The ‘father of open innovation’, Henry Chesbrough, has just published a follow-up to his ground-breaking first book. He believes business must extend beyond the creation of new technologies, to also include their broad dissemination and deep absorption, in order to prosper from new technologies. GLENDA NEVILL reports.
‘Open innovation is a term used to promote an information age mind-set toward innovation that runs counter to the secrecy and silo mentality of traditional corporate research labs.’ ~ Wikipedia
Right now, think tanks and scientists and researchers across the globe are collaborating in the search for a coronavirus vaccine (or cure).
This is a timeous reminder, says Irving Wladawsky-Berger, Research Affiliate at MIT’s Sloan School of Management and Fellow of the Initiative on the Digital Economy and of the MIT Connection Science initiative, that the open innovation model is “the perfect vehicle for today’s fast-moving environment, which includes the current race for a coronavirus vaccine”.
Wladawsky-Berger was blogging about adjunct professor and the faculty director of the Garwood Centre for Corporate Innovation at the Haas School of Business at the University of California, Berkeley, Henry Chesbrough’s second book (the first was Open Innovation: The New Imperative for Creating and Profiting from Technology, published in 2003). Seventeen years after his groundbreaking publication first hit the stands, Chesbrough authored the follow-up, Open Innovation Results: Going Beyond the Hype and Getting Down to Business.
In it, he writes: “We must extend beyond the creation of new technologies, to also include their broad dissemination and deep absorption, in order to prosper from new technologies. We distract ourselves with the ‘shiny new objects’ that arise from the advance of technology.
“All too often, the front end of the innovation process is not connected to the businesses that are to commercialise any new technologies. To realise the potential from exponential technologies, we must refocus our attention on the things that really matter in innovation (instead of simply starting another one and blithely ignoring what happens afterwards). That will require us to rethink innovation, both inside organisations and in society as a whole.”
Essentially, he argues that generating technology alone is not enough. It must also be broadly disseminated, and then absorbed and put to work before its full value is realised. The three facets of innovation, he says, are generation, dissemination and absorption. He uses real examples of global businesses to illustrate both successes and failures of open innovation.
|Closed innovation principles||Open innovation principles|
|The smart people in the field work for us.||Not all the smart people work for us, so we must find and tap into the knowledge and expertise of bright individuals outside our company.|
|To profit from R&D, we must discover it, develop it, and ship it ourselves.||External R&D can create significant value: internal R&D is needed to claim some portion of that value.|
|If we discover it ourselves, we will get it to the market first.||We don’t have to originate the research to profit from it.|
|The company that gets an innovation to the market first will win.||Building a better business model is better than getting to the market first.|
|If we create the most and the best ideas in the industry, we will win.||If we make the best use of internal and external ideas, we will win.|
|We should control our intellectual property (IP) so that our competitors don’t profit from our ideas||We should profit from others’ use of our IP, and we should buy others’ IP whenever it advances our business model.|
The H&M story
The global fashion brand and its foundation wanted to reinvent the fashion industry (a ‘planet intensive’ industry), and turn it into one that eliminates waste. H&M collaborated with Accenture and KTH Royal Institute of Technology in Stockholm to apply and accelerate innovation at scale through a Global Change Award. It offers an innovation accelerator and coaching to help the winners turn their ideas into reality, while Accenture delivers knowledge and insights into the future of fashion and retail. Analytics and thought leadership are used to identify the trends shaping sustainable fashion, and Accenture creates reports on the trends in circular fashion and open innovation to share with the broad industry.
Keeping within the concept of open innovation, H&M has also opened up its supply chain to rivals. Using Treadler, its B2B service that helps clients “accelerate sustainable change”, it will “enable its clients to benefit from H&M Group’s expertise, long-term supplier partnerships and strategic sustainability work, thereby helping them to overcome initial business barriers and accelerate sustainable change”.
“We see the opportunity to utilise the full potential of H&M Group’s extensive investments and progressive sustainability work by catering to clients’ needs and contributing to driving long-term growth for H&M Group, while driving change in our industry. In discussions with other companies, we have experienced a demand for these kinds of services,” said Gustaf Asp, managing director of Treadler, in March. Treadler will “initially work on a small scale and provide a service that is tailored to suit the need of each client, covering all steps from product development to sourcing, production and logistics”.
The Amazon story
Amazon relied on open source innovation to build the capability of its cloud based voice service platform, Alexa. In an article on Open Innovation within Business Ecosystems: A Tale from Amazon.com, published on researchgate.net, writers Isckia Thierry and Denis Lescop detail how the massive tech and ecommerce company used outside developers to create “more than 30 000 skills for Alexa, allowing the customers to control more than 4 000 smart home devices offered by 1 200 unique brands”. Amazon, they point out, “has to rely on open source innovation to ensure widespread adoption of the platform”.
Recently, Amazon opened a 966 square metre cashier free grocery store in Seattle. As the Wall Street Journal reported, the store will “serve as a showcase for its technology as it seeks to sell its system to other businesses”. The technology would likely be offered as a service, either under a licensing or profit sharing model. Currently, twenty-five smaller Amazon Go stores operate in the US.
The Philips story
Back in 1998, Philips established the Philips High Tech Campus. The idea was to centralise its research and development in one place. Later, it was renamed High Tech Campus Eindhoven after Philips allowed access to other companies and a technical university. Philips was able to use knowledge and insights from other experts, a “fruitful and intriguing experiment in open innovation”, as Atte Isomäki wrote in a blog on the Viima platform.
As an example of useful open innovation collaboration, Philips launched a joint venture with the technical university and other organisations to tackle major challenges such as affordable access to high-quality healthcare and energy-efficient lighting for densely populated cities. “This is a great example of open collaboration between the private and public sectors in order to cross-link research topics and knowledge to make amazing discoveries,” Isomäki wrote.
It also has MiPlaza, an open innovation lab where companies can develop applications using Philips research. In return, Philips can use the lab inventions to improve its own products.
The Netflix story
Back in 2006, Netflix launched an open innovation challenge, the Netflix Prize, open to the public. It wanted to find a filtering algorithm to improve user movie or series suggestions by 10%. There was a $1 million prize attached. Forty thousand teams from 186 countries entered.
In just under three years, two teams managed to live up to the challenge. “However, as the algorithm of the grand-prize-winning team was too costly to engineer, Netflix decided to go with one of the runner ups instead who had an improvement rate of 8.43%,” Isomäki reported.
“Netflix’s R&D open innovation challenge targeting the public and professionals on the field was quite successful in the end,” he reckoned. “The only problem was that the original execution of the challenge did not appropriately account for potential privacy concerns. On a positive note, Netflix were also able to find talented programmers and market their product and new suggestion feature.”
So what of marketing and open innovation? Certainly from a PR perspective, the wider outreach is a major plus. And for brands, there is recognition in a positive light, which increases brand value, something vitally important in competitive markets.
Back to Chesbrough and his new book. Last word goes to Carlos Moedas, EU Commissioner for Research, Science and Innovation, who wrote: “Henry Chesbrough has this unique ability to transform complex concepts into messages that everyone can relate to. Open Innovation Results links for the first time the effects of the financial crisis on innovation and therefore on long-term productivity. It is a must read for politicians, policy-makers and business leaders that want to make a difference by designing the right policies that drive not only the generation of new ideas but more importantly their broad dissemination and adoption by society.”