Accelerating Corporate Innovation

Corporate discussions around innovation often come in two parts. “We need to develop innovative products to beat competition,” followed by “true innovation is so costly and difficult to achieve.’  Is there a way to become more effective and efficient? 

One increasingly popular way is to open up your innovation process to external input and collaboration.  An Open Innovation model integrates a firm’s corporate R&D process with universities, start-ups, inventors, government and suppliers, creating a federated model of research, testing and collaboration.  In essence, corporations solicit and scour the work of scientists and organizations, both inside and outside their industry, for clever intellectual property (IP) they can use and reapply.   Once focused exclusively on cultivating homegrown IP, many corporate labs have now become surveyors, coordinators and integrators within an innovation ecosystem they created.

Many global developments have propelled this change including falling communication costs and the emergence of new collaboration technologies and networks.  As well, the pace of technological change in R&D intensive industries has quickened, driving up the costs, risks and difficulties of centralized and large-scale R&D.  Today, many firms (especially medium-size ones) have little choice but to collaborate if they want to stay in the forefront of product and process innovation. 

Some of America’s largest corporations have embraced open innovation including GE, Eli Lilly, HP and IBM.  One of the pioneers, P&G, launched its Connect & Develop initiative to improve the efficiency and effectiveness of its corporate R&D spending.  So far, results have been impressive.

The benefits of this strategy are considerable including lower R&D costs, reduced project risk, tighter integration with suppliers and quicker adoption of better technology.  However, there are some drawbacks to an open approach.  Coordinating and integrating IP is often messy.  Many scientists and managers are often reluctant to share their ideas, especially when they fear losing resources and control.  Finally, potential cost savings often evaporate when the firm has to pay high licensing and royalty fees to the inventor.

While the notion of collaboration is not new, the mandate, scope and transparency of the effort has increased. Open innovators have found a myriad of ways to link externally including: sponsoring scientific or granting contests; creating joint ventures with complementary non-profit labs;  participating in IP exchanges and; subsidizing university research.  Mundane but effective, P&G sends its product developers to trade shows and venture capital fairs as well as combing through patent filings.

The jury is still our about whether this innovation strategy is better than the alternative for most companies.  However, no organization, team or country can monopolise  innovation so an open approach is likely to be more productive and efficient.

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