Future of Open Innovation by shiftN

17th Savory Flavor Conference

The Future of Open Innova1on

Geneva, February 17-18, 2011

Philippe Vandenbroeck, Partner, shi4N

A diverse landscape

Understanding the future of open innova;on

Apple's iPod > 300 million sold 70% market share in the US iTunes 1 billion USD Q4 2010 only 6 months development time !

Shiftn, ÂŠ2010 www.shiftn.com

Apple's iPod > 300 million sold 70% market share in the US iTunes 1 billion USD Q4 2010 only 6 months development time ! because Apple sourced in the idea from an outside consultant and assembled a team of 8 component technology partners to bring it to market Shiftn, ÂŠ2010 www.shiftn.com

Open Innova1on is not new

Cri1cal uncertain1es

"Open Innova1on is the use of Henry Chesbrough

purposive inﬂows and ou?lows of knowledge to accelerate internal innova;on, and expand the markets for external use of innova;on, respec;vely."

A diverse landscape •  Sourcing in external exper;se •  Collabora;ve innova;on •  Valorizing endogenous (dormant) IP •  User‐led innova;on •  Corporate venturing

A diverse landscape •  •  •  •  •

Sourcing in external exper;se Collabora;ve innova;on Valorizing endogenous IP User‐led innova;on Corporate venturing

A diverse landscape OI Mode

Goal

Locus

Capabilities

Sourcing in

Reduce costs, Speed to Market

End of stage-gated innovation process

Frame issues, Find expertise

Collaborative Innovation

Radical innovation, New business models

Fuzzy front end

Ecosystem mgt, IP regime design System integration

Valorizing endogenous IP

Increase revenues from existing assets

User-led innovation

Empower customers, Create brand loyalty

Modularization, identify application space Ideation, customisation

Crowdsourcing, Marketing

Anywhere

Scouting

Sourcing in exper1se

Tata Nano: only 34 patents Open Hardware Model

? 13

SOCIAL PRODUCT DEVELOPMENT "Together, we develop two new products every week. One could be anything; the other is based on a brief we provide you ... "

Wide scan: P&G Connect & Develop

Concluding •  Open Innova;on is designing the ﬂow of knowledge assets across company boundaries. •  Open Innova;on is not a monolithic prac;ce. •  Building an OI por?olio has to be anchored in a clear strategic vision. •  Deploying full spectrum OI entails a strategic 'upframing', away from product and technology layer to include service and business model innova;on. Enormous degrees of freedom! Shiftn, ©2010 www.shiftn.com

Drivers behind open innova1on

Fragmentation of IP

Eroding innovation model of majors

Job mobility

The spread of Open Innovation

the microprocessor paradigm asset liquidity and option density

from value chain to value constellations: innovative co-productive relationships

Shiftn, ÂŠ2010 www.shiftn.com

the microprocessor paradigm asset liquidity and option density

from value chain to value constellations: innovative co-productive relationships "It is the views in the minds of business people that are the greatest constraint, and the source of greatest opportuni;es today. There are no 'mature' businesses. There are only 'mature' frames of reference." Normann and Ramirez, 1994 Shiftn, ©2010 www.shiftn.com

Culture (NIHS)

Fragmentation of IP

Failing innovation model of majors

Job mobility

The spread of Open Innovation

The IP conundrum

Transaction costs

Elusive business case AGAINST 23

The IP conundrum

evolving partner‐ ships interna1onaliza1on heterogeneous partnerships

Secrecy or Transparency? Speed or Security? Generic or Flexibility? Cost or Opportunity Cost?

economic vola1lity Importance of intangibles Increasing speed of innova1on

Diﬀeren1ated suite of agreements and exit/divorce plans Clear but modular typology of knowledge assets Clear phasing of R&D process evolving partner‐ ships interna1onaliza1on heterogeneous partnerships

Secrecy or Transparency? Speed or Security? Generic or Flexibility? Cost or Opportunity Cost?

economic vola1lity Importance of intangibles Increasing speed of innova1on

Elusive Business Case Research Orienta-on

Belderbos et al. 2009 Data reflect technological ac;vi;es of 168 sample firms, 1996‐2003 R&D‐intensive European, US and Japanese firms in five industries

EXPLORATIVE

EXPLOITATIVE

Collabora;ve Innova;on, Insourcing

Valorizing dormant IP

SOLITARY COLLABORATIVE

•  "Contrary to our expecta;ons, it is collabora1on in explora1ve technological ac1vi1es, rather than collabora;on in exploita;ve technological ac;vi;es, that leads to a reduc1on in ﬁrm value." •  "These ﬁndings ques;on the relevance of open business models for technological ac;vi;es. In par;cular, they suggest that the poten1al advantages of collabora1on for (explora;ve) technological ac;vi;es (i.e. access to complementary knowledge from other partners, sharing of technological costs and risks) might not compensate for the poten1al disadvantages, such as the incurred increase in coordina;on costs and the need to share innova;on rewards across innova;on partners."

The Future of Open Innova1on

Cri1cal uncertain1es Driving forces Poli1cal Geopoli;cal security Extent of mul;‐polarity

Environmental Impact of climate change Scarcity of energy/raw materials Social Demographics Availability of human capital Acceptability of closed IP

Economic Intensity of global compe;;on Access to capital Technological: Economic surplus Emergence of new business models Informa;on security

Cri1cal uncertain1es Cri1cal Uncertain1es

Strategic agility of innovators

Low

High Intensity of exogenous pressures

A back‐of‐the‐envelope scenario framework

high strategic agility

moderate pressures

high pressures

Scenario framework Willingness/ability to embrace new business models, partnerships.

high strategic agility

moderate pressures

Pressing societal needs (health, climate), Expensive inputs, Tough global compe11on Low societal acceptance of closed IP

high pressures

4 thumbnail scenarios high strategic agility

Focus on time-to-market and flexibility Strong focus on 'user-embedded' technology Soft IP (licence of right) Highly diﬀerentiated innovation landscape Convergence on interoperability standards OI-oriented public procurement

Techno‐ hybridiza1on moderate pressures

high pressures

4 thumbnail scenarios high strategic agility

Techno‐ hybridiza1on moderate pressures

high pressures

Ac1vist OI

Open source/commons-oriented innovation Limits on patentability and copyright Erosion of IP base through hacking and theft State control of IP rights in strategic areas

4 thumbnail scenarios high strategic agility

Techno‐ hybridiza1on moderate pressures

high pressures

Big = beau1ful

Ac1vist OI

Business as usual: insourcing logic Incumbents dictate terms of semi-OI Patent-anchored hard IP

4 thumbnail scenarios Strong focus on user experience 'Blue Ocean' service/business model innovation Fluid value constellations Brands trump IP

high strategic agility

Blue Ocean

Techno‐ hybridiza1on

moderate pressures

high pressures

Big = beau1ful

Ac1vist OI

Concluding •  The future of Open Innova;on is an open future. •  The ques;on is not whether we can prove these scenarios true. The ques;on is: if they materialize, what does it mean for our innova;on model? •  Under the assump;ons studied, the dominant IP regime is very likely to undergo signiﬁcant changes. •  Very likely all of these forms of Open Innova;on will manifest themselves. In that sense the scenario framework cons;tutes a typology of forms of OI. •  The full poten;al of Open Innova;on can only be leveraged by those companies that are willing to innovate their business model. Shiftn, ©2010 www.shiftn.com

With best wishes for an insigh?ul 17th Savory Flavor Conference

Five func1ons of a business model •  Ar;culate the value proposi1on •  Iden;fy a market segment •  Deﬁne the structure of the value chain/ network and posi;on of company therein •  Iden;fy revenue genera1on mechanisms •  Formulate a bto hold advantage over rivals

Business models and IP Business model

Innovation process

IP management

Undiﬀerentiated

None

Diﬀerentiated

Ad hoc

Reactive

Segmented

Planned

Defensive

Externally aware

Externally supportive

Enabling asset

Integrated

Connected to business model

Financial asset

Adaptive

Identifies new business models

Strategic asset