-related factor) Appropriate Structural Changes (procedure-related factor Knowledge of the Company (skill-relate factor) Obtaining the Right Blend of Skills (skill-related factor) Motivation of Operatives (motivation-related factor) Number of stars indicates the approximate proportion of companies who cited that enabler or obstacle as important 13

14 Open Innovation Enablers Internal cultural issues [Culture- + Motivation-related factor] Lack of appropriate skills [Skill-related factor] Operational difficulties [Procedure-related factor] Lack of resources [Procedure-related factor] External cultural issues [Culture-related factor] Number of stars indicates the approximate proportion of companies who cited that enabler or obstacle as important Managing Partnerships Between Large R&D and Start-ups 14

15 Strategic Innovation Breaks with Past R&D Practice in at least one of three areas: a) Value chain design; b) Conceptualization of customer value; c) Identification of potential customers 15

16 Influence Diagrams: OI Cause-and-Effect Relationships is the influence diagram. Conclusion: 4 Challenges Most R&D units face difficulties while implementing" Open Innovation (OI) Mindset Challenge IP Challenge Tools of Challenge Management Challenge Formal innovation strategies are welldefined but they have not yet won the hearts and minds of people. R&D Organizations know how to bring external knowledge inside but not the other way round. IP is underutilized. Traditional techniques for Open Innovation have been implemented but the latest tools have scarcely been applied. Top management support the use of external ideas but have not implemented the supporting management processes. 16

17 Conclusion: Benefits of OI Allows many people from different disciplines to tackle the same problem simultaneously and not sequentially. Anyone can participate with collaborative technology and OI training. Many minds work on the same problem to take less time to solve it. Let us open-up our closed handshake now, to initiate Open Innovation (OI) to Delight Customers of the Rubber World 17

18 R&D Business Innovation R&D Business Innovation is creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the R&D system. R&D Innovation is about New Value, Not New Things. Philips operates in electronics industry Innovation is relevant only if it creates value for customers and therefore for the firm. Creating new things is neither necessary nor sufficient for R&D innovation. 18

19 Five out of eight companies, Cisco, IBM, Intel, Lucent and Sun are related to ICT sector. P&G business is consumer goods DuPont is a material supplier in may fields. Implementation of open innovation differs from each other. E.g. in P&G would be difficult. Companies have to find the way that is the most suitable for its business model and strategy. All actions towards openness should create value to the company. It is always a risk to open boundaries of the firm but in our fast chancing global world, it is also risky not do to so. Find balance between openness and closed. Model of Open Innovation Open innovation is 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 Chesbrough Henry development of internal competences search for new competences through an extension of the R&D firm boundaries 19