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Connecting & Enabling: �The innovation intermediaries’ challenge

Open Innovation Speakers Series Center for Open Innovation Haas School of Business, Berkeley University

Henry Lopez Vega Ph.D. Candidate in Management Science

ESADE Business School email: henry.lopez@esade.edu

Berkeley, September 14th 2010

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What you ‘will’ learn: �From an innovation intermediaries’ perspective

• Is open innovation established in companies’ mindset?

• Who drives open innovation in large corporations?

• What are the benefits of open innovation?

• How are innovation intermediaries facilitating open

innovation?

• What are the predominant innovation intermediaries

business models?

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Outline for today’s session�

• Basics on innovation intermediation

• From one-sided to two-sided innovation intermediaries

• Two-sided innovation intermediaries

•  The business model of innovation intermediaries

• Embedding innovation intermediaries in large organizations

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What are the most frequent sources of external knowledge?

Source: NineSigma

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1) What are the, so called, innovation intermediaries? �

2) What are the type(s) of innovation intermediaries you know?

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intermediation: 101

• The tertius gaudens. This type of brokers or structural holes act as “buffers” between two nonreduntant contacts

• The mediator or tertius iungens: It is responsible for holding the whole together or enable consensus of the two other colliding elements.

•  Tertius iungens activity may involve coordination without adversarial tension and competing claims. Parties may be indifferent to one another's interests, oblivious to other potentially commensurate interests, or even share common interests without being tied together for the purposes of a given project.

Simmel(1902); Burt (1992); Obstfeld (2005)

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What are the most recurrent types of Innovation intermediaries?

•  Innovation intermediaries (Chesbrough, 2006; Howells, 2006)

•  External and internal intermediaries (Wright et al., 2008; Boon et al., 2008)

•  Technology, innovation, knowledge brokers (Winch and Courtney, 2007; Hargadon and Sutton, 1997)

•  Consultants as bridging intermediaries (Bessant and Rush, 1995)

•  Design laboratories, incubators (Dell’Era and Verganti, 2009; Hansen et al. 2002)

•  Bridging institutions (Carlsson and Jacobsson, 1995)

•  Knowledge Hub (Third mode universities) (Youtie and Shapira, 2008)

•  Intermediary level bodies or Technological Top Institutes (Van der Meulen and Rip, 1998)

•  Virtual or electronic intermediaries (Klein and Wareham, 2008; Verona et al. 2006)

•  Boundary organizations (Cash, 2001)

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One-sided innovation intermediaries

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One-sided innovation intermediaries

•  Incubators

• Technology Transfer Offices

•  Innovation agencies

• Technology, science and innovation parks

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Innovation Parks

✓ Activities related to collaborative innovation entail the Communities of interests that are designed to facilitate cross-exploration of initiatives for resident firms. Up to now these communities include: 1) health & Wellness; 2) sustainability practices and 3) marketing & digital.

✓  Sector selection: This phase included the identification of sectors that attract the interest of a larger number of residents. The discovery of these needs includes a survey, individual interviews and profiling of their innovation needs and current capability to innovate.

✓  Idea Generation: This step entails the collaboratively screening of information and evaluation of existing market opportunities, with internal residents and external experts, through mechanisms such as ethnography, interviews with field experts, surveys or external information. Around 80 possible ideas are initially identified.

✓  Idea evaluation: Market opportunities are scrutinized and filtered by Creapolis’s residents. Around 12 ideas are initially discussed through interdisciplinary workshops

✓ Activities related to the open innovation part of EsadeCreapolis’s innovation funnel ✓  Project selection:

✓  Single or a group of residents selected initiatives to develop and commercialize them along the open innovation funnel

✓  External advice from solution providers is enacted through collaborators e.g. Research institutes from the UAB, UB Innoget, Loop,

✓  Proof of concept: Mentoring and Support assists on the commercializing by providing advice on market identification, funding and crowd-sourcing

✓  Business Plan advice is received from two Creapolis employees and is limited due to the lack of specific knowledge and enough time to follow the development of initiatives

✓  Go to market:

✓  Identification and selection of external partners includes advice in contacting and developing the external value network

✓  IP tries to advice partners on how to secure and hinder the replication of developed products or services. It is provided by an external

✓  External sources of public funding or alliances are identified for launching initiatives. PROPI

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Two-sided innovation intermediaries

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Barriers to adopt Open Innovation

Source: NineSigma

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Why do technology and idea markets need Innovation intermediaries?

• Managing and protecting identity: Arrow’s Information Paradox

• Patent contamination: Avoid reading other companies’ patents

• Reaching unexplored and distant sources of knowledge

• Finding Innovation Partners: A Massive Filtering Problem

•  Identifying Useful, Non-obvious sources of knowledge

• Fostering two-sided markets Chesbrough (2006);Huston and Sakkab (2006); Lichtenthaler and Ernst (2008); Jeppesen and Lakhani (2010); Sieg et al. (2010)

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Generic Innovation intermediaries’ process

Adjusted from Jeppesen and Lakhani, 2010; Sieg et al. 2010 and insights from NineSigma

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Definition “Innovation intermediaries are platform providers, in two-sided innovation markets, designed to co-ordinate and facilitate the flow and integration of innovation requests and solutions across technological distinct or previously unknown innovation actors

(Lopez-Vega and Vanhaverbeke, 2010)”

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Innovation intermediaries’ Business Model

• Value creation

•  Access to organized external networks of qualified solution providers to solve confidential innovation challenges or partnering for business development opportunities

•  Transfer or license opportunities of IP or technologies

•  Services to develop external technologies and embed open innovation within organizations.

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Innovation intermediaries’ Business Model

• Value Capture

•  A percentage or a fixed fee from the contract awarded to winning innovation solvers

•  Up-front posting fee to send an innovation challenges to external networks

•  Consultancy services

Value Chain

• Strong network externalities

• Innovation consultancy services to facilitate the identification, selection, development and market commercialization of technologies

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Innovation intermediaries’ Business Model

• Market Segment

•  Blue Chip companies

•  Large companies engaged in research and New Product Development

Source: NineSigma, Your Encore, Innovaro, Yet2.com

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Innovation intermediaries’ Business Model

Value network

• Co-operative arrangements with foundations, large companies or public institutes

• Broader range of innovation consultants, technology centers and other international innovation intermediaries

Source: InnoCentive, Innovaro

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Innovation intermediaries’ Business Model

Competitive Strategy

• The size and commitment to provide solutions and qualifications of the innovation intermediaries’ solver network in compare to other intermediaries

• Differentiation strategies for specific type of companies

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What are the Canonical Closed innovation practices ?

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How does the ‘closed’ outside-in model works?

•  In the Closed model, IP management was pretty straightforward:

•  It all started inside the company; IP policy was to protect everything; licensing was done defensively; the goal was to maximize control; you could leave it to the lawyers

• Closed innovation practices:

• Avoid reading other companies’ patents; affirmative defense for willful infringement; avoid meeting with other companies’ people without “protection”; the David and Goliath problem

Chesbrough,2006

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What your company should do to ‘engage’ and ‘enable’ intermediated (open) Innovation

•  Enable the process with financial, human resources and make it part of your agenda

•  Select projects based on strategic relevance or urgency

•  Involve various stakeholders e.g. marketing, production, lawyers

•  Do your ‘homework’ first: search within your innovation, supplier’s network, etc.

•  Design a mechanism to select the appropriate innovation intermediary

•  Carefully select, discuss and interact with solution providers

•  Cooperate with the innovation intermediary to avoid ‘closed’ innovation problems

•  When appropriate integrate the solution within the production line and design mechanism to avoid the NIH problem

•  Change and adapt you organizational culture and structure

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Georges Lagardère VP sales & marketing Europe at NineSigma

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How ‘could’ innovation intermediaries be classified?

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Key sucess factors for each innovation intermediary type

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Questions for discussion?

•  Is open innovation established in companies’ mindset?

• Who drives open innovation in large corporations?

• What are the benefits of open innovation?

• How are innovation intermediaries facilitating open innovation?

• What are the predominant innovation intermediaries business models?

• What are the external possible sources of knowledge and how are these used?

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Berkeley, September 14th 2010

Henry Lopez Vega Ph.D. Candidate in Management Science

ESADE Business School email: henry.lopez@esade.edu

!ank y" very much for y"r comments and pa#icipation