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The Open Innovation Ecosystem

Since its introduction into the business language by Henry Chesbrough in 2003, ‘Open Innovation’ has become a phrase synonymous with independent group interaction and the outsourcing of creative ideas. Open innovation covers a wide range of business activities, so it would be prudent to define the various different practices, their advantages and their shortcomings;

Open Source Innovation or Crowdsourcing

This involves the release of information for the general public or a member forum to comment on, solve, or provide further information. Released information can take the form of specific calls for innovative solutions, experimental data or general areas of interest. The incentive to innovative often comes from a cash prize or a development contract. The advantage of this method is the outreach to a wide audience of potential solvers, however, this can lead to large amounts of information which require filtering and analysis to pick any promising leads. Intellectual property can also be a sticking point using crowdsourcing and many schemes have blanket agreements to ensure that all relevant IP is signed over.

Examples of Crowdsourcing

The Longitude Prize – (John Harrison was awarded £10,000 in 1765 for his work on marine chronometers)
Wikipedia – all information in this on-line encyclopaedia is provided for free by external contributors
Innocentive – cash prizes are awarded to solvers of specific problems released by corporations such as NASA
Proctor and Gamble Connect and Develop – web users are encouraged to send in their innovative solutions to a list of published problems/issues
X Prize – originally started as an incentive for privateers to develop space launch platforms (as won by Scaled Composites in 2004) now widened to other areas of technology such as the environment and lifesciences

Corporate Open Innovation

Companies are aware that looking outside (rather than relying on) their own company for innovation can result in shorter development lead times, reduced cost to market and easier entry into new markets. Taking a licence on another company’s technology or acquiring a start up outright are common methods in this approach. Hurdles overcome with this method are the acquiring company still requires internal expertise and resource to ensure that the acquisition or licence is appropriate – i.e. “where should we innovate” and there may still be a significant development gap to align bought-in technology.

Examples of Corporate Open Innovation

Medtronic acquires Corevalve in 2009 (rather than developing their own device internally, the medical device giant spent $1bn on the relatively small company which had received CE mark in 2007 for its proprietary valve technology)

In-Sourcing Optimised Open Innovation

An optimised approach to open innovation is to take the advantages of a wide variety of minds attacking a problem whilst minimising the risks of information overload, IP leakage and remaining on corporate strategic targets.
By creating an innovation eco-system of companies, one can select the most appropriate partners for the job in hand. In an industry where the unknown is the ordinary, this allows a high degree of adaptability and agility, project to project and task to task. Far from being a list of approved suppliers, affiliates are encouraged to be embedded in the project and offer their insight into a problem, bringing value from years of industry know-how. This process is fluid and as new technologies are called for in new projects, new competent partners are sourced in these areas. As new areas are branched into, the close relationship between affiliates is well poised to acknowledge potential new business and cross-fertilisation opportunities, increasing the value of projects. Optimised open source innovation balances crowdsourcing creativity with coherent information gathering and a high degree of control over IP and company sensitive information.

Key Attributes of an Open Innovation Ecosystem

Below are four key attributes that are crucial to the Open Innovation EcoSystem,

1. Communication

Essential for the system to be effective, affiliate companies don’t need to have dedicated communication, however, the lead organisation, as the hub of the eco-system, must be able to effectively communicate between all involved parties.

2. Trust

Collaboration and interdependency can only arise if all parties are willing to do so and are fully understanding of the associated risks (and benefits). Whilst not contractually bound, eco-system participants must acknowledge a level of good conduct, confidentiality and IP ownership in the interests of the eco-system itself.

3. Leadership

Without a gate keeper the eco-system becomes nothing more than a collection of companies. Project control from chairing meetings to filing patents should be managed by one party. Ideally this party should not have a particular speciality – other than managing specialist companies.

4. Networks

In order to be a true open innovation eco-system there must be a sufficient network and subset of networks to ensure that there is a regular flow of open innovation project opportunities from within the groups specialities and more importantly, from outside the group, ensuring diversity and growth.

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