OPEN INNOVATION AND DISRUPTIVE TECHNOLOGIES
For a CEO to fathom open innovation and disruptive technology, he or she must first know this: Invention is not innovation. Understanding the difference is critical. As Henry Chesbrough once elucidated in Optimize magazine, we should think of invention as new discovery. A discovery could be new to the world or new to industry, but it consists of something we did not know before. Furthermore, inventions are the province of people with scientific training or who are answering questions like how and why. They’re plumbing the depths of difficult, long-term questions that result in fundamental new knowledge. Innovation, by contrast, is applying knowledge to a real-world problem and taking an idea to market. You may not have any customer in mind during a process of discovery and invention, but ultimately a customer is critical to the process of innovation. In many cases, a company owns the rights to an invention, but innovation doesn’t take place until they figure out how to package it, market it, sell it, and devise a business model that wraps around the invention. Christensen points to the classic case of Xerox: The fact that you invented the Xerox machine doesn’t mean anything until you come up with the leasing business model that meets a customer need and makes that copying machine profitable in the marketplace. Anticipating the innovation, not just the invention, is the name of the disruptive technology game. That being said, the ability to scan the horizon and spot disruptive technology before it topples your business may sound like a mission impossible. But in Chapter 8 of this book, Dr. Bruce Vojak, a professor in the Department of Engineering at the University of Illinois, and Dr. Frank Chambers, a former innovation director at Eaton, present a heuristic methodology for road-mapping disruptive technology threats. Instead of relying on ESP or tarot cards, the senior technology visionary and his or her junior cohorts can use the authors’ methodology based on observations of past patterns of changes in complex, technology-based subsystems to guide their intuition and predict the future of technology. It is unlikely that Vojak and Chambers’ modeling or the best general principles of Christensen and or Chesbrough can keep companies ahead of the relentless curve of change and the oh-so-elusive “disruptive” factor. But three principles can be applied that keep a company, regardless of industry or size, more likely to be thinking outside of the lagging perspective of even its own customers, marketing people, and scientists:
1. Application of “open innovation” architectures across the entire corporate enterprise.
2. Using the beauty of small-scale initiatives (cf. Mankin) based on outside developed intellectual assets, often at smaller entities, via strategic alliances.
3. The use of outsourced, “out-of-the-box,” and cross-disciplinary scientist businesspeople has been advocated and is increasingly being adopted. P&G’s decision to tap InnoCentive’s worldwide coalition of 80,000 technologists and scientists to originate half of its new product innovations is a prime example.
An outstanding example of the first principle has taken shape at Air Products and Chemicals, Inc., a company that has evolved the open innovation model in a profitable manner. In Chapter 9, Dr. John Tao, Air Products’ corporate director of technology partnerships, and Vince Magnotta, technology transfer manager of technology partnerships, outline the organizational structure and process begun in 1995 to centralize their external technology efforts and implement best practices across the company. At Air Products, partnering is a cornerstone, mostly external. As the authors quip, “The best R&D is not an individual sport.” They explain how solutions are identified and accelerated utilizing partnering strategies such as university R&D alliances, global R&D insourcing, external providers, licensing-in, and joint development. Case studies are reviewed covering university alliances, working with a Russian institute, and measuring external research programs.
I should note here that Dr. Tao says that Air Products inspired Chesbrough’s work on open innovation almost as much as Chesbrough inspired them. Although these two may good-naturedly claim precedence over the other, notwithstanding Professor Chesbrough’s original grounding in his hands-on industrial management experience, Air Products has implemented the principles throughout a large industrial entity. Of particular note is their significant foreign partnering in Russia and China. In any event, based on my career in IP, I think the evolution of Air Products’ open innovation model is a healthy and natural one, which may or may not have arisen from the Chesbrough theory. The second operational principle is exemplified in Dennis McCullough’s discussion of how ABB Lummus has used small-scale initiatives as a key growth strategy. He argues that small-scale initiatives provide low-risk entry to new markets. (Once again, the careful executive should observe the implicit cautionary against large company focus on a few big bets.) McCullough explains how intellectual assets of others, nurtured through the disparate skill sets of larger and smaller partners in strategic alliances, can be made to work for both entities. His insights into specific techniques for “load leveling” in the alliance—giving the innovative lead to the small party and the developmental tilt to the larger party—are great teaching for the corporate leader. The third operational principle of getting your future thinking into “left field” by using people from “left field,” was discussed in an interesting McKinsey work from 2001. Although that work discussed utilizing these on-call specialists for helping with out-licensing—an endeavor not nearly so mission critical as strategic inlicensing— the concept will work ideally for discovering, analyzing, and exploring development paths for available external technologies, which may prove to be the basis for the healthy internal disruption. While discussing “how to out-license,” the McKinsey work advocated the creation of teams of on-call knowledge partners, both broad-based technologists and industry specialists. This 2001 idea for using these types of people to suggest applications for “leftover” or “excess” technologies across a range of technologies and industries had been applied by EKMS, Inc. since 1989. At EKMS, on behalf of many Fortune 500 organizations, we had bred such a knowledge partner pool for strategic IP in-licensing, partnering, and outlicensing. At EKMS we dubbed these out-of-the-box thinkers “doctors of dangerous eclecticism” (or affectionately, DDEs) The polymath CEO will recognize the need for pools of cross-innovating thinkers, scientists, and businesspeople who can look across fields as diverse as pollution controls and telecom and see the unexpected value connection. Sustainability becomes less a matter of picking the right model than it is of developing a corporate environment that learns to be one subject to continuous reinvention of the very manner in which it innovates. Generating value from innovation through cross-functional invention teams is a subject covered in Chapter 7 by Carsten Wittrup, Director of Global Technology at the BOC Group. To him, the internal and external connection network is vital because innovation is performed by people connecting with people in a creative and boundary-breaking process in which they are free to challenge rules, practices, and traditions to strive for and reach new and higher ground. His chapter provides a lot of grist for managing the “softer” side of the innovation process. If you are the CEO reading this and realize that you aren’t a right-brained type, what do you do? You can open your organization to such types in the highest ranks of innovation management. These people will make tangible in an organization the realization that innovation is best achieved by people making connections in both internal and external networks in a creative and boundary-breaking process. As CEO, you need not be the person who inherently challenges rules, practices, and traditions in an ongoing effort to change more rapidly. Ultimately, all innovation comes down to the human element. The leadership of the enduring tech company will take a village. It could be a committee of three to five people, some with an emphasis on the financial piece of the equation, some on sourcing of ideas, some on team leadership and innovation. But the person who leads that group must be a synthetic thinker, more rightbrained than left-brained, and that may be a big shift.
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