Open Innovation: A Case Study within the Chemical Industry

1. Open Innovation: A Case Study within the Chemical Industry Rob Munro Opening Innovation: Succeeding within an Established Technology Company, 2012 rob_munro@yahoo.co.uk +44 7896 128 878

2. Contents • What? Key Open Innovation Ideas • Why? Benefits, Risks and Success Factors • How? Design of an Open Innovation System • Implementation of The OI System • High Innovation Performance: The “X Factor” • Summary and Conclusions

3. Preconceptions? • What do you understand Open Innovation to be? • What would you like to know/understand about OI?

4. Many Examples

5. Key Ideas: The Origins of Open Innovation

6. Key OI Ideas: Origins

7. Key OI Ideas: Definitions The knowledge-basedview… “Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation respectively.” Vanhaverbeke, West, & Chesbrough, (2006) The knowledge management angle… “Systematically exploring knowledge exploration, retention and exploitation inside and outside an organizations boundary throughout the innovation process.” U. Lichtenthaler, (2011) Capabilities focus… “…systematically encouraging and exploring a wide range of internal and external sources for innovation opportunities, consciously integrating that within the firm’s capabilities…” West & Gallagher, (2004)

8. Key OI Ideas: Closed v Open Innovation as a Continuum? Specifications Contracts Go to Market Vertical Integration Equity Alliance Relation-Based Alliance The Era of Open Innovation, (Chesbrough, 2003b)

9. Key OI Ideas: Porous Boundaries “Coupled” Inside-Out Outside-In Representation of OI, (Herzog 2011:23)

10. Why Open Innovation? Drivers • Ubiquity of Information – porosity and availability. • Mobility of Skilled Employees. • New sources of investment capital - e.g. VC • Globalization of Innovation – Locations, Cost, Quality. • Trend to R&D outsourcing – Cost, Quality. • Integration of users and suppliers into the innovation process. • To access resources, knowledge, facilities, market access. • To dominate an industry product standard.

11. Key ideas: Benefits, Risks and Success Factors

12. Why Open Innovation? Benefits • Innovation Performance: • To increase product, process and service innovation performance. • To discover combinations of products features that would be hard to envision under vertical integration. • Innovate faster and to self-disrupt. • Financial Performance: • Determined Open innovators outperform all others. • Out-licencing– revenue from latent IPR. • Establishing New Ventures away from the heartland markets. • Strategic Fitness: Flexibility and responsiveness to market pressures. • Societal Benefits: Ultimately, better performing firms benefit society at large through improved wealth creation. • Risk Management: OI projects share the risks and costs of uncertainty.

13. Why Open Innovation? Risks • IP: Loss of the “crown jewels”. • Losing Revenue:Judging a fair shares of future revenues. • Management Ability:New management challenge. • Higher Costs: Transaction costs in managing contracts and opportunistic behaviours.

14. Why Open Innovation? Success • Firm Context: Size, Sector, Strategies, Staff • Innovation Management: In-house R&D Processes • Capability: Readiness to Embark (CMM) • Leadership and Governance • When to do OI • To access skills, knowledge, resources, markets • When firms can appropriate their fair share • Particularly for modular systems

15. Key idea: The Open Innovation Ecosystem

16. The OI Ecosystem: Key Ideas • Systems Thinking, (Peter Senge, 1990) • Elements and Activities • Foresight workshops, Executive Forums, Customer integration, Endowed chairs, Consortia projects, Internet platforms, Joint development, Strategic alliances, Spin-outs, Test Market, Corporate Venturing… “…working cooperatively and competitively with other businesses in order to co-evolve capabilities, to support new products, satisfy customer needs and incorporate a new round of innovations, the company builds a business ecosystem.” (Moore cited in Rohrbeck et al. (2009). • Ref: Methodologies for OI Management, (Rohrbeck et al., 2009)

17. Case Study: An OI Eco-system

18. The OI Eco-System

19. Implementing Open Innovation: Change Management

20. Implementing OI: The Issues • Organizational Inertia • Absence of Burning Platforms • Cultural Resistance • Perception of OI as a Fad • Not Invented Here Syndrome • Establishing new Routines • Not destroying the Good, with the Bad • Investment of resources

21. Implementing OI: Good Practice • Top-Level Commitment • Leadership and Governance • Manage the Change • Integrating Innovation Practices • Working within the Culture • Visible, “Quick Wins”

22. Implementing OI: Approach Ref: Summary of OI Implementation, (Chiaroni et al., 2010)

23. Key IDEAS: OI is Necessary but not Sufficient?

24. High Innovation Performance More-than-the-sum-of-the-parts… Ref: Components of a High Performance Innovation System, (Sommerlatte 2010:83)

25. Summary and Conclusions

26. Summary and Conclusions • OI has become a widespread management paradigm • Open innovation is not always superior to closed - contingent on firm-specific factors • OI is necessary, but not sufficient • A Systemic approach is required • Change Management is essential - New role for R&D

27. Open Innovation: A Case Study within the Chemical Industry Rob Munro Opening Innovation: Succeeding within an Established Technology Company, 2012 rob_munro@yahoo.co.uk +44 7896 128 878