Exploring the big picture of open innovation – concept, approach and value
Exploring the big picture of open innovation –concept, approach and valueMarcelo BravoOxford PharmaScience Group Plc
What is Open Innovation?Is it just a buzz word or are there tangibleresults?Why should you do it?What can you learn from open innovation inother industries? i.e. pharma
"Open Innovation is the term that refers tothe current thinking that companies cannotafford to rely entirely on their own research,but should instead buy or license processesor inventions from other companies. Inaddition, internal inventions not being usedin a firms business should be taken outsidethe company."
- Transfer your inventions or other assetsexternally, i.e. opensource- Collaborate with a range of partners toinnovate, i.e. consortia- Crowdsource innovation- Crowd-outsource innovation- Collaborate with a range of competitors toinnovate
“Open innovation is the use of purposive inflows and outflows ofknowledge to accelerate internal innovation, and expand themarkets for external use of innovation, respectively. [This paradigm]assumes that firms can and should use external ideas as well asinternal ideas, and internal and external paths to market, as theylook to advance their technology.”Henry Chesbrough, Open Innovation: Researching a New Paradigm"...Companies can no longer keep their own innovations secret untothemselves; ... the key to success is creating, in effect, an openplatform around your innovations so your customers, youremployees and even your competitors can build upon it, becauseonly by that building will you create an ongoing, evolving communityof users, doers and creators."Randall Rothenberg, editor, strategy+business (published by BoozAllen Hamilton)
Open Innovation is about bridging internal and external resources viacollaboration at any point in the innovation process.• highly effective use of connections and networks to exchangeknowledge, expertise and ideas• external partners being involved at any stage, not just ideageneration• equitable win-win business relationships where issues are tackledtogether• openness towards new business models to maximise the value of IPand other assetsStevenage Bioscience catalyst
Is it just a buzz word or are there tangible results?Open Innovation Choices –What is British Enterprise doing?Andy Cosh and Joanne Jin Zhang, June 2011(sample of c 1,200 UK business with up to 999employees between June 2010 and November 2010)
Traditional companies: those that made noexternal transfers, had few formal collaborationsand were in the bottom half of firms in terms oftheir use of external knowledge.Hunting‐cultivating firms: had made no externaltransfers, but had engaged in external sourcing ofknowledge and in formal collaborations moreactively.Ambidextrous firms: those that had transferredknowledge and technology externally, but werefound to also have engaged in hunting andcultivating
Why should you do it?Companies that leverage OI innovate moreand grow more, significantly more.In some industries, i.e. pharma, OI is essential.
Pharma industry facing a triple curse...Time to market...10+ years (IP life is only 20years)Cost... $1bn+ expense of bringing a new drugto marketRisk…at Phase 1 a drug has a 91% chance offailingOI Reduces risk and increases efficiency –ultimately increasing the bottom line
A day in the Life of the PharmaceuticalindustryThe pharma/biotech symbiosisA deconstructed value chain..networksAn industry geared for partnering
OI in the Pharmaceutical IndustryBig Pharma companies in symbiosis with smallerbiopharma.Funds that can would normally be spent internallyare instead spend externally via partnerships oracquisitions.
PharmaCompanyBiotechPatient/PayorBiotechBiotechBiotechBiotechBiotechPharmaCompanyPharmaCompanyBiotechBiotechBiotechBiotechBiotechBiotechBut it is much more complex than this..
A Deconstructed Value chainCRO’sCMO’sPharmaCompaniesRegulatoryConsultanciesMarket AccessConsultanciesR&D/ClinicalyConsultanciesUniversitiesR&DInstitutionsDrugDelivery CosBiotech CosCSO’sPatient/Payor
Partner, Partner, PartnerBig Pharma geared up for partneringPartnering Industry- i.e. Bio speed-dating conferences, PLX, etcNew Models- Consortia- OI catalysts (ie Stevenage Bioscience catalyst)- Crowdinnovating (i.e. Marblar)
Emerging business models for Pharma“What competes in the market place is thenetwork of cooperating companies”- Partners with complementary capabilitiesthat meet the needs of the market beingaddressed- Shared interest- Cultural diversity…cultural tolerance(Professor Brian Smith, SDA Bocconi)
Open Innovation?Unusual Business?Business as Usual.. in a rapidly changingindustry