Switch on to Open Innovation

No company can afford to rely solely on internal sources for ideas and breakthroughs, according to Henry Chesbrough, author of the best selling book,  ‘Open Innovation’. In today’s R&D environment, the logic of an earlier era, where innovation was closed off from outside ideas, technologies, and assets, no longer holds. In its place, the new paradigm of open innovation opens up corporations to collaboration and partnering along the entire value chain.

The Path to Open Innovation

Between 1945 and 1985, according to David Mowery of the University of California, Berkeley, research and development was mainly performed in centralized corporate research facilities. But from the mid-1980s onwards, investment in R&D departments became anemic. The focus moved from developing new products and processes to supporting business units that were profitable. And these units needed evolutionary breakthroughs rather than game-changing revolutionary discoveries. Many companies shuttered pure research initiatives and either refocused their R&D departments on immediate issues, such as customer problems, or eliminated them completely. 

The dramatic reduction in investment led to massive layoffs and scientists being moved to other parts of the businesses. However, the volume of work for researchers did not abate greatly, creating a backlog of projects. Programs that had high visibility within the management team got preferential treatment while projects that were strategic, and may have provided many years of profitable income, often got shelved.

This created the conditions for a new breed of entrepreneurship to flourish. Independent analytical labs, complete with latest equipment, sprouted up to support the R&D efforts of large corporations. These analytical labs began, and have continued, to focus on providing testing services, performing as a support arm to the corporate R&D function. Concentrating on routine analysis and overflow projects proved to be a successful strategy. The sector has experienced strong, continual growth and analytical lab companies, such as RJ Lee Group, have flourished. 

While the corporate strategy of substantially reducing R&D investment helped corporations to deal with immediate issues of profitability and maintaining earning per share ratios, it has not been without longer-term problems. Products are increasingly commoditized, meaning that they compete primarily on price, as their lifespans lengthen. In this global market, competitors in Asia, Europe and North and South America are looking to win on price. More concerning still is the capacity of companies worldwide to develop and market new products that may make existing instruments obsolete. 

Corporations are actively seeking to adopt novel approaches to innovation to address this competitive landscape. One of the most promising approaches is open innovation, which is beginning to see widespread adoption in the analytical sciences sector as well as areas that rely on rapid innovation, such as consumer electronics and packaged goods.

Making It Work

Clearly, we are not going back to the days of centralized R&D.  The corporations that develop analytical instruments realize that if they are to remain competitive they have to go outside the boundaries of their companies to find technologies that will help them to develop new products. 

This provides a perfect opportunity for analytical labs to reposition themselves from simply being a testing facility to becoming an innovation partner. The opportunity to move up the value chain and support this powerful innovation process is real and current. Open innovation has already generated considerable momentum in other fields but there have been barriers to implementation in fields such as material sciences, life sciences and chemistry. Here, discoveries and technologies take a long time to come to fruition, huge reams of data have to be analyzed, scalability for mass production needs to be worked out, and EPA, FDA, and other regulatory bodies have to be satisfied. 

Far from being barriers, these issues represent real opportunities for analytical labs to develop powerful solutions and services that assist corporate R&D to adopt open innovation. Moving up the value chain means helping companies find, develop and launch new products. 

Here are three examples of sought-after capabilities that would strengthen a company’s position as an open innovation partner:

A Guide to Open Innovation

 12 Characteristics of Open Innovation 

1. Ideas can come from anywhere, and anyone. 
2. Ideas need time to incubate; they are not instantaneous.
3. Spaces and environments are needed for ideas to collide. 
4. Follow hunches – and hunches about hunches. Connect. Exchange ideas.
5. Encourage dissent. Play ‘the devil’s advocate’. Form eclectic teams. Allow things to get a little bit crazy.
6. Develop an ecosystem. Reach out to experts, partners, customers.
7. Experiment. Iterate. Improve. Innovate. 
8. Lead from the top – get management buy-in.
9. Nurture and manage staff and projects.
10. Accept failure, and learn from it.
11. Institute a reward system that provides internal and external recognition.
12. Think differently: heed the black swan. (1). 

How to Implement Open Innovation

• Understand your internal innovation culture
• Understand the type of people you will need on your team 
• Understand where ideas come from
• Develop a technology search platform
• Develop an innovation process

How to Build an Open Innovation Culture

• Establish a clear mandate
• Identify a strong strategic purpose
• Develop an innovation language
• Layout the resources and authority to be given to the innovation team
• Clarify how potential conflicts are to be handled
• Build your team

Personality Attributes of the Open Innovation Team Members

• Holistic point of view
• Talent for networking
• Strong communication skills
• Full of optimism
• Strong passion and drive
• Curiosity
• Belief in change
• Sense of urgency
• Ability to deal with uncertainty 

Development of Comprehensive Technology Research/Assessment Platforms

There is one trillion dollars’ worth of unused intellectual property in our universities, federal labs, and corporations (2). Analytical labs that develop a software research platform to access these resources and validate the findings of the researchers will be sought-after partners, as this service is key to open innovation for corporate R&D departments. It will require an expansion of internal software development capabilities, possibly requiring many man-years of development. The key challenge is that there are over 5000 sources of information, each with a unique structure and database convention.

Validating Technology Readiness

Professors, scientists, and researchers at universities and federal labs have a strong tendency to be overly optimistic about the maturity of their discovery: they often have a fervent belief that their discovery is ready for prime time when it is still a preliminary finding from an experiment at the bench. Here, analytical labs can play a translational role, taking ideas that have significant promise and addressing the challenges of scalability and regulatory compliance. The number and range of discoveries that fall into this gray area is enormous. Plugging the development gap offers an excellent opportunity to small, nimble, specialist companies. 

Development of Crowdsourced Analytical Platforms

One of the key challenges of analytical testing is handling the huge volumes of data that are being generated; these need to be managed, parsed, indexed, categorized, cleaned and validated. Today’s software programs, often archaic legacy solutions, fail to do the job well. An opportunity exists to access crowd intelligence to increase speed and accuracy. For example, a protein researcher at the University of Washington, struggling to predict the native structures of proteins, designed Foldit. In this game, users play with three-dimensional structures and, following certain rules, fold them into protein structures. Today, more than 250,000 users are playing the game and it has transformed the field. 

Another program, which is called Eterna and was developed by Carnegie Mellon University and Stanford University, has over 30,000 players contributing RNA sequencing designs. So far, more than 306 RNA designs have been synthesized for in vitro testing. 

Analytical labs can be similarly transformative in their thinking. There are many other capabilities that they could develop that would add to the repertoire of open innovation. The adoption of open innovation by corporate R&D is changing the game. Analytical labs that move first have the chance to be the industry stars of tomorrow.

Razi Imam is an award-winning innovator, entrepreneur and author, and founder of 113 Industries.