Strategy for R&D Driven Open Innovation (OI)clinic.rubberboard.org.in/PDF/ircpdf/D3-SP-02...
Transcript of Strategy for R&D Driven Open Innovation (OI)clinic.rubberboard.org.in/PDF/ircpdf/D3-SP-02...
1
Dr. V. G. DhanakumarDirector
Indian Institute of Plantation Management (IIPM) Bangalore
(An Autonomous Organization of the Ministry of Commerce & Industry, GOI)
Strategy for R&D DrivenOpen Innovation (OI)
Successful Innovating Organizations
• Sense all “Impulses” that could lead toinnovation
• “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 throughInnovation
VGD@IIPM
2
• Project-based approach & Management• Cooperation with external experts
• Employees’ Motivation & Rate of Risk-taking
• Continued education/training
• Finance for innovation
Successful Innovating Organizations
VGD@IIPM
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)
VGD@IIPM
3
R&D Supply Chain Management (SCM)
Suppliers Purchasers Production / Processors
Distribution Market Customers
R&D Value Chain
VGD@IIPM
Stakeholders Chain
Suppliers’ Supplier
Customers’ Customer
“Novel Ways to Create Value”
?
How to Create Substantial New Value to Customers &
Organization
About “New Value”, Not New things
Customerdecides work of “Innovation”
by-voting-wallets
Innovation by“Do It Yourself” to
Underserved Customer
“All” aspects of Business with a
valuable end-userapplication
4
R&D Innovative Performance – Use of External KnowledgeThe majority of R&D firms do not incorporate external knowledge in their
products, Processes and services
R&D Innovative Performance – Use of PatentsA large amount of patents is not used and remains on the shelf
5
Closed Innovation: An Assumption
Traditionally, R&D development processes andmarketing of new products took place within R&Dboundaries.
Beginning twentieth century, universities, R&DCentre and government were not involved incommercial application of science.
Created their own (R&D) to new productdevelopment (NPD) cycle inside.
VGD@IIPM
The Current Paradigm: A Closed Innovation System
ResearchInvestigations
Development New Products& Services
TheMarket
Science&
TechnologyBase
R D&EVGD@IIPM
6
VGD@IIPM
R&D Innovation – Traditional ApproachFor years companies/R&D Units innovated using a Closed Innovation perspective
Contrasting Principles: Closed VS Open Innovation
Closed Innovation Principles Open Innovation Principles
Smart People in our field work for us
Excellence from R&D, we mustdiscover, develop and ship itourselves.
External (3PL) R&D can create significantvalue; internal R&D can claim a portionof that value
“Not all” smart people work for us*: Wemust find and tap into the knowledge andexpertise of bright individuals “outside”R&D
If we discover ourselves, we will get itto market first.
We don’t have to originate the researchin order to excel or profit from it.
Building a value-based business modelis better, than getting to market first
If we make the best use of internal andexternal ideas, we will win.
We should profit from others’ use of ourIP and we should buy others’ IP,whenever it advances our own businessmodel
If we are the first to commercialize aninnovation, we will win.
If we create the most and best ideas inthe industry, we will win.
We should control our intellectualproperty (IP) so that our competitorsdon’t profit from our ideas.
* Bill Joy of Sun Microsystems over a decade ago. See for example, http://thestandard.net
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.”
VGD@IIPM
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, 2003
VGD@IIPM
8
Open Innovation Process1. 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
VGD@IIPM
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.
9
CurrentMarket
InternalTechnology
Base
R DTechnology Insourcing
New Market
Technology Spin-offs
ExternalTechnology
Base
Other Firm’s MarketLicensing
The Open Innovation Paradigm
VGD@IIPM
Our current market
Our new market
Other firm´s market
Open Innovation
External technology insourcing
Internal technology base
External technology base
Stolen with pride from Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27, 2004
Internal/external venture handling
Licence, spin out, divest
VGD@IIPM
10
Open Innovation – New ApproachCompanies revise their innovation strategy by moving towards an Open Innovation model.
Open Innovation: Four Implementation Challenges
Source: Tutkimusraportti – Research Report 189
11
P&G’s Global Innovation Network (Sakkab, 2002, 40
Largest R&D expenses were in IBM
R&D Investments/revenue during the period of 1996-2005
12
P&G has a largest percentage of intangible assets (almost 40% of its assets are intangible in 2005)
Intangible Assets as Percentage from Total Assets during the period of 1996-2005
Knowledge is not anymore proprietary to theorganization. It resides in employees,suppliers, customers, competitors, anduniversities.
Combining internal and external ideas as wellas internal and external paths to market toadvance the development of newtechnologies.
Feature of Open Innovation
VGD@IIPM
13
Advantages of Open Innovation
VGD@IIPM
Shorter time to market
Shorter time to market
Find new technologies
Access to additional competence
Find new 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
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
VGD@IIPM
15
VGD@IIPM
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
16
Cause-and-Effect Relationships – is the influence diagram.
Influence Diagrams: OI
Conclusion: 4 Challenges Most R&D units face difficulties while implementing" Open
Innovation”(OI)
• Formal innovation strategies are well-defined… but they have not yet won thehearts and minds of people.
• Mindset Challenge
• R&D Organizations know how to bring external knowledge inside… but not the other way round. IP is underutilized.
• IP Challenge
• Traditional techniques for Open Innovation have been implemented…but the latest tools have scarcely been applied.
• Tools of Challenge
• Top management support the use of external ideas…but have notimplemented the supporting management processes.
• Management Challenge
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.
VGD@IIPM
“Let us open-up our closed handshake now, to initiate Open Innovation (OI) to Delight Customers of the Rubber World ”
18
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.
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.
R&D Business Innovation
Philips operates in electronics industry
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