February 2014

Organic Innovation, Open Innovation, Intellectual Property, & CXO Corporate Metrics Practices, July 23, 2013, describes primary research that GGI was conducting in 2013.  We have now concluded the research period and are currently analyzing the results.  Here we address a piece of what we found on the subject of Open Innovation [OI].

Product developers have been practicing “make vs. buy” analysis for decades.   Typically, the focus is on  whether to outsource the manufacture of components or subassemblies that have already been designed and developed in-house.  Since the early 2000s and the publishing of “Open Business Models:  How to Thrive in the New Innovation Economy” by Henry Chesborough, the make vs. buy considerations have been moving upstream into design and development activities.  This is what industry now refers to as “Open Innovation [OI].”  Should our company invent a needed new product feature or capability, or has another company already done it?  Can we acquire it or license it if something already exists that meets our needs?  Is partnering or allying with the company our best alternative if what they have is close but does not exactly (yet) meet our needs?  Or, should we put the investment in and incur the likely time-to-market penalty for doing it all ourselves from scratch?  What is the best way to achieve our design intent?

Many companies are beginning to wade into the waters of OI.  Clearly there are mixed results across industries in this early market.  Only Procter & Gamble has publically touted their financial successes via more open approaches.  As of now, the infrastructure within companies enabling scientists and engineers to quickly locate appropriate alliances or find ready to go plug and play solutions is still in the nascent stages. The train is on the tracks however.

Like any new market opportunity, demand has to reach a certain level before suppliers invest to develop a solution.  And, like any new market, different suppliers will offer different solutions.  For OI, the evolving offerings range from making it easier to access university-based research and prototyping to bartering intermediaries to outright brokers who attempt to put buyers and sellers of solutions together.

The OI categories that our research focused on are:

• Crowdcasting/Crowdsourcing
• Scouting Firms
• Venture Capital and Entrepreneur Forums
• Innovation Intermediary Firms
• Private Industry Consortia Groups
• Private Industry Business Portals
• Targeted Proprietary Networks
• University Contract Agreements
• Supplier Co-Development
• Non-Competitor Joint Ventures
• Competitor Joint Ventures
• Intellectual Property Auctions
• Focused IP Search/Purchase/License

Certainly the number of different OI approaches will grow over time.  As well, some of the current categories will become more refined and be described as similar but differentiable approaches in the future.  For instance, “Innovation Intermediary Firms” will likely evolve to those that specialize in identifying companies with components that already have part numbers versus identifying companies that just have intellectual property rights but have not yet developed part numbered components.  Boutique intermediaries may specialize in one area and full service intermediaries will eventually provide one stop shopping.

What is for sure is that the demand for OI has achieved critical mass over the past decade and a new industry to service this demand is actively developing.  The advent of social media was not without resistance.  It had to overcome inculturated values dating back to the Pony Express in the 1800s.  NIH also has deeply seated values, but these too will be overcome in the years ahead.

R U an Open Innovator [Machine Design – March 6, 2014], summarizes selected findings in the area of Open Innovation from GGI’s 2013 primary research initiative.  GGi’s final report containing our complete findings is soon to be available.