Open Innova*on, Contrac*ng and Rela*onship Management         IACCM
11
May
2011
       Dr
Kevin
McFarthing
           ©
In...
Contents                          
1.    What
is
Open
Innova(on?
2.    Why
and
how?
3.    Role
of
suppliers
4.    Role
of
...
The
Closed
Innova(on
Paradigm
  Science
     &
                                             The
Technology
               ...
The
Open
Innova(on
Paradigm
                                                               Other
Firm’s

                 ...
Outside
In
OI                            
•  Defini(on:
•  "Outside
In"
OI
is
when
you
access
other
   peoples
assets
to
ad...
OI
–
basic
principles                                  
•  Your
customers
really
don’t
care
where
the
solu(ons
come
   fro...
OI
–
basic
principles                               
•  A
greater
propor(on
of
IP
is
being
registered
   by
SMEs
  –  e.g....
Want/Find/Get/Manage
framework
•  Understand
what
you
need
•  Understand
where
to
find
it
•  Understand
how
to
secure
it
• ...
Where
do
you
look?
 •  Exis(ng
contacts

    –    Suppliers
    –    Customers

    –    Universi(es
                     ...
Suppliers                               
•  You
have
a
lot
already
in
   place
   –  Rela(onship
   –  Systems
   –  Enter...
Suppliers                                   
•  You
may
also
have
   –  Power
   –  Mul(ple
sourcing
   –  Leverage

   – ...
How
does
the
supplier
feel?
          ©
Innova(on
Fixer
Ltd
2011
   12

The
internal
dilemma
•  R&D
and
Marke(ng
want
innova(on
•  Procurement
also
want
  –  Lowest
price
  –  Guaranteed
deliver...
Nestlé
 •  “Sharing
is
winning”
philosophy
 •  Partners
include
     –  Barry
Callebaut,
BASF,
Cargill,
Cognis,
DSM,
DuPon...
Nestlé
and
Cargill
 •  Cargill
won
the
    first
“Nestlé
    Research
Open
    Innova(on
Award”
Source: Nestlé        ©
Inn...
Kra`
‐
Open
Innova(on
Driving
Value
                                                        Crea(on
                      ...
Kra`
 •  From
transac(on
to
collabora(on
 •  Being
less
prescrip(ve
opens
up
more
    opportuni(es
 •  Supplier
challenge
...
Kra`
                                                                         Evaluate/     Advance
per
  Iden(fy
business...
A
different
approach…
 •  $6bn
household
product
company
 •  Usually
#2
or
#3
in
their
categories
 •  WIN
BALANCING
     • ...
Help
them
•  Do
your
suppliers
know
  –  Your
strategy?
  –  Your
priori(es?
  –  Your
consumer/customer
insights
and
need...
How
much
to
tell
them?
•    Don’t
surprise
a
compe(tor
•    Be
as
specific
as
possible
about
the
problem
•    Don’t
be
too
...
Integrate
internally
•  You
must
have
full
buy
in
and
involvement
of
   the
key
areas
of
the
business
  –  R&D
  –  Procur...
Role
of
procurement                               
•  Be
fair
to
procurement
–
don’t
measure
them
on
one
   thing
and
dema...
Contracts                                    
•  Common
fields
                          •  Project
specific
   –  Exclusivi...
To
consider….                                  
•  Do
you
really need
                      •  Do
you
really
want
to
send
...
To
consider
‐
Intellectual
Property
•  Do
you
really
need
to
own
the
IP?
   –  Totally
   –  In
your
field
   –  In
your
ge...
©
Innova(on
Fixer
Ltd
2011
   27

To
consider….                             
•  Indemni(es
   –  Protec(ng
your
business
could
put
the
other
      company’s...
Source: Tim Cummins   ©
Innova(on
Fixer
Ltd
2011
   29

Source: Tim Cummins   ©
Innova(on
Fixer
Ltd
2011
   30

Source: Tim Cummins   ©
Innova(on
Fixer
Ltd
2011
   31

Suppliers
need
to
play
ball                                
•  It’s
not
just
about
increasing
volumes
•  It’s
not
just
avo...
From
bilateral
to
community
•    O`en
suppliers
are
managed
at
arm’s
length
•    Why?
•    Build
an
ecosystem,
a
community...
•  Network
of
   exis(ng
suppliers
•  Invita(ons
for
new
   ones
to
join
•  Clear
indica(on
of
   benefits
•  Direct
contac...
©
Innova(on
Fixer
Ltd
2011
   35

P&G
•  OI
projects
(external
input
>50%)
reportedly
achieve
   70%
higher
NPV
than
internal
projects
•  New
goals
for
Conn...
From
briefs
to
the
genuinely
new
                                                    Long
term
                           ...
Ul(mately…
        FROM                                              TO        Threats  
                                 ...
This
is
the
job!                                     
                                           •    You
drive
the
crea.o...
Thank
you!         
  ©
Innova(on
Fixer
Ltd
2011
   40

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Kevin McFarthing IACCM 11 May 2011

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Kevin McFarthing of Innovation Fixer Ltd presented at the EMEA meeting of IACCM on 11th May 2011 on Open Innovation, Contracting and Relationship Management.

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Kevin McFarthing IACCM 11 May 2011

  1. 1. Open Innova*on, Contrac*ng and Rela*onship Management  IACCM
11
May
2011
 Dr
Kevin
McFarthing
 ©
Innova(on
Fixer
Ltd
2011
 1

  2. 2. Contents 
1.  What
is
Open
Innova(on?
2.  Why
and
how?
3.  Role
of
suppliers
4.  Role
of
procurement
5.  Contracts
6.  Rela(onships
and
communi(es
 ©
Innova(on
Fixer
Ltd
2011
 2

  3. 3. The
Closed
Innova(on
Paradigm
 Science
 &
 The
Technology
 Market
 Base
 R
 D&E
 ©
Innova(on
Fixer
Ltd
2011
 3

  4. 4. The
Open
Innova(on
Paradigm
 Other
Firm’s

 Licensing
 Market
 Technology
Spin‐offs
 New

 Internal
 Market
Technology
 Base
 Current
 Market
 External
Technology
 Base
 Technology
Insourcing
 R
 D
 ©
Innova(on
Fixer
Ltd
2011
 4

  5. 5. Outside
In
OI 
•  Defini(on:
•  "Outside
In"
OI
is
when
you
access
other
 peoples
assets
to
add
value
to
the
products
 and
services
that
you
deliver
to
the
market.
 ©
Innova(on
Fixer
Ltd
2011
 5

  6. 6. OI
–
basic
principles 
•  Your
customers
really
don’t
care
where
the
solu(ons
come
 from
–
why
should
you?
•  There
are
more
smart
people
outside
your
organisa(on
 than
inside
•  OI
increases
the
number
and
range
of
solu(ons
to
your
 technical
and
product
problems
•  OI
can
be
faster
depending
on
your
ability
to
integrate
and
 the
partner’s
ability
to
cooperate
 •  AND 
•  Your
compe(tors
are
doing
it
–
you
are
now
figh(ng
on
 another
ba_lefield
 ©
Innova(on
Fixer
Ltd
2011
 6

  7. 7. OI
–
basic
principles 
•  A
greater
propor(on
of
IP
is
being
registered
 by
SMEs
 –  e.g.
Kra`
quote
that
≈98%
of
food
IP
is
generated
 outside
Kra`
•  An
increasing
propor(on
of
IP
is
being
 generated
in
countries
like
China
•  OI
leverages
exis(ng
internal
resource
•  OI
doesn’t
have
to
be
riskier
 ©
Innova(on
Fixer
Ltd
2011
 7

  8. 8. Want/Find/Get/Manage
framework
•  Understand
what
you
need
•  Understand
where
to
find
it
•  Understand
how
to
secure
it
•  Understand
how
to
manage
the
rela(onship
–
 and
build
open
innova(on
for
the
long
term
 ©
Innova(on
Fixer
Ltd
2011
 8

  9. 9. Where
do
you
look?
 •  Exis(ng
contacts

 –  Suppliers
 –  Customers

 –  Universi(es
 88% of companies use suppliers for innovation –  Friends
 (HEC, Paris) –  Referrals
 •  Research
tools
 –  Google!!
 –  Patents,
publica(ons,
news
 •  Intermediaries
 –  Consultants

 –  Brokers
 –  Technical
experts
 ©
Innova(on
Fixer
Ltd
2011
 9

  10. 10. Suppliers 
•  You
have
a
lot
already
in
 place
 –  Rela(onship
 –  Systems
 –  Enterprise
integra(on
 –  People
 –  Responsibili(es
and
 governance
 •  They
have
competencies
you
don’t
have
 ©
Innova(on
Fixer
Ltd
2011
 10

  11. 11. Suppliers 
•  You
may
also
have
 –  Power
 –  Mul(ple
sourcing
 –  Leverage

 –  Lack
of
trust
 –  A
thick
contract

 –  More
lawyers
 ©
Innova(on
Fixer
Ltd
2011
 11

  12. 12. How
does
the
supplier
feel?
 ©
Innova(on
Fixer
Ltd
2011
 12

  13. 13. The
internal
dilemma
•  R&D
and
Marke(ng
want
innova(on
•  Procurement
also
want
 –  Lowest
price
 –  Guaranteed
delivery
 –  Favourable
payment
terms
 –  Mul(ple
sourcing
 –  The
upper
hand
 ©
Innova(on
Fixer
Ltd
2011
 13

  14. 14. Nestlé
 •  “Sharing
is
winning”
philosophy
 •  Partners
include
 –  Barry
Callebaut,
BASF,
Cargill,
Cognis,
DSM,
DuPont,
Firmenich,
 Fonterra,
Givaudan,
IFF,
Kerry,
Mane,
Symrise,
Tetra
Pak
 •  Nestlé
shares
its
future
needs
for
all
its
business
units
with
 innova(on
partners
 •  Have
a
Master
JDA,
with
project
addenda
 •  IP
ownership
principle
 –  Every
physical
solu(on
is
owned
by
the
competency‐providing
 partner
 –  The
smart
applica(ons
are
owned
by
the
receiving
party
 (Nestle)
 •  SiW
has
added
$200M
in
revenue
Source: Nestlé ©
Innova(on
Fixer
Ltd
2011
 14

  15. 15. Nestlé
and
Cargill
 •  Cargill
won
the
 first
“Nestlé
 Research
Open
 Innova(on
Award”
Source: Nestlé ©
Innova(on
Fixer
Ltd
2011
 15

  16. 16. Kra`
‐
Open
Innova(on
Driving
Value
 Crea(on
 Scouting for New Solutions Searching Alliances / inside your PartnershipsVALUE CREATION network Licensing In - Technology Product In-bounding Licensing In - Trademark Supplier & Coman Challenges Supplier Co - development DIFFICULTY & TIMESource: Kraft ©
Innova(on
Fixer
Ltd
2011
 16

  17. 17. Kra`
 •  From
transac(on
to
collabora(on
 •  Being
less
prescrip(ve
opens
up
more
 opportuni(es
 •  Supplier
challenge
process
 –  Brief
 –  Develop
solu(ons
 –  30
day
go/no
go
Source: Kraft ©
Innova(on
Fixer
Ltd
2011
 17

  18. 18. Kra`
 Evaluate/ Advance
per
 Iden(fy
business
 Engage
 Develop/ Decide/ agreed
 need
 supplier
 Work/Product
 Communicate
 process
 Challenge

 Kick

 Check
 Check
 Decision
 brief
 off
 in
 in
 deadline
 




















SHOWCASE
 • 

Best
ideas
presented
 • 

Key
stakeholders
in
a_endance
 • 

Supplier
and
marke(ng
interac(on
Source: Kraft ©
Innova(on
Fixer
Ltd
2011
 18

  19. 19. A
different
approach…
 •  $6bn
household
product
company
 •  Usually
#2
or
#3
in
their
categories
 •  WIN
BALANCING
 •  If
an
Open
Innova(on
project
comes
off,
 everybody
wins
 •  If
it
doesn’t,
Clorox
compensate
the
supplier
 •  There
is
always
money
on
the
table
for
the
 supplier
–
so
they
come
back
to
Clorox
Source: Clorox ©
Innova(on
Fixer
Ltd
2011
 19

  20. 20. Help
them
•  Do
your
suppliers
know
 –  Your
strategy?
 –  Your
priori(es?
 –  Your
consumer/customer
insights
and
needs?
 –  Your
technical
needs?
 –  Product
priori(es?
•  The
more
they
know,
the
more
they
can
help
 ©
Innova(on
Fixer
Ltd
2011
 20

  21. 21. How
much
to
tell
them?
•  Don’t
surprise
a
compe(tor
•  Be
as
specific
as
possible
about
the
problem
•  Don’t
be
too
prescrip(ve
about
the
solu(on
•  Ask
yourself
–
what’s
the
worst
that
can
 happen?
•  Be
open
to
exploi(ng
the
surprising,
 unan(cipated
proposal
 ©
Innova(on
Fixer
Ltd
2011
 21

  22. 22. Integrate
internally
•  You
must
have
full
buy
in
and
involvement
of
 the
key
areas
of
the
business
 –  R&D
 –  Procurement
 –  Legal
 –  IP
 –  (Marke(ng
and
supply)
 –  Alliance office  –  Open innova*on team  ©
Innova(on
Fixer
Ltd
2011
 22

  23. 23. Role
of
procurement 
•  Be
fair
to
procurement
–
don’t
measure
them
on
one
 thing
and
demand
another
•  Measure
on
innova(on
and
classic
commercial
goals
•  Innova(on
can
deliver
new
products
and
cost
savings
 –  Kellogg
split
opportuni(es
into
these
two
groups,
with
 different
processes
•  Train
and
support
appropriately
•  Understand
if
policy
changes
are
required
•  Understand
if
more
training
is
appropriate
 ©
Innova(on
Fixer
Ltd
2011
 23

  24. 24. Contracts 
•  Common
fields
 •  Project
specific
 –  Exclusivity
or
not
 addenda
 –  Services
(both
ways)
 –  Field
 –  Payments
 –  Project
brief
 •  Direct
 –  Timing
and
milestones
 •  Supply
contract
 •  Royalty
 –  IP
 –  Confiden(ality
 –  Dura(on/termina(on
•  Boilerplate
 ©
Innova(on
Fixer
Ltd
2011
 24

  25. 25. To
consider…. 
•  Do
you
really need
 •  Do
you
really
want
to
send
 exclusivity?
 innova(ve
proposals
out
to
 –  Total
 tender?
 –  In
your
field
 –  Reac(on
of
supplier
 –  Will
non‐exclusive
give
what
 –  You’re
unlikely
to
get
the
best
 you
want?
 they
have
to
offer
 –  How
long
do
you
need
it?
 –  Limits
the
rela(onship
•  Dura(on/termina(on
 –  Strong
disincen(ve
 –  One
off?
 –  Ongoing
rela(onship?
 ©
Innova(on
Fixer
Ltd
2011
 25

  26. 26. To
consider
‐
Intellectual
Property
•  Do
you
really
need
to
own
the
IP?
 –  Totally
 –  In
your
field
 –  In
your
geography
•  What
is
the
commercial
benefit?
 –  What
does
the
IP
protect?
 –  What
is
the
expected
product
life(me?
•  How
easy
can
compe(tors
develop
around
the
IP?
•  Are
you
be_er
off
keeping
it
a
trade
secret?
•  Owner
needs
to
maintain
IP
 –  Reversion
clause
is
essen(al
 ©
Innova(on
Fixer
Ltd
2011
 26

  27. 27. ©
Innova(on
Fixer
Ltd
2011
 27

  28. 28. To
consider…. 
•  Indemni(es
 –  Protec(ng
your
business
could
put
the
other
 company’s
business
at
risk
 –  Are
they
too
one‐sided?
•  Project
failure
and
liability
 –  Innova(on
projects
fail,
it’s
a
fact
of
life
 –  Don’t
punish
the
supplier
for
genuine,
competent
 project
failure
 ©
Innova(on
Fixer
Ltd
2011
 28

  29. 29. Source: Tim Cummins ©
Innova(on
Fixer
Ltd
2011
 29

  30. 30. Source: Tim Cummins ©
Innova(on
Fixer
Ltd
2011
 30

  31. 31. Source: Tim Cummins ©
Innova(on
Fixer
Ltd
2011
 31

  32. 32. Suppliers
need
to
play
ball 
•  It’s
not
just
about
increasing
volumes
•  It’s
not
just
avoiding
price
decreases
•  It’s
not
about
increasing
your
slice
of
the
pie;
 it’s
about
increasing
the
size
of
the
pie
•  It’s
about
building
a
long
term
rela(onship
 with
your
customer
for
the
benefit
of
your
 customer’s
customer
 ©
Innova(on
Fixer
Ltd
2011
 32

  33. 33. From
bilateral
to
community
•  O`en
suppliers
are
managed
at
arm’s
length
•  Why?
•  Build
an
ecosystem,
a
community
•  Use
the
richness
of
interac(on
for
your
benefit 
•  Encourage
community
collabora(on

•  Supplier
days
•  Mul(ple
points
of
contact
 ©
Innova(on
Fixer
Ltd
2011
 33

  34. 34. •  Network
of
 exis(ng
suppliers
•  Invita(ons
for
new
 ones
to
join
•  Clear
indica(on
of
 benefits
•  Direct
contact
with
 R&D
and
 packaging
teams
 ©
Innova(on
Fixer
Ltd
2011
 34

  35. 35. ©
Innova(on
Fixer
Ltd
2011
 35

  36. 36. P&G
•  OI
projects
(external
input
>50%)
reportedly
achieve
 70%
higher
NPV
than
internal
projects
•  New
goals
for
Connect
&
Develop
(October
2010)
 –  C&D
to
triple
its
contribu(on
to
P&G’s
innova(on
 development
by
delivering
$3
billion
toward
the
 Company’s
annual
sales
growth
 –  P&G
to
become
the
Partner
of
Choice
for
innova(on
 collabora(on
by
consistently
delivering
win=win
 rela(onships
 ©
Innova(on
Fixer
Ltd
2011
 36

  37. 37. From
briefs
to
the
genuinely
new
 Long
term
 Joint
 supply
and
 opportunity
 innova(on
 and
IP
 alliance,
as
 Sharing
 genera(on
 part
of
a
 Informa(on
 supply
 and
needs
 community
 Innova(on
 briefs
 ©
Innova(on
Fixer
Ltd
2011
 37

  38. 38. Ul(mately…
 FROM   TO  Threats 
 Mutual
help 
 Suspicion 
 Trust
 Avoiding
risk 
 Seizing
opportunity 
 Indemni(es 
 Sharing
risk 
What
can
go
wrong 
 How
we
can
get
it
right 
 Our
slice
of
the
pie 
 Making
the
pie
bigger 
 This
project 
 Long
term
rela(onship 
We
must
own
all
of
it 
 We
have
access
to
what
we
 need 
 ©
Innova(on
Fixer
Ltd
2011
 38

  39. 39. This
is
the
job! 
 •  You
drive
the
crea.on
of
new
supply
chains
for
 new
proposi.ons
that
bring
sustainable
sales
•  Open Innova*on  •  growth.
 You
collaborate
closely
with
the
Innova.on
 purchasing/value  Theme
Leads
and
the
Innova(on
Leads
on
 defining
the
search
direc(ons.
 sourcing manager  •  You
collaborate
closely
with
the
purchasing
and
 supply
intelligence
teams
globally.
 •  You
create
and
maintain
the
global
network
of
 knowledge,
technology
and
supply
partners,
•  As
Open
Innova(on
Purchaser
 extending
way
beyond
the
current
supply
base.
 •  You
connect
with
upstarts,
ventures,
technology
 you
are
responsible
for
finding,
 brokers,
etc
to
in‐source
technologies
and
 rela(onship
building,
selec(ng,
 products.
 contrac(ng
and
monitoring
high‐ •  You
deliver
new
supply
chains
for
new‐to‐Philips
 proposi(ons.
 tech
knowledge,
technology
and
 supply
partners
globally.
 •  You
manage
the
rela(ons
with
key
development, 
 marke(ng
and
supply
partners.
 •  You
are
part
of
the
project
teams
and
inform
all
 stakeholders
pro‐ac(vely.
 •  Your
scope
is
interna(onal
so
extensive
 travelling
is
part
of
this
job
 ©
Innova(on
Fixer
Ltd
2011
 39

  40. 40. Thank
you! 
 ©
Innova(on
Fixer
Ltd
2011
 40


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