Analysis of open innovation at Siemens

1. Why did Siemens create an open innovation initiative?
What perceived problems was the initiative trying to solve?
What question or mandate would you imagine coming from senior leadership?
Parminder Bindra
Parag Deshpande
Samuel Katz
Cliff Klett
Ittai Marom
Open Innovation Strategy

2. Executive Summary - Open Innovation at Siemens
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• Global giant: 300,000+ employees with a global footprint in various industries
• Traditionally a first-mover, or fast-follower, at the very least
• Decentralized structure caused silo-ing and poor cross-company communication
• Open Innovation was an experiment to discover new ways to innovate
• Initial intention of breaking down internal walls and identifying internal experts
• Eventually shifted out in collaborations with universities and existing web services
• Siemens case study demonstrates that Open Innovation has its pros and cons
• What’s the opinion about Open Innovation in business today?
• Perspectives of senior leadership and the board might not align at all times
• Siemens is an example of a meticulous, risk-averse, step-by-step integration of Open Innovation into a
company’s overall strategy
BACKGROUNDANALYSISINSIGHTS

3. • Open Innovation can be viewed as outsourcing problem-solving and
idea generation by employing crowdsourcing strategies in the “flat”
world of 21st century
• Enables an organization to leverage cross-sector collaboration
through corporate labs, and cooperation with universities, research
centers, and suppliers and customers
What is Open Innovation (OI)?
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Advantages
• Allows you to think outside the box and break
free from old misconceptions
• Reduces cost of conducting research
• Incorporation of customers early in the
development process
Disadvantages
• Risk of exposing a firm’s intellectual property
• May be viewed as disrupting the firm’s culture
• Subject Matter Experts and R&D personnel
within the company may feel threatened with
the influx of new product ideas
Open Innovation Funnel

4. Why did Siemens adopt open innovation?
• Siemens traditionally set industry trends, focused on being a first mover
• Fast-following after competition was also accepted
• By launching the Open Innovation initiative, Siemens was simply
continuing to do what it had always done: innovate, this time by
embracing a new innovative concept
• Siemens set out to explore its potential
• Despite a strong knowledge base and deep R&D, pockets of specialized
information have become silo-ed within the company
• A potential tool to help identify technology experts within Siemens
First steps in Siemens Open Innovation Strategy
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Crowdsourcing of Ideas
Partnering with
Universities
Founding of
Start-ups
Investment in
Start-ups

5. • The realization that it has decentralized structure did not encourage cross-
pollination of ideas
• Barriers within the huge organization, hampering communication and flow
of ideas
• Too many “reinventing the wheel” occurences where two separate
business units face the same R&D challenges by themselves
• Competitive attitude between divisions lead to hoarding of knowledge
• To tap into unrecognized diversity and capabilities of professionals and
amateur solvers to crowdsource short and medium term projects
What Problems Was Open Innovation Trying to Solve?
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“Wanted to overcome
the barriers of silo
thinking...”
#Innovation Leader
@Siemens Launches
Innovation Gallery on
#NineSights
10/6/2014 NineSights
press release
Dr. Thomas Lackner

6. Leadership Outlook - Senior Leadership & Board
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“This is a waste of our time
and may damage our IP rights
showing our rivals sensitive
information & knowledge”
“A number of highly
innovative companies have
indeed included innovation
goals in the CEO’s balanced
scorecard”
Prof. Jean-Philippe Deschamps
Senior Management
Open
Innovation
CT Divion is already doing
everything necessary in the
innovation environment
Regularly review and discuss the
company’s innovation risk
Establish specific innovation
goals for management
Include OI projects
in-scope for audit
testing in the bi-
annual / annual
risk assessment
Product life cycles are
becoming shorter. The board
must focus our attention to
OI as a means of collating
knowledge from different
departments.
Siemens business is too
complex for OI, and in
these volatile times
(2008) it seems a waste
of money and energy
Going forward with
OI may disrupt our
relationship with
the Workers’
Council
Development of a
methodology to
assess ROI on
material OI projects
Thoughts -
Board
Members
Thoughts -
Senior
Management

7. The Global Financial Crisis of 2007-2008
• US stock market reaches an all-time high in October 2007
• Shortly thereafter, markets begin declining and initial signs of an impending crisis surface in
the following months, through the beginning of 2008
• The subprime loans and credit default swaps crash of October 2008 leads to numerous
bankruptcies of mortgage and investment banks and puts insurance companies on the brink of
collapse
• There is a subsequent world recession and global slowdown of economies
A Brief Historical Perspective
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Siemens adoption of Open Innovation in FY 2008-09
• The years 2008-09, in the throes of a volatile and uncertain global economy, Siemens launches
its Open Innovation initiative.
• Given the frankly terrifying condition of the global economy, this is certainly a bold move,
which required careful risk management and step-by-step development.

8. Other Success Stories of Open Innovation
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FirstBuild
• FirstBuild backed by GE Appliances is a co-creation community
that is changing the way products come to market
• The community influences the product from the very beginning
that helps to quickly deliver better products that improve the lives
of our consumers
• Invent a new world of home appliances by creating a socially
engaged community of home enthusiasts, designers, engineers,
and makers who share ideas, try them out, and build real products
Current open innovation challenge
Crowdsourced entries
for the challenge

9. Other Success Stories of Open Innovation
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Samsung Accelerator
• The Accelerator is part of the Samsung Global Innovation
Center, which is dedicated to enabling entrepreneurs to
thrive in all stages by providing access to Samsung
resources, decision-makers, product roadmap, and the
world’s largest platforms for distribution.
• The Samsung Accelerator provides strategic capital, office
space, operational and product support to seasoned
entrepreneurs so they can build market-driven software and
services.
NASA's Open Innovation - Unlock The Future
• Announcement of the new Technology Transfer Program
• NASA to open up its patent portfolio with “no up-front
payment” (meaning NASA waives the initial patent licensing
fees, and there are no minimum fees for the first 3 years)
• NASA will allow all manner of inventors, entrepreneurs, and
tinkerers to start experimenting with NASA-owned IP.

10. Team insights
• Open Innovation is more than a tool - it is an additional layer in a company’s overall strategy
• It requires a centralized methodology to bridge between divisions and technologies
• Seeking outside perspective reduces your risk and the cost of not doing anything, as seen previously in the
case of Kodak
• When adopting OI, senior leadership and the board must clearly indicate the mandate for aspects like multi-
stage adoption, adapting company culture, managing exposure to the competition, considering external
marketplace environment and many others.
Summary and Thoughts
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Aspects to consider while implementing
• What is the ROI of Open Innovation? Across divisions? How can you measure if sharing of ideas is actually
contributing to your bottom line?
• Designing metrics for Open Innovation within a large organization is a challenge - how do you measure
success? How do you set smart KPIs which can be used across the company?

11. References
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Ades, Cely, Aline Figlioli, Roberto Sbragia, Geciane Porto, Guilherme Ary Plonski, and Kleber Celadon. "Implementing Open Innovation: The Case of Natura, IBM
and Siemens." Journal of Technology Management & Innovation Journal of Technology Management & Innovation 8 (2013): 113-14. Journal of Technology
Management & Innovation, 11 Feb. 2013. Web. 15 Apr. 2016.
http://www.scielo.cl/pdf/jotmi/v8s1/art57.pdf
Lockhart, Campbell. "Open Innovation – An Integrated Tool in Siemens | Innovation Management." Innovation Management. N.p., 05 Sept. 2013. Web. 15 Apr.
2016.
http://www.innovationmanagement.se/2013/09/05/open-innovation-an-integrated-tool-in-siemens/
"Promoting Open Innovation." Siemens, n.d. Web. 15 Apr. 2016.
http://www.siemens.com/innovation/en/home/innovation-strategy/promoting-open-innovation.html
“Open Innovation” n.d. Web. 15 Apr. 2016
https://en.wikipedia.org/wiki/Open_innovation
“NASA Open Innovation Projects” n.d. Web. 17 Apr. 2016
http://www.nasa.gov/open/plan/open-innovation.html
Open Innovation http://bock-pm.com/service/open-innovation/
Chesbrough, Henry “Business Model Innovation”
http://www.slideshare.net/SiliconValleyST/business-model-innovation-by-h-chesbrough