Organizational Structure Running A Successful Business
Henry Chesbrough - Open Innovation Seminar 2009 - Brazil
1. Open Innovation:
A New Approach to Industrial R&D
Henry Chesbrough
Realização: Open Patrocínio Oficial e
Innovation Center - Brasil Colaboração: Allagi –
Open Innovation Services
São Paulo, Brasil
22/10/2009
2. Open Innovation:
A New Approach to Industrial R&D
Presentation to Open Innovation Conference
Sao Paolo, Brazil
Henry Chesbrough
Center for Open Innovation
UC Berkeley
October 22, 2009
3. The Current Paradigm:
A Closed Innovation System
Science
& The
Technology Market
Base
Research Development New Products
Investigations /Services
R D
3
4. Xerox’s
Xerox’s Business Model,
and Project Evaluation Errors
Designed to minimize “false positive” errors
Ignores risk of “false negative” errors 4
5. Chess
• Plan several
moves ahead
• No new
information
needed
• You know what
you and your
opponent have
5
6. Poker
• Pay to play
• Pay for new
information
• Discover what
other players and
you have
6
8. The Open Innovation Paradigm
Other Firm’s
Licensing Market
Technology Spin-offs New
Internal
Market
Technology
Base
Current
External Market
Technology
Base
Technology Insourcing
R D 8
9. Open innovation in practise
License in
Spin in
Acquire
Divest
Spin out
License out
“The creation of new businesses is a highly dynamic process,
best represented as a horizontal funnel” (passed in iterative
steps)
Robert Kirscbaum, DSM: Research & Technology management, July – August 2005
9 C 2002 Henry Chesbrough EIRMA SIG III, 2005-10-20
10. Open Innovation
Other firm´s
market
License, spin Our new
out, divest market
Internal
technology base
Internal/external Our current
venture handling market
External technology
insourcing
External technology base
Stolen with pride from Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from
Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27, 2004
11. 2003: We broke up the fortress …
Philips Research,Ronald Wolf, 10/08
12. Bringing in the right partners – Open innovation
> 75 companies and
> 7000 people at
High Tech Campus Eindhoven
Corporate Research
innovators institutes
Consultancy Economic
& services development
companies
Philips Research,Ronald Wolf, 10/08 12
13. Venturing timescale longer: keep it apart from business
Consumer Lifestyle
Consumer Lifestyle
Healthcare
Lighting
Philips Research,Ronald Wolf, 10/08
14. The expansion of the corporate funnel
Insourced
Ideas /Technology Spin in
ODM Start ups
IP insourcing OEM Acquisitions
Incubators Spin out
Alliances IP Licensing
Front – end Development Commercialization
Philips Research,Ronald Wolf, 10/08
15. BP’s challenge in February 2006
• Energy Bioscience looked promising (Senior Executive buy-in)
• How do we meld commercial/technology strength with
biology/biotech?
− The company had no bio-expertise
• How to reach out to biology/biotech communities
− Not a corporate lab!
− Corporate labs too insular – can’t tap broader expertise in a
rapidly moving field
− Where was the Energy/Bio talent pool anyway?
− Not the usual university research programme
− BP does many of these and knows strengths/weaknesses
− Need to facilitate the development, demonstration, and
commercialization of research results
15
16. Funding for Open and Proprietary Components
$50M/yr
A imagem não pode ser exibida. Talv ez o computador não tenha memória suficiente para abrir a imagem ou talv ez ela esteja corrompida. Reinicie o computador e abra o arquiv o nov amente. Se ainda assim aparecer o x v ermelho, poderá ser necessário excluir a imagem e inseri-la nov amente.
A imagem não pode ser exibida. Talv ez o computador não tenha memória suficiente para abrir a imagem ou talv ez ela esteja corrompida. Reinicie o computador e abra o arquiv o nov amente. Se ainda assim aparecer o x v ermelho, poderá ser necessário excluir a imagem e inseri-la nov amente.
A imagem não pode ser exibida. Talv ez o computador não tenha memória suficiente para abrir a imagem ou talv ez ela esteja corrompida. Reinicie o computador e abra o arquiv o nov amente. Se ainda assim A imagem não pode ser exibida. Talv ez o computador não tenha memória suficiente para abrir a imagem ou talv ez ela esteja corrompida. Reinicie o computador e abra o arquiv o nov amente. Se ainda assim aparecer o x v ermelho, poderá ser necessário excluir a imagem e inseri-la nov amente.
aparecer o x v ermelho, poderá ser necessário excluir a imagem e inseri-la nov amente.
UC Berkeley BP
Host Institution Proprietary Component
$35M/yr contracts
subcontracts
A imagem não pode ser exibida. Talv ez o computador não tenha memória suficiente para abrir a imagem ou talv ez ela esteja corrompida. Reinicie o computador e abra o arquiv o nov amente. Se ainda assim aparecer o x
v ermelho, poderá ser necessário excluir a imagem e inseri-la nov amente.
Other contracts
subcontracts
A imagem não pode ser exibida. Talv ez o computador não tenha memória suficiente para abrir a imagem ou talv ez ela esteja corrompida. Reinicie o computador e abra o arquiv o nov amente. Se ainda assim aparecer o x v ermelho, poderá ser necessário excluir a
imagem e inseri-la nov amente.
Lawrence Berkeley BP Components
National Laboratory A imagem não pode ser exibida. Talv ez o computador não tenha memória suficiente para abrir a imagem ou talv ez ela esteja corrompida. Reinicie o computador e abra o arquiv o nov amente. Se
ainda assim aparecer o x v ermelho, poderá ser necessário excluir a imagem e inseri-la nov amente.
Other
$15M/yr
A imagem não pode ser exibida. Talv ez o computador não tenha memória suficiente para abrir a imagem ou talv ez ela esteja corrompida. Reinicie o computador e abra o arquiv o nov amente. Se ainda assim aparecer o x v ermelho, poderá ser necessário excluir a
imagem e inseri-la nov amente.
University of Illinois Entities
Urbana-Champaign
ENERGY BIOSCIENCES INSTITUTE (EBI) BP R&T
OPEN RESEARCH PROPRIETARY RESEARCH
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17. Licensing provisions
For inventions solely owned by UCB, UIUC and/or LBNL
NON-EXCLUSIVE EXCLUSIVE
Non-exclusive, royal free (NERF) BP may obtain exclusive license
license in BP’s area of interest, rights to sole or joint inventions.
providing:
- pre-negotiated capped fees
- BP will diligently pursue
commercialization - “Bonanza clause” in case of
extraordinary commercial
- BP will underwrite the patent success
costs
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21. Intel & Open Innovation
Other Firm’s
Market
LANDesk
Internal New
Market
Technology
Base
Current
External Market
Technology Intel
Base Capital Acq’ns
Universities
Technology Insourcing
R D 21
22. 9 months!
9 months!
9 months!
9 months!
The iPod
Faddell
Tony
23. Not Just for High Tech:
Procter & Gamble Other Firm’s
Market
“Use it or Lose it”
Internal New
Market
Technology
Base
Current
External Market
Technology
Venture Large
Base Acquisitions Acquisitions
Technology
“Spinbrush” “Gillette”
Scouts
R D 23
24. An Iberian Example: El Bulli
• Ferran Adria studies molecular gastronomy, working
with Herve This, a French physical chemist
• Adria brings this to El Bulli, restaurant is the Lab
• Adria launches many business experiments
• Borges: oils, snacks
• Lavassa: coffee
• N H Hoteles: FastGood, Nhube
• Iberian Airlines (with FastGood)
• Careful not to dilute the El Bulli brand
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28. Is the internal R&D department
an antiquated concept?
• No – open innovation can leverage internal R&D
• But…..
• New focus: must look outside as well as inside
• New role: connecting to and collaborating with the
outside
• New skill: integrating internal and external together
28
29. How do companies gain access to the right
competences at the right point in the
innovation process?
Want
Find
Get
Manage
29
30. How do companies gain access to the right competences
at the right point in the innovation process?
What is our “shopping list”?
Want
Where will we find these resources?
Find
How will we access the resources? How
Get do we structure the agreement?
How will we manage these resources,
Manage once we have signed the agreement?
Sources: Hoffman-Laroche; Slowinski and Segal, 2003
31. Building Your Shopping List
Start with your product road map
Identify the gaps, missing pieces, and open spaces to be explored
Define the external relationships needed to support the business
strategy
Whom are we targeting (type of partners)?
Are we collaborating on or outsourcing (value chain module)?
How deep does our relationship need to be?
Share across internal organizations. They will need to work with
external innovation partners too!
32. Let’s Focus our Discussion a Bit—WGFM Model Applied to Co-
Development
What is our “shopping list”?
Want Open Innovation
Strategy
Where will we find these resources?
Find External Partner
Identification
How will we access the resources? How
Get do we structure the agreement? Structuring the
Relationship
How will we manage these resources,
Manage once we have signed the agreement?
Relationship
Management
34. Innovation Intermediaries: A great transaction resource
Intermediary
(Company) Focus Primary Function
InnoCentive Online exchange portal Marketplace for technology
transfer/agent
NineSigma E-mail RFPs Agent
Big Idea Group Concept developer Agent/codeveloper
Yet2.com Technology exchange Online marketplace /
technolgoy licensing
Accelovation Linguistic-based Internet Search engine
research
InnovationXchange Membership-based Broker
innovation community
Shanghai Silicon IP Repository for legally Broker
Exchange obtained semiconductor IP
Ocean Tomo IP merchant banker Market maker
Source: Open Business Models, Henry Chesbrough, 2006
35. Relationships Require Consideration of Both Parties
Cisco’s Critical Partner Evaluation Criteria
1. Short-term returns for both companies
Don’t try to “boil the ocean”
2. Clearly defined long-term potential for both companies
Collaboration “set-up costs” are too great for merely a quick win
3. Shared vision of technology and market developments
Agree on “where the world is headed”
4. Shared destiny of cooperation, not competition
Supports openness with technical information and sharing of intellectual
property
Source: “Model of Co-Development Emerges”; Deck and Strom, Research * Technology Management, May–June 2002
36. Let’s Focus our Discussion a Bit—WGFM Model Applied to Co-
Development
What is our “shopping list”?
Want Open Innovation
Strategy
Where will we find these resources?
Find External Partner
Identification
How will we access the resources? How
Get do we structure the agreement? Structuring the
Relationship
How will we manage these resources,
Manage once we have signed the agreement?
Relationship
Management
37. Business Contract and the JDA—Tools for “Get”
The Joint Development Framework helps to structure the relationship
Global Relationship Focus
Project Operational Focus
Business Contract
Structures the ongoing Joint Development
relationship Agreement (JDA)
Developed and negotiated by Structures specific projects
senior management Developed by the ones who will
Legally binding and establishes use it
liabilities Provides operational flexibility
Sets intellectual property rights Defines development
responsibilities, schedules,
Scopes boundaries under milestones, and deliverables
which multiple JDAs can be
written Focuses on how the relationship
will work (e.g., communication,
Supersedes the JDA when issue resolution, project reviews)
discrepancies arise
41. Great Partners Work Seamlessly Along
“Want, Find, Get, and Manage”
Find
Want Get
Manage
Negotiates high quality
agreements – rapidly, two
way link to strategy
Fast efficient
Targeted,
due diligence,
Receptive & Execute Seamlessly
valuable to
Proactive Builds a Multi-Project, High Value Relationship
the partner
Deliver Marketplace Results
Overall: Expeditious, Trustworthy, Capable
Copyright 2006; PRTM and Alliance Management Group, Inc.
49. Photo Credits
Flickr: Chess/Fox, Tuesday Night Poker/Rambis, Ryan
Air/ezreenphotography, Ryan Air New Boeing 787
Colours/macrodebs, 332/265/Digg Pirate, The bus
shelter at the edge of the ocean/goddess_spiral, Flickr
treo ad/Steve Rhodes, Technology - "Future
Vision“/$ydney
iStockphoto: 000003004014, 000003062424, 000004293861,
000007135639, 000005589058, 000000718722
iPod photo: http://www.apple.com/ipodclassic/
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