By Roland Harwood, Co-founder of 100%Open
Roland Harwood, co-founder of 100%Open, the new open innovation agency spun out of NESTA, talks to AngelNews about Open Innovation in the UK in 2010.
Here at AngelNews we are convinced that a major platform for economic recovery will come from sustained engagement between very large corporates and their SME siblings. There are manifold ways that this engagement can take place, but one of the most interesting strategies is around the area of Open Innovation (“OI”) where such engagement is not just in the form of an acquisition of the small by the large, a licensing agreement or even in the form of a supplier/customer relationship, but in a more comprehensive way where the collaboration can be formed in a way that 1+1=3. OI is less about the legal structures or initiatives used for collaboration, but more about the attitude and approach to reaching a point where these are applied. Open Innovation was a term conceived by Henry Chesbrough at the Centre for Open Innovation at UC Berkeley in his book Open Innovation: The new imperative for creating and profiting from technology. It defines the paradigm where firms of all types should use external ideas alongside internal ones to develop their businesses, and should use internal and external paths to market to exploit their intellectual property, particularly in the context of technology. Both P&G and IBM have been at the forefront of OI and tend to be the corporates cited in any discussion about topic, but in reality there is now an industry developing around the whole theme. An increasing number of corporates are engaging at some level with OI, whilst a number of businesses are setting up as intermediaries serving them from the US, through Western Europe and into India. And where intermediaries see a business opportunity, there is surely money to be made for everyone! We caught up with Roland Harwood, the head of recent NESTA spin-out 100% Open www.100open.com a boutique advisory firm focusing on providing advice in the Open Innovation arena, to hear what he thinks about the Open Innovation agenda in the UK today.
Why did you do the spin-out Roland?
My point of view is that OI is becoming a mainstream business strategy. Everyone is talking about it and from what I can see no-one knows quite how to do it; there are major issues to be addressed, especially around managing intellectual property and structuring mutually beneficial business models. There are multiple strategies being adopted and it is all complicated — even for the initiated. This means there is an opportunity for an independent group to provide advice and support.
Why is OI becoming mainstream?
OI is all about doing things faster, better and cheaper. It is about large companies recognising that all the smart people do not work for them, and that to tap into the smart people who do not work for you, but may be in a smaller creative organisation, you need to find a way to make it work for them too. Meanwhile, small companies with great technology face real challenges in rapidly scaling their technologies on an international platform. The great example set by P&G is leading other organisations to jump on the bandwagon.
How is OI manifesting itself in the UK?
Corporates are increasingly finding that this is a main board level issue. The directive to engage in OI usually comes from the highest level — usually the CEO and/or the main board. They are directing middle managers to find a way to make it work, who in turn are doing everything from crowd-sourcing to competitions and co-creation workshops. Much of it is experimental and the business models are only beginning to emerge. The movement has been accelerated by the downturn and will continue to be encouraged by public sector spending cuts. In time, I suspect it will end up with large corporates taking a much more networked approach, with their role becoming one of network facilitator and co-ordinator. Meanwhile SMEs will work hard to build their brand value in these networks. There are signs of investors also beginning to play a role — a good example is the annual London Technology Fund competition. The only certainty is that everyone is going to have to work very hard to deliver the results from the opportunities that democratization of innovation will bring.
Give us an example of how a large corporate has engaged with OI...
A nice example which we worked on was a project for the telecommunications company, Orange. Orange’s board set open innovation as a top strategic priority. They developed a plan that would look for low-hanging fruit, particularly in the area of growing the audience in online mobile.
Orange was looking for big ideas in this arena. It defined big as an idea that could generate €30m in revenue, especially in the area of call and reward services. Orange did a large scale trial project, which uncovered six new small companies which Orange entered into negotiations with!
What is the biggest challenge in OI?
The nub is the lack of trust between large and small companies. They don’t trust each other. Small companies do not believe that they won’t be exploited and large companies do not believe that small companies will be able to deliver on a grand scale. That creates an opportunity for 100% Open. In reality small companies only have one chance to make a first impression with a large corporate and it is vital that they get it right. There are loads of good small companies but they need help to develop their propositions to suit the large corporate’s needs. This is not just in the proposition they make on the day, but having everything else in order — including their own IP protection. As most small companies will not have done this before the role that the right intermediary can play is vital. The intermediary needs to understand intimately what the target large corporate wants. We have created an “IP airlock” that opens up a communications channel between large and small firms that did not previously exist. We think the wider challenge is about how the innovation ecosystem is going to be wired up. This is a big area for discussion and we want to be at the centre of the debate.
What facet of big business is driving the interest in OI?
There is a lot of interest from large corporates in getting more out of your customer relationships, whether you are talking about Virgin or Tesco, both of whom are very interested in what OI might be able to bring. We think the next manifestation of this interest will be large corporates organising “jams” around key future themes such as air travel or online retailing. Relevant targeted people will be invited to join the jam, particularly from segments of the customer base with the purpose of unearthing the unmet needs they have and using the insight to develop solutions on the day or start innovation projects on the back of it. These jams are focused on and offline collaborative environments, where the aim is to spark productive conversations and turn these into collaborative ventures. In fact I think they are one of the most forward thinking interpretations of OI — getting the customers in before you have even decided what you think they might want — now that is a manifestation of co-ownership of a concept.
How does a committed OI company operate?
The most advanced OI corporates take a mature balanced portfolio approach with a clear focus of rapidly accelerating the commercialisation process. The core rationale is that when it works it is a much cheaper way of innovating. The challenge is keeping the right level of relationship at each stage with smaller partners. There is no point in running a scheme project or strategy to get one big win, if in doing so, you get 99 furious businesses who feel that they have not been treated fairly prior to rejection. So you need to be very consistent, have a very clear communications policy and have a process that the market in which your target partners like and respect. Failing to do this leads to a backlash and bad karma which can have serious ramifications, not least if some of your partners are also your customers. The best really invest in OI — they try to avoid being too narrow and too specific, but still be clear enough that people know what you want. Small and medium enterprises (SME's) who want to engage with OI need to recognise that they don’t know what they don’t know and will need to learn as they go along.
Is there a particular example of an OI company that you admire?
IBM and P&G are undoubtedly ahead of the game, I admire that and they continue to develop their OI strategies. This should keep them leading the pack. My particular favourite currently is the Applied Technology Division at Mclaren. Its sole purpose is to build new markets and because it has been so focused it has already seen a lot of success. Its “googletime” approach to exploring new opportunities is unique in its sector. And the success stories are interesting not only because they have created new and real business opportunities, but because they really have done some good. We have worked with them on a $bn potential new product in air traffic control, which NATS is already using to manage planes at major airports. And it has also worked with Great Ormond Street hospital to apply the learnings from managing activity in a pit stop — to movement of dangerously ill patients from A&E to intensive care. Mclaren would never have achieved success in such diverse projects if it had just been something they did when they had a bit of slack time.
Any lessons for Government?
Government could be doing a lot more in terms of supporting OI, but not by interfering. They need to support those who want to fill the vacuums in routes to market and one way would be to create a more agile IP regime so that SMEs have better bargaining power.
Today IP protection is still stacked in favour of large companies with big budgets. The next big opportunity will come, I am certain, through a lateral connection between one industry and another. Government needs to make sure it is not in the way to prevent that connection from being made. It has a real chance to benefit from OI itself — if it can develop a mentality of being a partner or even a customer of an SME (Small and Medium Enterprises) rather than a source of subsidised cash for the equity gap, it will get a long way to achieving this aim.
And any lessons for everyone?
Yes. Don’t be exploitative — you can’t run away from your reputation so if you try to get something for nothing, it’ll come back and bite you. If you would like to contact Roland, you can contact him on roland@100Open.com or visit the 100%Open website for more information: www.100open.com
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