Five good reasons to go for Open Innovation

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The central idea behind Open Innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own capabilities or create new capabilities.

Five good reasons to go for Open Innovation

  1. 1. Five good reasons to go for Open Innovation Franck Oliver Sime and Nicolas Meilhan
  2. 2. Defined as the creation of a substantial new value for customers or businesses, innovation has 4 major dimensions: What, Who, How & Where Source: MITSloan – ’06, F&S analysis PROCESSES (HOW) Organization Networking Brand Supply Chain PRESENCE (WHERE) OFFERING (WHAT) <ul><ul><li>Platform </li></ul></ul>Customer Experience Value Capture CUSTOMERS (WHO) <ul><ul><li>Solutions </li></ul></ul>Innovation
  3. 3. The central idea behind Open Innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own capabilities or create new capabilities Source: Chesbrough, H. – ‘03, F&S analysis Market Research Development Company boundaries Research projects The closed paradigm The open innovation paradigm <ul><li>The smart people in the field work for us. </li></ul><ul><li>Not all the smart people in the field work for us. We need to work with smart people inside and outside the company. </li></ul><ul><li>To profit from R&D, we must discover it, develop it, and ship it ourselves. </li></ul><ul><li>External R&D can create significant value: internal R&D is needed to claim some portion of that value. </li></ul><ul><li>If we create the most and best ideas in the industry, we will win. </li></ul><ul><li>If we make the best use of internal and external ideas, we will win. </li></ul><ul><li>We should control our IP, so that our competitors don't profit from our ideas. </li></ul><ul><li>We should profit from others' use of our IP, and we should buy others' IP whenever it advances our business model. </li></ul>Current market Research Development Company boundaries New market Research projects
  4. 4. The potential benefits of Open Innovation have never been as strong, driven by a combination of internal constraints and external opportunities Recent work pursued by Frost & Sullivan led us to identify 5 good reasons for companies to go for Open Innovation. Budget constraints Limited resources Distributed knowledge Accessible communities Specific know-how Uncovered areas of the value chain EXTERNAL OPPORTUNITIES INTERNAL CONTRAINTS R&D challenges Untapped capabilities Great ideas Room for Open Innovation Skills gap
  5. 5. Invest your R&D dollars more wisely <ul><li>Issue </li></ul><ul><li>In the economic downturn, there is a tendency to reduce R&D costs and focus only on projects with immediate returns. R&D is asked to deliver more with less. </li></ul>Illustration In 2011, GSK started a long-term partnership with 10 academic “superstars”, with the aim of developing medicines more cost effectively. Under the agreement, academics work more closely with the company but still retain their independence. GSK will tap into their expertise while providing them with funding, facilities, and large incentives paid if a treatment is successful. Professor Mark Pepys was the first academic to be selected for the program. *OI: Open Innovation <ul><li>Open Innovation practices addressing this issue </li></ul><ul><li>Partnering with academia. e.g.: GSK with academic superstars </li></ul><ul><li>R&D outsourcing/partnership. e.g.: Cognizant (Business Process Outsourcing) </li></ul>1
  6. 6. An open door to a wider community of experts to address specific research challenges <ul><li>Issue </li></ul><ul><li>Companies often face specific innovation challenges that require a combination of expertise and experience not found within the company. In order to make internal R&D more effective and more agile, companies are increasingly making use of external capabilities. </li></ul>2 Illustration InnoCentive is an open source platform that tackles R&D problems in a broad range of domains and frames them as “challenges” for anyone to solve them. The best solution for each challenge is rewarded with a cash incentive. Founded in 2001, the company claims to have a community of 250,000 re.g.istered solvers, more than 1,300 challenges posted on the platform and more than 27,500 solutions submitted. <ul><li>Open Innovation practices addressing this issue </li></ul><ul><li>Open source platforms. e.g.: InnoCentive, NineSigma, Fold it. </li></ul><ul><li>Open facilities (lab, campus, etc…) e.g.: Stevenage BioScience Catalyst (by GSK & the UK department for Business, Information and Skills - BIS); High Tech Campus Eindhoven (by Philips). </li></ul>
  7. 7. An open door to benefit from ideas or technologies already developed by others <ul><li>Issue </li></ul><ul><li>Nowadays companies have a hard time in creating truly innovative products and differentiate themselves from competition </li></ul><ul><li>By extending their boundaries to capture existing innovation, companies strengthen their internal capabilities and tap into the potential offered by external networks. This ultimately reinforces their innovation pipeline </li></ul>3 <ul><li>Illustration </li></ul><ul><li>Corporate venture capital (CVC) is the investment of corporate funds directly in external start-up companies. Rather than relying on their own innovation, CVC is an attempt to benefit from innovations existing in the market place </li></ul><ul><li>How CVC succeeds? </li></ul><ul><li>Get in early and stay in </li></ul><ul><li>Focus on start-ups which can help the corporation </li></ul><ul><li>Engage the main stakeholders in the process: the business units.  </li></ul>Source: IMD –CVC When it works and when it doesn‘t – ’07; F&S analysis <ul><li>Open Innovation practices addressing this issue </li></ul><ul><li>Corporate Venture Capital. e.g.: Intel Capital; Pfizer Venture Investment </li></ul><ul><li>Licensing and similar alliances (manufacturing, distribution, etc…) </li></ul>
  8. 8. Involve your value chain partners early in the process to reduce your time to market <ul><li>Issue </li></ul><ul><li>Time to market is critical to innovation success especially for industries with short product life cycle. </li></ul><ul><li>Involving your suppliers, customers and staff early in the process will reduce your risk of being blindsided by competitive technologies or products. The early exposure to market (customer insights) will also reduce the number of iterations and shorten your time to market. </li></ul>4 Illustration Connect + Develop , P&G’s dedicated open innovation portal, offers the opportunity to scientists, inventors and SMEs to bring their innovations to P&G. Connect + Develop claims more than 1,000 active agreements with innovation partners and more than 4,000 unsolicited ideas every year. When solicited, 75% of responses provide a solution that can be turned into a product and eventually launch onto the market. <ul><li>Open Innovation practices addressing this issue </li></ul><ul><li>Own operating OI platforms. e.g.: Connect + Develop from P&G; BMW virtual innovation agency </li></ul>
  9. 9. Think outside your industry box to create additional value for your customers (1+1=3) <ul><li>Issue </li></ul><ul><li>Companies tend to focus their attention only on their own industry while unique synergies exist outside their box. </li></ul><ul><li>By joining forces with a partner outside their core industry with complementary skills, companies are able to create innovative end products for customers. When doing so, they increase the chances of entering a new market more easily or simply reinforce their presence on their existing markets. </li></ul>5 Illustration Since 2007, Samsung and Google have entered into a global cooperation to offer to mobile users worldwide a more dynamic experience. Samsung mobile phones equipped with Google software enable users to search information, find locations, and manage their email on the move . In 2011, GSK partnered with McLaren (Formula 1 racing firm) to use McLaren’s technology and processes to enhance the performance of GSK operations <ul><li>Open Innovation practices addressing this issue </li></ul><ul><li>Partnerships. e.g.: Samsung & Google; GSK & McLaren </li></ul><ul><li>Data sharing systems/ platforms. e.g.: Tres Cantos Antimalarial Set </li></ul>
  10. 10. OI benefits are relevant across industries but the fit of OI practices differs from one industry to another Weak Strong Fit : Five good reasons to go for Open Innovation Associated practices Healthcare Chemicals Materials & Food Information & Communication Technologies Automotive & Transportation 1. Invest your R&D dollars more wisely <ul><li>Partnering with academia </li></ul><ul><li>R&D outsourcing/ partnership </li></ul>2. An open door to address specific research challenges <ul><li>Open source platforms </li></ul><ul><li>Open facilities (lab, campus, etc…) </li></ul>3. An open door to benefit from ideas or technologies already developed by others <ul><li>Corporate Venture Capital </li></ul><ul><li>Licensing and similar alliances(manufacturing, distribution, etc...) </li></ul>4. Involve your value chain partners to reduce your time to market <ul><li>Own operating OI platforms </li></ul>5. Think outside your industry box to create additional value for your customers <ul><li>Partnerships </li></ul><ul><li>Data sharing systems/ platforms </li></ul>
  11. 11. The key points you need to consider when exploring the potential benefits of OI for your organization <ul><li>What Open Innovation practices fit better with your company goals and culture? </li></ul><ul><li>What approach is most likely to work best when implementing Open Innovation within your organization? </li></ul><ul><li>How will you monitor and evaluate Open Innovation to ensure success? </li></ul>
  12. 12. About Frost & Sullivan Sector-based organisation >40 offices worldwide <ul><li>Market research and consulting company </li></ul><ul><li>50 years of experience </li></ul><ul><li>40+ offices worldwide  global coverage & local expertise  Collaborative Network </li></ul><ul><li>Sector-based organisation  9 divisions </li></ul><ul><li>1,700 employees across the globe </li></ul> 24 rue de Londres, 75009 Paris t +33 (0) 1 42 81 54 52
  13. 13. Our consulting business delivers business analysis & recommendations, focusing on strategic marketing issues Long term opps Scenario & planning Due diligence Product portfolio review Business modelling & planning New product development/ launch Sourcing Performance Innovation practices Support function Competitive intelligence Key Questions Addressed What Is the Starting Point? Where to Go? What to Achieve? How Do We Get There? What Is It Worth? How do we get it implemented? Strategy & value creation Operational strategy Structure & organisation
  14. 14. Case Study – Open Innovation within the pharmaceutical industry <ul><li>Outcome & business impact: </li></ul><ul><li>F&S analysis provided an overview of all existing Open Innovation practices used in the pharmaceutical industry </li></ul><ul><li>Open Innovation best practices were identified, highlighting relevant challenges and key success factors; transferable practices within our client’s organization were then selected </li></ul><ul><li>Main findings of this project were presented to a large audience of client’s R&D and Licensing department and are used as pillars to develop the company Open Innovation strate.g.y </li></ul><ul><li>Our approach and work: </li></ul><ul><li>We first analyzed the specificities of pharmaceutical innovation process before short listing companies with existing Open Innovation practices to be analyzed in detail </li></ul><ul><li>We then conducted a detailed benchmark of practices among selected companies. Key success factors, challenges and outcomes of these practices were analyzed thoroughly to identify best practices </li></ul>The Client : A global pharmaceutical company The Challenge: Identify Open Innovation best practices within pharmaceutical industry and help our client to optimize its R&D pipeline <ul><li>Project objectives : </li></ul><ul><li>Understand drivers for the adoption of Open Innovation and define key success factors for its implementation </li></ul><ul><li>Identify Pharma Open innovation best practices based on a benchmark of initiatives and programmes among peers </li></ul><ul><li>Provide recommendations to support our client’s initiatives towards Open Innovation </li></ul>
  15. 15. Your contacts <ul><li>Franck-Oliver Sime </li></ul><ul><li>Consulting Analyst, Paris Office </li></ul><ul><li>Worked on this research </li></ul><ul><li>+33 1 42 81 38 22 </li></ul><ul><li> [email_address] </li></ul><ul><li>Nicolas Meilhan </li></ul><ul><li>Senior Consultant, Paris Office </li></ul><ul><li>Led this research </li></ul><ul><li>+33 1 42 81 23 24 </li></ul><ul><li> [email_address] </li></ul>

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