Open Innovation – Collective solutions for tomorrow

A new way of collaborating, of harnessing expertise from around the world, in a wide range of fields; a new way of heightening business success and of delivering creative solutions to pressing global problems.

What is this recent trend? It is a paradigm shift for managing innovation that involves companies linking up with external partners to satisfy their innovation needs. It is known as “open innovation.”

In an age of rapidly changing technological landscapes and challenging economic conditions, maintaining a company’s competitive edge can hinge on its willingness to open up to outside ideas and inventions. In the words of Bill Joy, co-founder of Sun Microsyststems, “No matter who you are, most of the smartest people work for someone else.” This commercial reality encourages companies to look beyond their own research and development (R&D) structures and to tap into external knowledge resources. Moving from the traditional model of closely-guarded company research and purely internal problem-solving toward a more outward-looking model can take time but such a move promises to generate tangible benefits in terms of a firm’s growth and long-term viability.

The term “open innovation” was coined by Prof. Henry Chesbrough, Executive Director, Center for Open Innovation, University of California (Berkeley), back in 2003. His book, Open Innovation – The New Imperative for Creating and Profiting from Technology, defines it as the growing tendency for companies to seek out external ideas and talent. He explains that open innovation “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.” A commitment to open innovation can enhance business strategies and maximize a company’s chances of success.

An evolving innovation landscape

The emergence of a knowledge market makes open innovation a savvy choice for a number of reasons:

• Companies can take advantage of an increasingly mobile and highly educated workforce. When employees change jobs, they take what they know with them and effectively facilitate a flow of knowledge between companies.
• An expanding venture capital market in certain fields creates the conditions for promising ideas to be further developed or commercialized beyond the originating firm, and the possibilities for licensing or establishing spin-offs are also on the rise.
• Instead of one company single-handedly managing the research, development, financing and commercialization of a product, any or all of these stages can be shared among several entities. In this way, many more companies in the value chain can contribute to the innovation process.

Finding partners

To adopt an open innovation approach, companies need access to information on the latest breakthroughs in a given field, and on potential partners with whom they can pool resources in developing new technologies. As a consequence, there is rising demand for Internet-enabled open innovation mechanisms that provide these vital services.

One online community in this niche is the U.S.-based iBridge Network, which offers tools, resources and relationship opportunities to help users identify and exchange early stage innovation and research opportunities. This enables industry, scientists, researchers and entrepreneurs to find information on best practices and initiate collaborative research projects across a wide range of fields. The forum allows users to establish licenses directly with research labs. By giving access to automated patent numbers linking to Google Patents and to WIPO, users consulting the network can easily see where, for example, there are patents pending on interesting new ideas.

Seekers and solvers

Recognizing that intelligent ideas abound in many fields of knowledge and in all parts of the world, Messrs. Alpheus Bingham and Aaron Schacht, Eli Lilly executives, established InnoCentive in 2001. InnoCentive, dubbed the “e-Bay of Innovation”, is a global, Internet-based platform designed to help connect “seekers,” those with challenging research problems, with “solvers,” those proposing inventive solutions. InnoCentive is, in effect, an open innovation marketplace where companies, universities, public-sector bodies and others can link to a rich pool of expertise in a wide range of fields. From the outset, InnoCentive ensured it had a governance structure in place that would protect the intellectual property (IP) rights of both seekers and solvers. David Ritter, InnoCentive’s Chief Technology Officer believes that “to compete in today’s economy, companies must find ways to innovate faster with their current resources.” In his opinion, “Open Innovation is now an essential core capability.”

Individual solvers who opt to work on a specific problem featured on the platform must sign a non-disclosure agreement, before receiving the relevant information to begin the search for a solution. If selected by the seeking entity, a pre-determined monetary award ranging from US$5,000 to US$1 million is granted to the solver. Once a solver, whose solution is selected accepts the award, the IP is transferred to the seeker. If the solver already holds a patent on the solution selected, the right to use the patent for the described challenge is transferred to the seeking entity. The success of the InnoCentive model is rooted in its contractual framework. These arrangements provide for R&D laboratory audits and ensure that solutions examined, but not acquired, by “seekers” do not show up in a seeker’s IP portfolio at a later stage – thus protecting the interests of non-winning solvers.

Growing numbers of participants, some 10 percent to date, are forming teams to pool their expertise and increase their chances of success. InnoCentive has responded to this spontaneous development by launching a new capability to support and encourage these and similar networking arrangements by creating shared work spaces and a governance structure to manage IP issues associated with these collaborations.

Out-of-box thinking

Harvard Business School Prof. Karim Lakhani has studied the effectiveness of this problem-solving process. Interestingly, he found that many of the solutions selected had been developed by solvers whose expertise lay outside the field in which the problem occurred. The further solvers rated themselves to be from that field, the greater their chances of success!

When faced with a problem, in-house researchers tend to look to their own specialized field of knowledge, thereby narrowing the range of possible solutions. A global forum like InnoCentive, helps researchers “think out of the box.” It allows problem holders to do what Mr. Lakhani calls a “broadcast search,” inviting experts from across the globe and in a wide range of fields to turn their minds to a given problem. The InnoCentive model demonstrates the value of a cross-fertilization of approaches and solutions in catalyzing breakthrough discoveries.

InnoCentive publicizes solutions to challenges only if both seeker and solver agree. In one such case, successful solver Tom Kruer and his son, Nathan, worked together to come up with a solar-powered mosquito repellant for SunNight Solar Corp. Realizing that mosquitoes are attracted to human warmth and sweat, their solution relies on these very qualities. They use a non-toxic phase change material (PCM), in this case incorporating phase change wax. A PCM is a substance capable of storing and releasing large amounts of energy as it changes from solid to liquid form and vice versa. Phase change wax, which can closely simulate human body temperatures, is used to store solar heat during the day. The heat released when the PCM is brought indoors combines with human sweat absorbed by a band worn throughout the day. These are placed in a cone-shaped device that then attracts and traps the mosquitoes. The company is now building a prototype of this ingenious invention.

Specializing also a plus

Some open innovation forums are geared to a specific research field. For example, the Pool for Open Innovation against Neglected Tropical Diseases, run by the non-profit BIO Ventures for Global Health, facilitates access to IP and technologies for researchers working on these diseases. Willing pharmaceutical companies or universities contribute relevant patents or related knowledge to a pool where they are made accessible to other qualified researchers around the world. The ultimate goal is to help accelerate the pace of further drug development and increase the probability of finding effective remedies to these life-threatening illnesses more quickly. In May 2010, the Technology Innovation Agency (TIA) of South Africa became the first government agency to join the pool. Its aim is to stimulate the country’s capacity to develop effective therapies for diseases such as tuberculosis and malaria.

From the individual to the collective

Open innovation can have a significant impact on a company’s policies and strategies, its employees and organizational culture – in short, its core business model. By consciously working towards company attitudes that accept the give and take of open innovation, employee creativity can be unleashed to corporate advantage.

The open approach is already helping to jump-start stalled company growth in large and small businesses alike, and is paving the way for the fruits of university research to move from laboratory to market. Open innovation also brings into play ideas from independent inventors and problem-solvers from around the world. It represents a move from the individual to the collective – a win-win solution of potentially global proportions.