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Siemens - open innovation case


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Analysis of open innovation at Siemens

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Siemens - open innovation case

  1. 1. Why did Siemens create an open innovation initiative? What perceived problems was the initiative trying to solve? What question or mandate would you imagine coming from senior leadership? Parminder Bindra Parag Deshpande Samuel Katz Cliff Klett Ittai Marom Open Innovation Strategy
  2. 2. Executive Summary - Open Innovation at Siemens Fox School of Business 2 PMBA - MIS 5402 • Global giant: 300,000+ employees with a global footprint in various industries • Traditionally a first-mover, or fast-follower, at the very least • Decentralized structure caused silo-ing and poor cross-company communication • Open Innovation was an experiment to discover new ways to innovate • Initial intention of breaking down internal walls and identifying internal experts • Eventually shifted out in collaborations with universities and existing web services • Siemens case study demonstrates that Open Innovation has its pros and cons • What’s the opinion about Open Innovation in business today? • Perspectives of senior leadership and the board might not align at all times • Siemens is an example of a meticulous, risk-averse, step-by-step integration of Open Innovation into a company’s overall strategy BACKGROUNDANALYSISINSIGHTS
  3. 3. • Open Innovation can be viewed as outsourcing problem-solving and idea generation by employing crowdsourcing strategies in the “flat” world of 21st century • Enables an organization to leverage cross-sector collaboration through corporate labs, and cooperation with universities, research centers, and suppliers and customers What is Open Innovation (OI)? Fox School of Business 3 PMBA - MIS 5402 Advantages • Allows you to think outside the box and break free from old misconceptions • Reduces cost of conducting research • Incorporation of customers early in the development process Disadvantages • Risk of exposing a firm’s intellectual property • May be viewed as disrupting the firm’s culture • Subject Matter Experts and R&D personnel within the company may feel threatened with the influx of new product ideas Open Innovation Funnel
  4. 4. Why did Siemens adopt open innovation? • Siemens traditionally set industry trends, focused on being a first mover • Fast-following after competition was also accepted • By launching the Open Innovation initiative, Siemens was simply continuing to do what it had always done: innovate, this time by embracing a new innovative concept • Siemens set out to explore its potential • Despite a strong knowledge base and deep R&D, pockets of specialized information have become silo-ed within the company • A potential tool to help identify technology experts within Siemens First steps in Siemens Open Innovation Strategy Fox School of Business 4 PMBA - MIS 5402 Crowdsourcing of Ideas Partnering with Universities Founding of Start-ups Investment in Start-ups
  5. 5. • The realization that it has decentralized structure did not encourage cross- pollination of ideas • Barriers within the huge organization, hampering communication and flow of ideas • Too many “reinventing the wheel” occurences where two separate business units face the same R&D challenges by themselves • Competitive attitude between divisions lead to hoarding of knowledge • To tap into unrecognized diversity and capabilities of professionals and amateur solvers to crowdsource short and medium term projects What Problems Was Open Innovation Trying to Solve? Fox School of Business 5 PMBA - MIS 5402 “Wanted to overcome the barriers of silo thinking...” #Innovation Leader @Siemens Launches Innovation Gallery on #NineSights 10/6/2014 NineSights press release Dr. Thomas Lackner
  6. 6. Leadership Outlook - Senior Leadership & Board Fox School of Business 6 PMBA - MIS 5402 “This is a waste of our time and may damage our IP rights showing our rivals sensitive information & knowledge” “A number of highly innovative companies have indeed included innovation goals in the CEO’s balanced scorecard” Prof. Jean-Philippe Deschamps Senior Management Open Innovation CT Divion is already doing everything necessary in the innovation environment Regularly review and discuss the company’s innovation risk Establish specific innovation goals for management Include OI projects in-scope for audit testing in the bi- annual / annual risk assessment Product life cycles are becoming shorter. The board must focus our attention to OI as a means of collating knowledge from different departments. Siemens business is too complex for OI, and in these volatile times (2008) it seems a waste of money and energy Going forward with OI may disrupt our relationship with the Workers’ Council Development of a methodology to assess ROI on material OI projects Thoughts - Board Members Thoughts - Senior Management
  7. 7. The Global Financial Crisis of 2007-2008 • US stock market reaches an all-time high in October 2007 • Shortly thereafter, markets begin declining and initial signs of an impending crisis surface in the following months, through the beginning of 2008 • The subprime loans and credit default swaps crash of October 2008 leads to numerous bankruptcies of mortgage and investment banks and puts insurance companies on the brink of collapse • There is a subsequent world recession and global slowdown of economies A Brief Historical Perspective Fox School of Business 7 PMBA - MIS 5402 Siemens adoption of Open Innovation in FY 2008-09 • The years 2008-09, in the throes of a volatile and uncertain global economy, Siemens launches its Open Innovation initiative. • Given the frankly terrifying condition of the global economy, this is certainly a bold move, which required careful risk management and step-by-step development.
  8. 8. Other Success Stories of Open Innovation Fox School of Business 8 PMBA - MIS 5402 FirstBuild • FirstBuild backed by GE Appliances is a co-creation community that is changing the way products come to market • The community influences the product from the very beginning that helps to quickly deliver better products that improve the lives of our consumers • Invent a new world of home appliances by creating a socially engaged community of home enthusiasts, designers, engineers, and makers who share ideas, try them out, and build real products Current open innovation challenge Crowdsourced entries for the challenge
  9. 9. Other Success Stories of Open Innovation Fox School of Business 9 PMBA - MIS 5402 Samsung Accelerator • The Accelerator is part of the Samsung Global Innovation Center, which is dedicated to enabling entrepreneurs to thrive in all stages by providing access to Samsung resources, decision-makers, product roadmap, and the world’s largest platforms for distribution. • The Samsung Accelerator provides strategic capital, office space, operational and product support to seasoned entrepreneurs so they can build market-driven software and services. NASA's Open Innovation - Unlock The Future • Announcement of the new Technology Transfer Program • NASA to open up its patent portfolio with “no up-front payment” (meaning NASA waives the initial patent licensing fees, and there are no minimum fees for the first 3 years) • NASA will allow all manner of inventors, entrepreneurs, and tinkerers to start experimenting with NASA-owned IP.
  10. 10. Team insights • Open Innovation is more than a tool - it is an additional layer in a company’s overall strategy • It requires a centralized methodology to bridge between divisions and technologies • Seeking outside perspective reduces your risk and the cost of not doing anything, as seen previously in the case of Kodak • When adopting OI, senior leadership and the board must clearly indicate the mandate for aspects like multi- stage adoption, adapting company culture, managing exposure to the competition, considering external marketplace environment and many others. Summary and Thoughts Fox School of Business 10 PMBA - MIS 5402 Aspects to consider while implementing • What is the ROI of Open Innovation? Across divisions? How can you measure if sharing of ideas is actually contributing to your bottom line? • Designing metrics for Open Innovation within a large organization is a challenge - how do you measure success? How do you set smart KPIs which can be used across the company?
  11. 11. References Fox School of Business 11 PMBA - MIS 5402 Ades, Cely, Aline Figlioli, Roberto Sbragia, Geciane Porto, Guilherme Ary Plonski, and Kleber Celadon. "Implementing Open Innovation: The Case of Natura, IBM and Siemens." Journal of Technology Management & Innovation Journal of Technology Management & Innovation 8 (2013): 113-14. Journal of Technology Management & Innovation, 11 Feb. 2013. Web. 15 Apr. 2016. Lockhart, Campbell. "Open Innovation – An Integrated Tool in Siemens | Innovation Management." Innovation Management. N.p., 05 Sept. 2013. Web. 15 Apr. 2016. "Promoting Open Innovation." Siemens, n.d. Web. 15 Apr. 2016. “Open Innovation” n.d. Web. 15 Apr. 2016 “NASA Open Innovation Projects” n.d. Web. 17 Apr. 2016 Open Innovation Chesbrough, Henry “Business Model Innovation”