Agenda:

• The crisis of traditional innovation approaches and the rise of Open and Collaborative Innovation
• Open Innovation
• Agile innovation and Agile organization

The “Traditional” Innovation Funnel:

The Stage-Gate model, Coper 1986

Managing Innovation:

-> Historically, efforts in innovation management focused on internal organizational issues:

• Creating an innovative climate inside the company
• Select the right projects (and kill them when needed)
• Executing and monitoring projects

-> These issues are all still important …

The Crisis of Traditional Approaches to Innovation:

-> Not always more R&D is better: increased R&D expenditure without the corresponding link to new products leads to serious questions from shareholders

-> The ability to capture ideas from R&D and convert these into products and services that people want to buy is more significant than idea-generation

-> Investing in new Ideas for the existing businesses may not be enough: the European Industrial Management Association (EIRMA, 1985) recognised R&D as having three distinct areas, each requiring investment:

• R&D for existing businesses
• R&D for new businesses
• R&D for exploratory research

SHORTENING LIFE CYCLEs of Innovations	1980s, hard disk drives would typically ship for four to six years, by the end of 1990s the period was just six to nine months. The time period between two competing drugs on the market is currently less than four months, up form 6 years in the late 1980s
RISING COSTS of innovation development	The cost of building a semiconductor fabrication facility in 2006 is nearly 3 $ billion … it would have cost nearly 1% of that in 1986 The cost of developing a new drug is currently well over 800 $ million, up more than ten-fold from the mid of 1990s

NIMI: Not In My Industry syndrome: enlarged competition is become athe rule everywhere.

Quotation:

Managing innovation was like a chess game: if you want to win tou have to figure out your moves in advance. You know your pieces, your competition and your customers.

Nowdays is like play poker: you don’t have the information in advance, can’t really predict what will happen but still have to decide whether continue investing to stay in the game and see next cards….

📌James McGroddy, ex IBM Research Director

Opportunities For Changes in the Innovation Landscape:

-> At time fo Digital Distruption innovation shold be organised in…

• Open
• Collaborative
• Agile and
• Continuous way.
• As shared responsibility
• With time & Resources in competition
• With endogenous motivation

-> Since change is a daily reality, we should combine

CAPACITY FOR INNOVATION	OPERATIONAL EFFECTIVENESS
-> DEF: ability to develop new products & solutions. Develop the organization that will be able to prevent & meet the demands of tomorrow’s customers.	-> DEF: ability to meet current market demands.

Open Innovation:

-> DEF:

“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.”

📌Henry Chesbrough (2006), Open Innovation: Researching a New Paradigm

No one has a monopoly on knowledge the way that, say, IBM had in the 1960s in computing, or that Bell Labs had through the 1970s in communications. When useful knowledge exists in companies of all sizes and also in universities, non-profits and individual minds, it makes sense to orient your innovation efforts to accessing, building upon and integrating that exteral knowledge into useful products and services.

Funnel at Xerox:

Licencing and spin-out: It is unlikely that the best (or even very good) ideas are all located in one organization and, even with an idea in hand, should one organization really manage all of the technical and markets risks associated with commercializing technologies?

📌Prof. Raul Chao, june 5th 2012 on Forbes

Open Innovation Implications: a different concept of “core” knowledge

-> We live today in a network of knowledge where the distinctive capability in technological innovation shift from know-how to know-where

-> Beside, you need to have an Open Culture and a minimum ammount of critical knowledge in order to assure Absorbitive capacity

Enabling Factors:

VISION: understand why we want to innovate and ; Organizational culture iplay a role in the willingness and ability of an organization to successfully profit from external sources of innovation. Absorptive capacity by looking at the effect that internal R&D capabilities hav upon the ability to utilize external knowledge. Competencies: extrenally sourcing innovations could change the R&D competencies of the firm, both directly & indirectly. -> Resources allocated to sourcing innovations from external sources could directly reduce the resources made available for internal innovation. -> External sourcing can improve internal R&D capabilities.

Actions:

-> There are two sides of innovation:

OUTSIDE-IN PROCESS: enriching the company’s own knowledge base through the integration of suppliers, customers, and external knowledge sourcing.

• Which potential part of the ecosystem could be a good innovation for our project.

INSIDE-OUT PROCESS (or OUTBOUND): refers to earning profits by bringing ideas to market, selling IP & multiplying technology by transferring ideas to the outside environment.

• Focus on externalising their knowledge & innovation in order to bring ideas to market faster than they could through internal development.

COUPLED PROCESS: co-creation with (mainly) complementary partners through  alliances, cooperation & joint ventures during which give and take are crucial for success.

• Combine the outside-in process (to gain external knowledge) with the inside-out process (to bring ideas to market) and jointly develop and commercialize innovation.

Outside-In Open Innovation:

Companies can leverage different and multiple sources for Digital Innovation:

• ICT Vendors, one of the most important source in the last 3 years, are going to lose their leading role (-31%)
• Startups (+115%) will replace ICT Vendors, increasing the marginal role they played in the last 3 years
• Universities and Top Management will be the main sources for Digital Innovation with more than 30% of companies

Possible sources of Inbound Open Innovation:

• Customers (LEGO)
• Start-Ups:

• Employees: generation and implementation of significant new ideas, products, and processes originating from a single employee or the joint efforts of two or more employees who are not assigned to this task. Employees have hidden abilities for innovation & potential can be made visible, recognized and exploited.
• Suppliers: L’Oreal innovates with its suppliers in hosted event called Cherry Pack.
• Crowds or communities: like Wikipedia.

CROWDSOURCING: process of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, especially an online community, rather than from employees or suppliers.

-> The different forms can be analysed looking at their key managerial and organisational characteristics:

• Level of integration
• Time horizon
• Risk
• Startup time and costs
• Reversibility
• Level of contractual formalisation

Inside-Out Open Innovation:

-> Many technologies are unused…

• According to a survey conducted in 1998 only 67% of patents held by the top patenting firms around the world were utilized in mainstream businesses
• 70%to 80% of corporate technology assets typically never get used in core products or lines of business
• In 1999 less than 10% pf Procter&Gamble technologies were being used in products

=> Many technologies are unused bcse…

• Technologies are often patented only to block competitors
• R&D and innovation are serendipitous activities, they may produce technologies not useful today, but good technologies can be used in the future.

CVC, Corporate Venture Capital:

-> Corporates, including CVC arms, are partecipating in 25% of deals into all startups globally.

• Partecipate in private markets with various aims in mind.

Good Reasons for “Going Open”	Good Reasons for “Keeping Close”
The pace of change is so high that the technology will become rapidly obsolete Need to access complementary assets through contractual agreement The window of opportunity is narrow The firm is not familiar with the market (market risk) The technology is not proven yet (technical risk)	Speed to market is not critical Technology is proven and innovation is incremental Control over product quality is critical Ownership of complementary assets and world-class capabilities Need to protect knowledge assets

Barriers to Open Innovation:

1. NIH, Not-Invented-Here & NSH, Not-Sold-Here Syndromes -> Should be removed by working on culture, rewarding & incentives
2. Lack of absorptive & desorptive capacity -> open innovation is not mere outsourcing
3. Loss of contorl over core competencies -> IP management and partner selection should be given high priority
4. Managerial complexity -> ICT knowledge management systems could be used to organize information

Organizational Structure:

-> Traditional one are

• Well defined disciplinary boundaries
• Supervision

Organizational Agility:

-> DEF: ability of a company to anticipate, understand and respond to market volatility in ways that create competitive advantage»

AGILE ORGANISATION: A network-like organization with a people-centered culture, operating in a context of continuous learning and rapid decision-making cycles enabled by technology

-> The concept of Agile Organization comes from the methodologies used in the software industry

Principles:

Balance Time:

Enabling Factors:

Organizational Structures

Skills & Aptitudes:

Process, Methodologies & Tools:

Ecosystem:

How Facilitate the Shift Toward Agility: