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

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Presentation on theme: "Open Innovation: A New Paradigm for Industrial R&D Presentation to Queen’s University Henry Chesbrough Center for Open Innovation UC Berkeley November."— 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 2 The Current Paradigm: A Closed Innovation System Research Investigations Development New Products /Services The Market Science & Technology Base RD

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

4 Open Innovation Our current market Our new market Other firm´s market 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 License, spin out, divest

5 Philips Research,Ronald Wolf, 10/08 2003: We broke up the fortress …

6 Philips Research,Ronald Wolf, 10/08 6 Bringing in the right partners – Open innovation > 75 companies and > 7000 people at High Tech Campus Eindhoven Research institutes Economic development companies Corporate innovators Consultancy & services

7 Philips Research,Ronald Wolf, 10/08 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 8

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

10 Licensing provisions 10 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 © 2008 Henry Chesbrough 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

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

13 © 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

14 | 14 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.” Larry Huston (just retired) 120 Technology Entrepreneurs VP, Knowledge & Innovation, Corporate R&D 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” Example: Proctor & Gamble

15 | 15 P&G Share Price Restored!

16 © 2008 Henry Chesbrough 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

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

18 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 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 patents sustainability 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 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…. Businesses Control the Use of Their Green IP

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

29 29

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: 000003004014, 000003062424, 000004293861, 000007135639, 000005589058, 000000718722 iPod photo: 30

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