Cluster based open innovation system - enabler of economic and firm's development Cluj Innovation Day 20.03.2015 Innovation myths mess with success… 1. Innovation is about creating a hot new product… New products are swiftly copied and rarely enjoy sustained profits 2. Innovation comes from being creative… It is far likelier to come from being disciplined 3. Innovation is expensive, demanding lots of resource Failure to innovate is what is costly 4. Create hundreds of ideas because of high failure rates… Fewer, bolder ideas based in strong capabilities and the unmet customer needs you discover work best 5. Financial analytics are key to approving concepts… Guessing cash flow in year four for something unprecedented wastes months and is nearly always wrong — build prototypes instead Source: Doblin/Monitor Analysis 2 Ten types of innovation: Move beyond products to win 1. Business model how the enterprise makes money 5. Product performance basic features, performance & functionality 6. Product system extended system that surrounds an offering 2. Networking enterprise’s structure/ value chain & partnering 7. Service how you support your customers Finance Business model Networking Process. Enabling process Core process Offering Product performance Product system Delivery Service Channel Brand Customer experience 8. Channel how you connect your offerings to your customers 3. Enabling process assembled capabilities you typically buy from others 9. Brand how you express your offering’s benefits and ideas to customers 4. Core process proprietary processes that add value 10. Customer experience how you create an integrated experience for customers Source: Doblin/Monitor Analysis 3 Prosperity, Productivity, and Innovation The key source of regional prosperity is increased productivity, which comes from innovation A high and rising standard of living is the proper objective of economic development efforts For wages and profits to grow, workers and their firms must create more value year after year They must boost productivity, or competitiveness Productivity will not grow if firms keep making the same goods and services using the same methods and processes They must do something new and better They must innovate Prosperity Productivity (Competitiveness) Innovation 4 Drivers of Prosperity Many different factors contribute to the overall business environment and, ultimately, drive prosperity and innovation Prosperity (Creation of high-paying jobs) Productivity (High value creation by workers) Innovation (New products, processes, business models, etc.) PK-12 Education Workforce Quality of Life and Talent Attraction University Research and Tech Transfer Tax and Regulatory Environment Transportation and Communication Infrastructure Entrepreneurship Business Recruitment and Retention Suppliers and Buyers 5 Culture of Competition Collaboration and Networks Responsiveness of Government Clusters Defined and correlations to innovation and prosperity A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities (M.Porter) Based on US based research performed by Deloitte – Direct correlation between number of patents and average salary per region (correlation between innovation and prosperity) – Direct correlation between focus on industry and higher average salary growth per region (correlation between industry focus and prosperity per region; ie cluster per industry) 6 Innovation Performance of Regions Patenting Intensity and Wage Level $50,000 R2 = 0.6344 P-value = 0.001 NY CT MA NJ $40,000 CA DE Average Regional Wage, 2001 WA IL MD VA Economy HI exhibits AL less WV AR innovation MS MO KS FL TN OK SD $20,000 0 10 CO IN NC RI OR OH AZ NH WI Economy exhibits more innovation UT NM MN TX PA GA $30,000 MI IA SC ND MT 20 30 40 50 Patents per 100,000 Inhabitants by Region, 2001 Source: U.S. Patent and Trademark Office; CHI Research; County Business Patterns; Michael E. Porter, The Economic Performance of Regions‖, Regional Studies, Vol. 37, 2003 Note: All states, except three (ID, VT, AK) eliminated when a state had one patentor accounting for more than 50% of total patents, or the top 5 accounting for more than 80% of total patents 7 60 Clusters Have Multiple Effects on Innovation Increase Productivity / Efficiency Stimulate and Enable Innovations Facilitate Commercialization Efficient access to specialized inputs, Ease of coordination across firms Rapid diffusion of best practices Better ability to perceive innovation opportunities Multiple suppliers and institutions to assist in knowledge creation Ease of experimentation Opportunities for new companies are more apparent Lower barriers to entry into cluster related businesses Source: Professor Michael Porter, Harvard Business School; Monitor Analysis 8 Competition is fundamentally enhanced by linkages across firms, industries, and associated institutions What Is Open Innovation Open innovation is a purposeful, systematic quest for, and use of, new sources of innovation by engaging suppliers, employees and other parties in collaborate development – It is not serendipitous or one-off, requiring a supporting process and infrastructure Open innovation is applied by companies to stretch the boundaries of what’s possible in their offerings, customer engagement, internal processes, networks and business models Deloitte helps companies access sources of inspiration and innovation outside of the organization to create new sources of value 9 Cluster-based, open innovation is a particularly useful tool for economic and firm development A new way of thinking about an economy and organizing economic development efforts Better aligned with the nature of competition and sources of competitive advantage. Clusters capture important linkages in terms of technology, skills, information, marketing and customer needs that cut across firms and industries. Such linkages are fundamental to competition and, especially, to the direction and pace of innovation Recasts the role of the private sector, government, trade associations and educational or research institutions Brings together firms of all sizes Creates a forum for constructive business-government dialog Cluster members identify common opportunities, not just common problems Highlights attractive public and private investment opportunities Provides guidance for both social and economic policies Source: Professor Michael Porter, Harvard Business School; Monitor Analysis 10 Importance of a Wide Definition of Open Innovation Broad Outside Open Innovation Inside Cluster Inside Company Narrow Experts Partners 11 Everyone Open innovation is a great tool to get at the “edges” where Innovation tends to be most challenging Like with innovation generally, most measurement schemes over-emphasize product performance innovation because there is no shared definition More systemic and broad-based innovation activities are often overlooked Finance Business model Networking Offering Process. Enabling process Core process Product performance Product system Delivery Service Channel Brand Finance Customer experience Business model Volume of innovation efforts Hi Last 10 years Networking Process. Enabling process Core process Offering Product performance Product system Delivery Service Channel Brand Customer experience Cumulative value creation Hi Last 10 years Pareto revisited: Fewer than 2% of projects produce More than 90% of value… Lo Lo Develop a shared, cluster-based definition of innovation Participate in and learn from international innovation scorecard efforts to improve innovation within innovation types Developed a more nuanced measurement effort to take the national innovation condition into account and help support systemic innovation across innovation types Source: Doblin/Monitor Analysis 12 What Is Open Innovation Process and Infrastructure A process — a set of activities — whose purpose is to find or generate good ideas, technologies, etc., and adapt them for use Frame Engage Contract Create / Find Adapt / Fit and The infrastructure needed to support those activities — optimized for the type of open innovation the organization chooses to pursue Interfaces Tools Data People Metrics / Incentives Suppliers Universitie s VC Funds Trade Customers Expert Networks HQ Captive Labs Industry Players 13 Open Innovation and Clusters Share Key Success Factors Conquer ―Not Invented Here‖ Seek for best solution source Promote open communication A Encourage creative conflict Open Mindset B Proactiveness E Scout for new opportunities Actively seek for partners Dedicate team resources Encourage sharing of R&D C Tolerance of Failure Flexibility D Cooperativeness Encourage risk taking Learn from failures Encourage internal and external collaboration Involve more partners earlier Source: Monitor Analysis adapted from ―Open Innovation‖ by Henry Chesbrough 14 Enhance efficiency in buying and selling technologies Accept new business models Monitor Point of View Multiple Models to Connect with External “Expertise” Companies must leverage a range of models to tap into external expertise, balancing tradeoffs between fostering a broad set of transactional relationships versus more targeted strategic relationships Broad Reaching and Transactional Open Partner Platforms External Challenges Focused and Collaborative R&D / Technology Brokering Building Posting Scanning, platforms that challenges and either naturally attract rewards to a independently diverse broad or through partners who audience, brokers, for see value in directly or new IP that can developing on through a be licensed to top of your market maker target new offering opportunities Consortium / Incubator Value Chain Network Partnership / Alliances / JVs Joining open or Forming Creating topic specific linkages across strategic consortiums to value chain partnerships gain technology members to within an and market collectively industry or into insight and find identify and adjacent opportunities target spaces to for joint R&D opportunities unlock new opportunities iPhone and App Store P&G Connect and Develop GSK and ceedd™ US Advanced Battery Google Maps Netflix Prize XETHANOL and UTEK IBM “Collaboraties” 15 SABIC Innovative Plastics network Walt Disney, NBC and News Corp. (Hulu) IFF value chain network Nike and Apple iPod Deloitte Innovation Services 16 How We Can Help Monitor Develops and Installs Open Innovation Systems What we have heard from clients “We need strategies that are less constrained by internal capabilities” “We need to determine where and how we reach for external support to succeed with a new opportunity” Our focus areas for open innovation We help leaders set open innovation strategy that build aggressive targets and increases your likelihood for success We provide clients open innovation infrastructure and processes to accelerate specific initiatives “We need to increase innovation productivity and build a discipline to reach outside our walls” We partner with clients to build open innovation capabilities that are systematic and repeatable 17 Setting intent and ambition Identifying and reframing opportunity spaces for investment Linking to company strategy Defining core value drivers Authoring problem statements and external challenges Co-constructing a concept Executing structured open innovation pilots and experiments Designing the interface with internal development processes Training employees How We Can Help Enable: Designing the Open Innovation System Key Activities / Modules 4–6 Weeks 4–6 Weeks 8–10 Weeks 6–8 Weeks Diagnose Map Design Implement Diagnose the company’s ―capacity‖ for open innovation to identify the most economically attractive areas to focus efforts around Map the landscape of existing, emerging and potentially disruptive opportunity spaces for innovation, prioritizing focus areas Design the ideal ―endstate‖, prioritizing a set of new external communities as well as the playbook for engagement Implement targeted experiments and partnerships while embedding training and incentives for sustained open innovation activities Outputs and Deliverables Strategic focus areas for open innovation Map the landscape of existing, emerging and potentially disruptive opportunity spaces Map and gap analysis of current network Assessing the current network for open innovation We help companies look across the current and future competitive terrain to define their opportunity spaces, identifying options of “where to play” for the next generation of growth Playbook and roadmap for engaging external parties Monitor Point of View Multiple Models to Connect with External “Expertise” Implement in the organization Companies must leverage a range of models to tap into external expertise, balancing tradeoffs between fostering a broad set of transactional relationships versus more targeted strategic relationships Broad Reaching and Transactional Open Partner Platforms External Challenges Map of linkages with internal processes Communication plan and change program Preparing a Plan: Cultural Transformation A process needs to be established to ensure that the network is created, maintained, utilized and evaluated Focused and Collaborative R&D / Technology Brokering Consortium / Incubator Value Chain Network Partnership / Alliances / JVs Building Scanning, Creating Posting Joining open or Forming platforms that either strategic challenges and topic specific linkages across naturally attract independently partnerships rewards to a consortiums to value chain diverse or through within an broad gain technology members to partners who brokers, for industry or into audience, and market collectively see value in new IP that can adjacent directly or insight and find identify and developing on be licensed to spaces to through a opportunities target top of your target new unlock new market maker for joint R&D opportunities offering opportunities opportunities 36 38 iPhone and App Store P&G Connect and Develop GSK and ceedd™ US Advanced Battery Google Maps Netflix Prize XETHANOL and UTEK IBM “Collaboraties” 18 18 SABIC Innovative Plastics network Walt Disney, NBC and News Corp. (Hulu) IFF value chain network Nike and Apple iPod 40 42 How We Can Help Create: Prospecting with Open Innovation Key Activities / Modules 2–4 Weeks 2–4 Weeks 4–6 Weeks 6–8 Weeks Diagnose Map Design Implement Diagnose the opportunity and problem that is trying to be solved, reframing new insight into value drivers which define the external search Map the most relevant external sources that address key challenges and value drivers required to capture the opportunity Design the most effective methods for working with external parties (e.g., partnerships, transactional relationships) Implement external involvement by refining the offering description and designing an integrated concept Outputs and Deliverables Value driver analysis and problem statement Key Choices: How to Frame Customer Needs Technology and capability landscape Playbook for accessing external expertise Case Example: Medical Device Coatings Assessment Opportunity Characterization and Prioritization There are two types of inputs to the framing work Construct the specific partnership engagement Case Example: Medical Device Coatings Assessment Action Plan and Outcomes The design of the partnership / collaboration / alliance should be carefully considered with concentration on scope, organization, decision rights, structures and valuations (if required) A near-term actin plan with timing and accountability was developed for R&D and business development teams to pursue prioritized opportunity and build necessary capabilities Partner Qualification Corporate or BU Strategy Partnership Strategy Contract Completion Post-Partnership Management Partnership Design Scope What are the objectives of the partnership? How will value creation occur”? What are the competitive scenarios and implications? What will be the functions of the partnership? What will be each partner’s involvement and contribution? Which assets / products will be contributed? What are the non-compete agreements between the parents? Ownership of innovations? How will shared assets / services be divided? Organization and Decision Rights What are the key decision rights? Are they any veto rights? Who has control? Joint? What are conflict resolution mechanisms How will entity react to possible internal / external shocks? What is the governance? How are decisions made? What is the organizational structure? What is the budgeting and reporting process? What are the appropriate incentives? 32 19 Operational plan for sustained collaboration Structure and Valuation How will the contributions be valued? Does this affect the sharing of the outcomes? What are the exit provisions? What representations are warranties to be provided? What are the value drivers? Will there be access to third party capital or other funding? How will synergies be shared? What ownership structure to choose? Will this change over time? Financing Innovation initiatives Open Innovation Technology Transfer Project 1 Technology Transfer Project 2 Suppliers Universiti es VC Funds Trade Customers Expert Networks HQ Captiv e Labs Technology Transfer Project N Industry Players Cluster IT Cluj ------------------------------------------------------------------------------------------------------------------------Financing options Innovative Clusters – POC Technology Transfer - POR Use Deloitte expertise in accessing EU funding options above 20 How We Can Help Our Differentiated Combination of Expertise We bring differentiated and relevant expertise that can build the core capabilities for open innovation Deep experience installing growth systems Deloitte has proven expertise in helping leaders install systems: bringing defined processes, tools and capability building that can drive faster time to impact and commitment Leading thought leaders in innovation management Deloitte’s Innovation Practice has over 25 years of experience in driving growth through innovation, pioneering new sophistication and management techniques An ability to speak both technology and user-centric language Deloitte’s innovation practice combines 60+ professionals across a wide range of specialist skills with an external network of over 5,300 experts in more than 450 technology categories Deep expertise in organizational change management Deloitte brings deep expertise in delivering corporate transformations, drawing on over 25 years of experience and the work of leading experts in the field of corporate change and transformation 21 For more information please contact Bogdan Marin [email protected] +40 731 730 574 22 Appendix A: Open Innovation Models Monitor Point of View Multiple Models to Connect with External “Expertise” Companies must leverage a range of models to tap into external expertise, balancing tradeoffs between fostering a broad set of transactional relationships versus more targeted strategic relationships Broad Reaching and Transactional Open Partner Platforms External Challenges Focused and Collaborative R&D / Technology Brokering Building Posting Scanning, platforms that challenges and either naturally attract rewards to a independently diverse broad or through partners who audience, brokers, for see value in directly or new IP that can developing on through a be licensed to top of your market maker target new offering opportunities Consortium / Incubator Value Chain Network Partnership / Alliances / JVs Joining open or Forming Creating topic specific linkages across strategic consortiums to value chain partnerships gain technology members to within an and market collectively industry or into insight and find identify and adjacent opportunities target spaces to for joint R&D opportunities unlock new opportunities iPhone and App Store P&G Connect and Develop GSK and ceedd™ US Advanced Battery Google Maps Netflix Prize XETHANOL and UTEK IBM “Collaboraties” 24 SABIC Innovative Plastics network Walt Disney, NBC and News Corp. (Hulu) IFF value chain network Nike and Apple iPod Open Partner Platforms Monitor Point of View Open Partner Platform: iPhone “Apps Store” External Challenges R&D / Technology Brokering Consortium / Incubator Value Chain Network Apple’s use of third-party developers has allowed it to create an extensive portfolio of iPhone applications, creating a powerful asset to attract and retain users Apple enabled third-party developers to create iPhone applications available for download through Apple’s online ―App Store‖ Since launch on July 11, 2008, iPhone applications have been a huge success – Over 50,000 applications developed – Over 1 Billion applications downloaded Beyond creating large barriers to entry, the business model has proven highly profitable for both Apple and developers – App Store revenue expected to exceed $800M in 2009, with Apple taking 30%1 – Kleiner Perkins Caufield & Byers launched a $100M ―iFund‖ targeting the iPhone 1 Piper Jaffray estimate 25 Partnership / Alliances / JVs Monitor Point of View External Challenges: Procter & Gamble Open Partner Platforms External Challenges R&D / Technology Brokering Consortium / Incubator Value Chain Network Partnership / Alliances / JVs P&G’s innovation “revolution” has been hailed as both a huge success and an exemplar on how to reconfigure innovation to connect with a broad set of experts outside the firm Actions: Connect and Develop Results CEO mandate to acquire 50% of all innovations from outside P&G Uses existing networks (e.g., universities, suppliers, retailers) to source and drive innovation Significant up-front investment to reconfigure R&D — took ten years to accomplish, with three years of up-front planning from a dedicated team of 18 senior R&D leaders Increased use of external innovation sources: 35%+ of new products and 45%+ of initiatives in development include elements from outside P&G Increased growth: Annual sales growth of 10% from 2000 to 2008 Decreased costs: R&D as % of sales decreased from 4.8% in 2000 to 3.4% in 2006 Increased R&D productivity by ~60% Success Stories Crest Spinbrush Developed by small company P&G improved product, expanded distribution, extended Crest brand equity Put Crest into billion USD brand category Mr. Clean Magic Eraser Japanese company launches BASF-developed foam sponge P&G discovers product in store, tests internally then launches in U.S. and Europe Doubled hard surface market share in one year 26 Pringles Prints Through global network finds Italian baker that had developed method to print on cakes and cookies Adapted method for Pringles brand U.S. Pringles business realized double-digit growth Open Partner Platforms External Challenges Monitor Point of View R&D / Technology Brokering: GSK and CCEEDD R&D / Technology Brokering Consortium / Incubator Value Chain Network Partnership / Alliances / JVs GlaxoSmithKline’s corporate approach to R&D is untraditional; it uses small, entrepreneurial drug discovery centers in place of a single, centralized function. The creation of CEEDD applies this approach to external innovation, creating an independent business unit to pursue external partnership to fuel innovation Established the Center of Excellence for External Drug Discovery (CEEDD) to support late-stage drug development CEEDD forms partnerships with biopharmaceutical firms to bring projects from target to clinical proof of concepts – At proof-of-concept, GSK has the option to license the compound for development and commercialization – Biotechnology firms receive GSK’s expertise in commercializing beyond proof-of-concept, as well as funding Once therapeutic areas of interest have been determined, the partnering firms receive upfront payments from GSK, with additional payments for meeting success milestones as well as royalty agreements for any commercialized therapies Forty percent of phase III compounds in trials and 48% of approved products stem from in-licensed agreements – 10 of 11 top brands began as collaboration GSK’s Consumer Healthcare division has specialized ―Open Innovation‖ teams that work with external parties develop and commercialize their products Source: ceedd.com, Drug Discovery News, GlaxoSmithKline 27 Open Partner Platforms Monitor Point of View Consortium: Wal-Mart External Challenges R&D / Technology Brokering Consortium / Incubator Value Chain Network Partnership / Alliances / JVs Wal-Mart has created a consortium of CPG companies and academics, and has invited leading competitors Target, Costco, Tesco, and Kroger to participate – The consortium, led by faculty at the University of Arkansas and Arizona State, will ensure a single set of measurements is agreed upon and will operate independently in the future The consortium inoculates Wal-Mart against environmentalists’ attacks, and creates a competitive atmosphere where suppliers will compete to reduce the environmental impact and, by extension, the cost of their products By participating, firms can exert influence on the standards as well as well as demonstrate a commitment to sustainability The consortium is taking a phased approach over the next 3 to 5 years that will collect data from Wal-Mart’s 100,000 suppliers, allow the consortium to formulate standards based on the data, and slowly roll-out the index to consumers Source: New York Times, MSNBC, Arkansasbusiness.com 28 Invitees Consortium Members In July 2009, Wal-Mart announced the creation of a sustainability index, an effort to urge suppliers to quantify the environmental impact of their products. The move is tied to WalMart’s broader sustainability strategy which urges suppliers to reduce energy and materials usage in production to ultimately reduce the cost of their products Open Partner Platforms Monitor Point of View Value Chain Network: IFF External Challenges R&D / Technology Brokering Consortium / Incubator Value Chain Network International Flavors and Fragrances (IFF) has invested substantially to integrate themselves up the value chain, engaging with and partnering with their customers by providing access to IFF’s intellectual property (IP) and partnering on consumer research To integrate up the value chain, IFF strives for partnership with its clients – The firm operates 32 ―creative centers‖ in 24 countries, which serve as hubs of collaboration between IFF and its customers and act as centers for research into local markets Using its global reach, IFF routinely conducts analyses of consumer products, cataloging the results, and then making this database available to its customers to assist them in identifying trends and identifying new solutions Customers are also given access to IFF’s IP, including – The Consumer Fragrance Thesaurus, a database that links fragrance and aroma ingredients with the emotional responses that they evoke in consumers – IFF’s ―groundbreaking‖ research in understanding the impact of pheromones on adult men and women Source: SEC, IFF 29 Partnership / Alliances / JVs Open Partner Platforms Monitor Point of View Partnership / Alliance: Hulu External Challenges R&D / Technology Brokering Consortium / Incubator Value Chain Network Partnership / Alliances / JVs Hulu, a joint venture launched by NBC and News Corp. in 2008 and joined by Disney in 2009, was an effort by traditional media companies to stake a claim in the online video-ondemand market. The site has become a hit as the corporate parents freely licensed their core assets, but avoided interfering in management Hulu’s independence allows the site to turn competitors into complementors, striking partnerships to use content from Viacom, Paramount, PBS, Sony, and Warner Brothers among others The site embraces lending their assets to other sites, allowing access to their content on any site via an embedded video player Visitor engagement is best-in-class and has not been affected by steady increases in site traffic – Each visitor watches nearly 10 videos per month – Unique visitors have grown over 2x since launch Hulu charges 2x to 3x the ad rates that broadcast networks do, although this is a cost per thousand charge not a placement fee – Monitor analysis places annual advertising revenue at approximately $40M – Other estimates give Hulu a 10% stake of the $448M ad-supported online TV market (~$45M in revenue in 2008) Source: Fast Company, Reuters, Financial Times, Hoovers, Business Week, Forbes 30 Appendix B The Benefits Stretching the Boundaries of Innovation Open innovation is a great tool to get at the “edges” where Innovation tends to be most challenging Ten Types of Innovation™ Finance Business Model Networking Process Enabling Process Core Process Offering Product Performance Product System Delivery Service Channel Brand Customer Experience Innovation Landscape™: Innovation patterns for personal computers and related devices, 1995–2005 Industry after industry will show a valley of activity on the more challenging ―edges‖ of the Ten Types of Innovation™, yet our research consistently demonstrates that it is when innovating on business models and customer experiences that leaders create the most sustained value Open innovation provides a new capability to stretch the boundaries of what’s possible and enable a shift beyond productcentric innovation 32 Our Point of View Challenges to Realizing the Value Companies have been attempting open innovation for some time, but there are many reasons why it remains so difficult . . . The outside world thinks differently: The insights organizations gather from open innovation may be very different from internal ―conventional wisdom.‖ How to integrate outside thinking into inside processes and norms is a challenge every open innovator will need to face. IP management is tricky: In any collaboration, a critical issue comes in only being as ―open‖ as necessary — on all sides of the relationship — and in ensuring that the rewards of success are fairly distributed. The right rewards may not be consistent between partners: Some partners may value financial success while others focus more on non-economic rewards, for example personal satisfaction, fame or publicity, affiliation and connection, networking, or self-expression. The “Goldilocks Dilemma” forces a difficult balance: When reaching outside company walls there is a critical balancing act of defining a need or challenge that is narrow enough to permit efficient targeting and use of resources and broad enough to encompass (all) potentially interesting solutions. Organizations are designed for in-house innovation: Moving to an open innovation model is not just about reorganizing and reallocating resources within the R&D department – it requires major cultural and behavioral changes across the organization. There are many models of open innovation: A few standout examples have grabbed the headlines, but we have seen that one-size-fits-all tools do not work. The scope of open innovation and the specific solutions for implementing it will differ significantly by organization. 33 Monitor Case Study Project Approach and Outcomes We designed an approach to enable the organization, helping the leadership of Energy Co. construct a strategy to invest in shifting to a more open and efficient R&D function Approach Deliverables and Output Diagnose Map Design Implement Assess the internal readiness, ability and willingness for open innovation Benchmark R&D’s utilization and efficiency of external networks Identify priority partnership possibilities Develop case studies of effective open innovation in Energy and adjacent industries Construct a playbook for engaging partners and external networks Design the process and organizational map to link internal and external innovation Build a multi-year roadmap to roll-out pilot initiatives and broader transformation across BU’s and functions Design communication plan 34 Prioritized investment around the most pressing gaps in the current eco-system Designed a change plan to address internal barriers it would face as it looked to shift its R&D model Built a playbook for deploying a core set of open innovation models, identifying priority areas for experimentation Launched a multi-year campaign to sequence the integration of new systems and processes Monitor Case Study Designing Pilots for Open Innovation We helped the client with experiments to pilot different models of open innovation Illustrative Partner Qualification Corporate or BU Strategy Partnership Strategy Contract Completion Post-Partnership Management Partnership Design Scope What are the objectives of the partnership? How will value creation occur‖? What are the competitive scenarios and implications? What will be the functions of the partnership? What will be each partner’s involvement and contribution? Which assets / products will be contributed? What are the non-compete agreements between the parents? Ownership of innovations? How will shared assets / services be divided? Organization and Decision Rights What are the key decision rights? Are they any veto rights? Who has control? Joint? What are conflict resolution mechanisms How will entity react to possible internal / external shocks? What is the governance? How are decisions made? What is the organizational structure? What is the budgeting and reporting process? What are the appropriate incentives? 35 Structure and Valuation How will the contributions be valued? Does this affect the sharing of the outcomes? What are the exit provisions? What representations are warranties to be provided? What are the value drivers? Will there be access to third party capital or other funding? How will synergies be shared? What ownership structure to choose? Will this change over time?
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