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Open Innovation: A New Paradigm for Industrial R&D

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Presentation on theme: "Open Innovation: A New Paradigm for Industrial R&D"— Presentation transcript:

1 Open Innovation: A New Paradigm for Industrial R&D
Presentation to Queen’s University Henry Chesbrough Center for Open Innovation UC Berkeley November 10, 2009

2 The Current Paradigm: A Closed Innovation System
Science & Technology Base The Market Research Investigations Development New Products /Services R D C. M. Christensen

3 The Open Innovation Paradigm
Other Firm’s Market Licensing Internal Technology Base Technology Spin-offs New Market Current Market External Technology Base Technology Insourcing R D

4 Internal technology base External technology base
Open Innovation Other firm´s market License, spin out, divest Internal technology base Our new market External technology base Internal/external venture handling External technology insourcing Our current market Our current market are our current group satisfaction 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 C. M. Christensen

5 2003: We broke up the fortress …

6 Bringing in the right partners – Open innovation
> 75 companies and > 7000 people at High Tech Campus Eindhoven Leverage joint R&D into different application areas Extended reach and capability for new ideas and technology Corporate innovators Research institutes Consultancy & services Economic development companies

7 The expansion of the corporate funnel
Front – end Development Commercialization Insourced Ideas /Technology ODM OEM Spin in Start ups IP insourcing Incubators Spin out IP Licensing Acquisitions Alliances

8 BP’s challenge in February 2006
Energy Bioscience looked promising (Senior Executive buy-in) How do we meld commercial/technology strength with biology/biotech? The company had no bio-expertise How to reach out to biology/biotech communities Not a corporate lab! Corporate labs too insular – can’t tap broader expertise in a rapidly moving field Where was the Energy/Bio talent pool anyway? Not the usual university research programme BP does many of these and knows strengths/weaknesses Need to facilitate the development, demonstration, and commercialization of research results

9 Funding for Open and Proprietary Components
$50M/yr contracts contracts UC Berkeley BP Proprietary Component Host Institution $35M/yr contracts subcontracts Other contracts subcontracts BP Components Lawrence Berkeley National Laboratory $15M/yr Other Entities University of Illinois Urbana - Champaign ENERGY BIOSCIENCES INSTITUTE (EBI) OPEN RESEARCH BP R&T PROPRIETARY RESEARCH

10 Licensing provisions For inventions solely owned by UCB, UIUC and/or LBNL NON-EXCLUSIVE Non-exclusive, royal free (NERF) license in BP’s area of interest, providing: BP will diligently pursue commercialization - BP will underwrite the patent costs EXCLUSIVE BP may obtain exclusive license rights to sole or joint inventions. pre-negotiated capped fees “Bonanza clause” in case of extraordinary commercial success

11 Procter & Gamble P&G used to be a VERY closed organization
“We invented Not Invented Here” – J. Weedman P&G financial crisis, in 2000 Missed a series of quarterly financial estimates Stock market lost confidence in the company Stock price fell by more than half in 4 months! CEO (Jagr) was fired © 2008 Henry Chesbrough

12 P&G’s Stock Price: 8/1998-3/2000 © 2008 Henry Chesbrough

13 Searching for the Root Cause
“We fundamentally had a growth problem. Our current brands were performing well. But we weren’t developing many new brands.” – C. Wynett To get new brands, P&G needed to open up. Connect and Develop SpinBrush, Swiffer, Regenerist © 2008 Henry Chesbrough

14 Example: Proctor & Gamble
A.G. Lafley President and CEO P&G “We will acquire 50% of our innovations from outside P&G” Jeff Weedman 28 External Business Development managers VP, External Business Development “We don’t care where good ideas come from.” Nabil Y. Sakkad SVP, R&D, Global Fabric & Home Care “There’s 1.5 Million people in the world who know about my business. I want them on my team” Larry Huston (just retired) 120 Technology Entrepreneurs VP, Knowledge & Innovation, Corporate R&D

15 P&G Share Price Restored!

16 The New P&G Many processes to enable open innovation
Technology scouts Legal templates for IP, partnering Investments in Innovation Intermediaries The Goal Now: Become the open innovation partner of choice © 2008 Henry Chesbrough

17 Not Just for High Tech: Procter & Gamble “Use it or Lose it” Internal
Other Firm’s Market “Use it or Lose it” Internal Technology Base New Market Current Market External Technology Base Venture Acquisitions “Spinbrush” Large Acquisitions “Gillette” Technology Scouts R D

18 An Iberian Example: El Bulli
Ferran Adria studies molecular gastronomy, working with Herve This, a French physical chemist Adria brings this to El Bulli, restaurant is the Lab Adria launches many business experiments Borges: oils, snacks Lavassa: coffee N H Hoteles: FastGood, Nhube Iberian Airlines (with FastGood) Careful not to dilute the El Bulli brand

19 Is the internal R&D department an antiquated concept?
No – open innovation can leverage internal R&D But….. New focus: must look outside as well as inside New role: connecting to and collaborating with the outside New skill: integrating internal and external together

20 The Crisis in Copenhagen
Successor to Kyoto protocol Disputes over emissions targets…. …. and over access to the IP and technology to achieve them! Proposals of $100 billion + are ill-suited to the times Can Open Innovation help?


22 Founding Partner resources:
brand development (Nike) legal architecture (Science Commons) - technical implementation ( - technical implementation (nGenera) - technical implementation (2degrees) - messaging and story (IDEO) - academic outreach (U Washington) business rationale for sharing (UC Berkeley)

23 sustainability patents greentech / sustainability patents represent a small portion of the overall portfolio of the average company. and most companies have little skill or experience in licensing or sharing them


25 Businesses Control the Use of Their Green IP
retain the essential rights inside the core business use a standard offer to license the rights via automated transactions determine exceptions to licensing requirements research geography field of use etc….

26 The Business Benefits of Sharing or Exchanging Green IP
Publicity, yes, but there’s much more … Greater usage of technology to lower costs Commoditize an input to lower costs Establish a technical standard to influence the future development path Incremental revenues from licensing outside of your business Stimulate greater research activity in areas of value to your business

27 Open Innovation in Copenhagen?
Private reasons to share or exchange Green IP Good business, not just good publicity No government action required Though policy can help stimulate the process… Developing nations need not pay for all IP rights Exchange, share, or license just those they need Developing nations innovate too And these can be shared with other developing countries

28 Policy Can Help! Provide greater information on available green technologies, whether private or publicly held Offer financial assistance for licensing useful Green IP to developing countries Also technical assistance Award prizes for most useful Green IP Provide tax incentives to stimulate sharing or exchange of Green IP


30 Photo Credits Flickr: Chess/Fox, Tuesday Night Poker/Rambis, Ryan Air/ezreenphotography, Ryan Air New Boeing 787 Colours/macrodebs, 332/265/Digg Pirate, The bus shelter at the edge of the ocean/goddess_spiral, Flickr treo ad/Steve Rhodes, Technology - "Future Vision“/$ydney iStockphoto: , , , , , iPod photo:

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