Monday, August 24, 2009
The Open Innovation No One Discusses
Open Innovation has been the rage, the buzz, in industry for the past 3 years, ever since Dr. Henry Chesbrough coined the phrase back in 2006. Today, we see many companies who have their Open Innovation programs in place, and are happily reaping the benefits of 'early wins'. What seems surprising to me are two incongruities; first, 'early wins' have been established as the criteria for many of these companies to ensure their OI programs continue to be funded. By definition, however, OI is disruptive innovation, a program that changes the practices of an organization to take advantage of a new way the customer lives, works and learns. Second, these organizations are suffering from what I call the lack of Outovation. Where Innovation is a company reaching out to help find answers to their technical challenges (ie General Mills, Kraft, Cadbury Adams), Outovation is the practice of utilizing a company's unused IP to create value. Unused IP can be in the form of old patents that have never been used to create a product; trade secrets and even ideas trapped in the minds of those brilliant people in the bowels of the company. How does a company access that mountain of unused IP? What are your thoughts on the real definition of Open Innovation?
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Hi Kurt,
ReplyDeleteI had worked in product innovation companies both large and startups in the past. Currently, I run and manage a Open Innovation and IP COnsulting Organisation IIRA from Bangalore,India.
Here are my answers to your queries:
1.How does a company access that mountain of unused IP?
Innovation is big business and shaping into an industry of its own. In the old days (much before Supply Chain Systems cmae into being)companies used to maintain of inventory of products they had not sold as well as those of the components. These were tangiable assets. This is why they were accounted too in the books.IP is an intangiable asset. The true value of an IP is one that is as perceived by the buyer and depends on various external factors.This "perceived value" makes this whole process very complicated. That explains why no company includes IP valuation( all the value of innovations done internally) as a part of their quarterly results.But most of them do maintain a database of their "R&D results" or "innovations" atleast owing to the investments made in these effort. They could access the data of these unused IP from their financial history. Most companies carry forward such investments as a "loss" as a way to reduce their taxes. Now, they could create a database of such "losses" and access them in the future and contribute to Open Innovation in their respective industries.
2. What are your thoughts on the real definition of Open Innovation?
Open Innovation is much like Open Source software in IT business. It gives freedom for the innovator to pick and chose the various pieces of a jigsaw puzzle. Going forward, I could imagine it functioning like the "factory method". This would help companies unlock their R&D and IP investments especially in cases covered under (1).
V Krish
Co-founder & President,
IIRA
Bangalore
www.iira.in
V Krish,
ReplyDeleteThanks for your comment. I like the idea of perceived value for unused IP. There seems to be an undercurrent in larger corporations to somehow place a value on that unused IP. It may not happen until companies begin to realize value from it. Until then, the struggles you mentioned will most likely continue.
Interesting comment as well on how to carry unused IP as a tax loss. To do that wouldn't those companies need to assess the value to those ideas, and, if so, wouldn't they need to go outside the confines of their organization to obtain the true value of them? If so, then in my opinion you have just defined the true value of OI. If a company goes outside to get the true value of unsued IP, some of those ideas may get picked-up and developed by outside resources, thus creating value for the company and the partner.