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Open Innovation: What it’s not! Brian McCaul

Just prior to the IKT website going live one of the reviewers suggested to me that references to the concept of ‘Open Innovation’ should be explained. I agreed. But as a term that’s increasingly becoming de rigueur in KT circles, I hadn’t appreciated that this might be a concept that is picking up associations that are far from – even diametrically opposed - to the thrust of the emerging research and practice of Open Innovation. 

So for starters, I think it would be good for us to imbed a link to this site: http://www.openinnovation.eu each time we drop the phrase into narrative on the site. This site is one of the best resources I’ve seen on this subject – and is straight from the horse’s mouth, having been established by some of originators and developers of the concept: So I recommend the site to anyone interested in Open Innovation (OI).
 
But the primary reason for posting this now is that in the course of the discussion with my colleague it became apparent that a rather dangerous misunderstanding of the OI concept might be circulating in some KT circles. The reason that this bothers me is because of the particular twist that is being put on it. 
 
The most alarming manifestation of this misinterpretation of OI was reported to me as a proposal by a public sector organisation, apparently, suggesting to local universities that they should host an event in which they jointly make their IP openly and freely accessible to local businesses. I am taking this second hand here, but as I’ve heard similar reservations on this ‘theme’ of OI, it occurred to me - whether this was a real proposal or not – this is clearly an increasingly common or easy mistranslation.   So, here is my take on what Open Innovation is, and – importantly - what it’s not. 
 
Nothing in the concept of OI implies that generators of IP should not protect their IP, or that they should make it randomly or freely available for no return. (OI is not the same as Open Source - though neither is it necessarily counter posed it OS).
 
Conversely, the OI concept:
§         Stresses a greater need for proactive and nuanced management of intellectual property. If all innovation is not to be done within the firm, but is just as likely come from outside via a deal, then protecting IP is the only way that partners to a deal can safely release IP and still receive some reward for their efforts.
§         Stresses the need to think about the business model before devoting potentially too much to R&D resource to projects that are either unlikely to reach the market, or will only be of value if a new approach to the market is identified.
§         Stresses the important role that University and corporate spinouts can play in developing radical business models or technologies, that are too disruptive to an established firms model - until proven in the ‘laboratory’ of the spinout. And the complementary importance of the firm in acquiring such spinouts (or their technology) to provide the resources necessary for further growth and market access.
 
In respect of the first bullet, it may sometimes be the case on the University side that there is a lack of a nuanced approach to IP management. In some institutions this can be due to inflexible policy-driven regimes. It’s not unheard of that some universities may compound the problem through an inability to recognise the real value of IP versus the value of the business model. Or that they may undervalue the route to market that a business partner brings to the deal. This is presumably an issue that Peter Saraga’s review currently has in its sights, but it serves neither Universities nor corporate users of IP to misinterpret OI as a call to University to unthinkingly release IP into the public domain.
 
Beyond the obvious fact that IP which does not have some exclusivity is often of no value to those that are expected to invest heavily in its exploitation, if we wish Universities to be more entrepreneurial, this misunderstanding of OI is counter-productive.
 
So, okay, if IPR doesn’t relate to core technology, OI principles may suggest that a firm or a university might ‘give’ it away, but, crucially, only in the context of some other business model that derives some alternative return (e.g. IBM giving away Java).  For Universities, where the value-chain is more complex – one could foresee circumstances where this would also apply. This is not to naively claim that IP exploitation is itself a significant or stable revenue stream for Universities. But to release IP without the any prospect of return, even that indirect benefit via increased HEIF or RAE or student numbers, would be foolhardy. 
 
On the second bullet point – the business model - we are unlikely to be served well by a research base that is encouraged to have no responsibility for conceiving what the application or the business model for the technology that they spend years developing. This is not only an extension of point above but an important lesson that Universities could learn from OI as practiced in some corporates: by all means find ways of accelerating rate at which IP leaves Universities, and demolish barrier to this, but let’s improve the quality of the early thought as to how R&D might realise some benefit (in the broadest sense). 
 
Finally, on the third point, it’s worth reminding ourselves that without University commercialisation efforts – especially via spinout - we would lose an important ‘laboratory’ function - that of developing new business models that challenge the conventional way of doing things.
 
So, in conclusion, I think that OI offers an important insight into university knowledge transfer practice itself: and it reaffirms the fact that for universities to give up on commercialisation would be a loss to innovation. OI does not mean giving IP away. But it may be a useful lens through which to perceive the correct balance of return that they achieve from its exploitation.
 
What do you think? Is the view that I’ve encountered as common or as worrying as I suggest?

Comments

Dr Hossein Sharifi

I like to agree with Brian and add some points on the issue, possible implications of the probable introduction of Open Innovation (OI) to the University Knowledge Transfer (KT) in the future (which seems to be imminent), and what complementary views should be taken on board to adapt the concept to Universities and the KT community.

Naturally there is a danger in misinterpretation of new models and concepts when crossing boundaries and sectors. OI is relatively new to the academia and business and as indicated by Brian Europe has just started to take it on board in which the UK’s share is very little (see the website). Besides still there are concerns and debates in the academic community over OI’s practicability in business and how it can be implemented in business let alone the Public Sector. However it can be expected to be taken up much quicker than ever by the policy makers whose attention has been turned for a while on utilising public research and bringing it to use. Seeking quick fixes can be potentially dangerous!

We have been involved in a research part of which is to examine the idea of OI in KT communities and university KT offices and some interesting findings are emerging as the result which includes:
• The concept is being appreciated in the KT community, though not heard of much, and a hidden tendency exists in the community to welcome the idea supported by packets of good practice in the line of OI thinking,
o However there is way to go in this and the perception, acceptance and practice of that are well distanced at this stage.
• There are certain and considerable barriers and impediments for such approaches to replace the conventional mindset in University KT, which largely relate to POLICY (and hence the CONTEXT such as funding and governance), ORGANISATION (and hence relationships), and CULTURE (goal congruency, Academe Vs Business, etc.)
• It is possible to envisage a transitional move to new modes of KT within universities if the adaptation and deployment is approached properly and within the rational for joining globalisation move.

This can lead to understand and be concerned over the possible dangers of prescriptions that may be issued (even hypothetically or as rumours!) by policy makers or public sector organisations as warned by Brian.

Understanding the concept better and interpreting it appropriately is quite important which calls for the academia to work closer with the practitioner community on this.

To add to this I also like to introduce very briefly some premise of our approach which we believe will help in constructing the right conceptual model for modernised KT. These issues include:
• Stakeholder oriented approach to the KT by the community to address the disconnection between HEIs and Business and Community.
• Value Chain approach to the KT process where the KT organisations should become governance bodies in an Open Environment of Knowledge Exchange and Transfer, to address the Institutional position of the KT process, deal with increasingly introduced openness and democratisation of knowledge, as well as value appropriation issues
• Dynamic capabilities which will define new traits of formation and operations of responsible units for managing and governing KT.

These complementary dimensions will help to identify and define what OI is and is NOT for HEIs and PROs.

Continued discussions on this will be quite helpful to start a move to clarification of the concept and sending the message to the community and policy makers.

Hossein Sharifi; Liverpool University Management School.

Mark Anderson

Very interesting to read these initial blogs. If "open innovation" is to be more than just the latest buzz phrase, I suggest it needs to have a clear definition, and the definition needs to be meaningful. I looked at the website that Brian referred to, and found the following definition: "combining internal and external ideas as well as internal and external paths to market to advance the development of new technologies." Yes, and....? If this is the definition, it is so broad and general that it could shelter any number of half-baked ideas. I do hope the knowledge transfer community isn't going to use "open innovation" as a secret password to distinguish between those who are in the know, and those who aren't. Regards, Mark.

Brian McCaul

Thanks Mark

It’s helpful for someone to pose the ‘So what?’ question. If the OI concept doesn’t pass that test then, you’re right; it would merely more jargon for ‘those in the know’.

I have two answers to this ‘so what?’ question:

* OI is making a real impact on business performance, and

* Half-baked readings of OI are leading to half-baked expectations of KT community (as you suggest could be a danger).


Firstly, OI is becoming more than a concept and is being widely adopted, to significant benefit, by many corporates. There’s increasing evidence for this. But for now I’d refer to one study that demonstrates the impact of OI practiced within large corporates. Booz Allen Hamilton’s last annual report demonstrated that a select group of the world’s 1,000 largest corporate R&D spenders performed significantly better than their competitors over a sustained period while spending less on R&D than their industry rivals – largely by pursuing innovation strategies that feature principle of OI. So OI is perhaps no longer an interesting theory, but - increasingly - an interesting fact.


Secondly, I agree that there can often be a danger in reducing a body of research to a simple definition (like that in a legal agreement!) or a strap line, such as that you picked out of the website I recommended. And, yes, I can see how this might contribute to half-baked conclusions – some of which are actually counter to the trust of the conclusions of the OI research. That’s why I’m bothered if KT practitioners or policy makers get the wrong end of such a concept.


So maybe – for there two reasons - the best thing that policy makers and practitioners who are using the term Open Innovation can do is to read some of the literature. A good starting point it the introduction to Chesbrough’s second book on the matter: Open Innovation – Research a New Paradigm.

Regards, Brian


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