The dark side of open innovation – how to avoid the pitfalls Paul Isherwood 13th June 2011 Five common mistakes in open innovation Not having the right mindset – and/or the wrong people doing the looking Not defining the problem correctly – not complete, not broad enough Looking in the same places as your competitors do – consider non-traditional methods Transactional mentality – it’s about developing the best relationships, not just the technology Taking a linear approach to innovation versus a non-linear one Source: Beyond Traditional Scouting, Venture2 inc, September 2009 The 5Ps of innovation Purpose Performance People Process Partners Source: Open Innovation in Action, Andrew Gaule, H-I Network, October 2006 Agenda PURPOSE – why do you need to innovate? PROCESS – how do you go from concept to launch? PEOPLE – what roles & competencies are needed? PARTNERS – how external relationships can help? PERFORMANCE – which targets & metrics are key? PASSION – how to raise the probability of success? External innovation focus is essential Innovation occurs outside large companies Recognition of IP in small organisations Reduced time for taking an idea to product Increasing competitive pressure The innovation pyramid Incremental & breakthrough OPEN innovations go together Varying degrees of risk & return An innovation pyramid can be open, transparent & dynamic Peak of pyramid has ideas with breakthrough potential Middle of pyramid is new opportunity incubator Base of pyramid ensures operational excellence CLOSED Source: Block-by-blockbuster innovation, Kanter, Harvard Business Review, May 2010 Breadth of innovation Innovation should be considered in its broadest view when seeking ideas or input In an innovation supported growth model, growth can come from a number of areas: – Ingredients – Products – Packs – Processes – Claims – Routes to market – Regulatory compliance All are valid Industry/market perspective Industry convergence – Blurring of boundaries between industries creating new sectors – eg. nutraceuticals & functional foods – eg. biotechnology & nanotechnology → “nanobiotech” Industry differences – Pharma & chemical - science driven technology intense R&D projects – Food & drink - consumer focused and often purely market driven Growth opportunities – Working in tune with the marketplace not just the technology – Innovation will be happening at the intersection of the two Converging technologies & markets What should companies do if trends of convergence are affecting their industry? – Need well established technology foresight activities in place – Realise that existing resources & competencies may not suffice – Identify either market or technology-related competence gaps – Early involvement of partners across different industries is crucial – Require new industry standards, regulators often lagging behind Conclusion: companies need to open up! Source: Stefanie Bröring, Wageningen University in The Future of Innovation, edited by von Stamm & Trifilova, December 2009 Agenda PURPOSE – why do you need to innovate? PROCESS – how do you go from concept to launch? PEOPLE – what roles & competencies are needed? PARTNERS – how external relationships can help? PERFORMANCE – which targets & metrics are key? PASSION – how to raise the probability of success? The innovation machine How do companies generate new ideas? How do they turn those ideas into products? Sometimes it is wiser to buy than to make it yourself Four box innovation grid 1 Understanding the consumer need 2 Expert understanding of the science 3 Finding technical solutions 4 Translating science into consumer benefits 1. Absolute clarity on articulated & unarticulated needs via behaviours/habits 2. Detailed knowledge of the “molecule” or therapeutic area 3. Extensive network of internal & external sources 4. Creation of compelling communication eg. new claims Making the “academic” & economic case SCIENCE + INSIGHT = REVENUE Source: Innovation Stress Points, a research report by H-I Network, www.h-i.com, September 2008 Open Innovation @ GSK www.innovation.gsk.com Agenda PURPOSE – why do you need to innovate? PROCESS – how do you go from concept to launch? PEOPLE – what roles & competencies are needed? PARTNERS – how external relationships can help? PERFORMANCE – which targets & metrics are key? PASSION – how to raise the probability of success? Open innovation team in GSK OI team are responsible from concept to delivery Co-located with scientists & marketing in innovation hubs Timely assessment and development of idea or technology by key decision makers Educate influential stakeholders External visibility for product & technology wants Relationship Management Earlier project involvement with colleagues Expand & nurture networks of partners OUTWARD FACING INWARD FACING Key activities for the OI team Leveraging OI – Internal Open Innovation Pharmaceuticals • Neurology • Anti-infectives • Oncology • Respiratory • Cardiovascular • Metabolic • Vaccines Consumer Healthcare • Wellness • Oral Care • Nutrition Emerging → Exploratory → Launch Business Approval Product – Development Commercial – Ideation External Networks – Search Packaging – Ideation Consumer – Insight Management – Pipeline Effective knowledge transfer Product – Research Commercial – Innovation External Networks – Build Packaging – Innovation Consumer – Communication Management – Project Agenda PURPOSE – why do you need to innovate? PROCESS – how do you go from concept to launch? PEOPLE – what roles & competencies are needed? PARTNERS – how external relationships can help? PERFORMANCE – which targets & metrics are key? PASSION – how to raise the probability of success? Diverse range of external sources Research Associations Types of collaborative relationships Nature of the relationship Outsourcing Arms Length Purchase of goods and services (possibly over the long term) Type I Short term focus but co-ordinated activities and planning between partner companies Type II Longer term focus with integration activities between partner companies Type III Permanent arrangement with partner companies highly integrated Alliance Joint Ventures Shared ownership in an operation with a collaborator company Ownership Vertical Integration Full ownership of the activity or operation Partnership Closeness of the relationship LOW HIGH Key enablers to partnering success The critical areas of the business relationship which the Relationship Healthcheck addresses include: –Vision, purpose and objectives –Collaborative behaviours and mindset –Cultural understanding –Clarity of roles, responsibilities and resources –Leveraging capabilities and strengths –Governance, process and systems –Communications Source: Global Business Partnership Alliance Ltd., http://www.gbpalliance.com/index.html, April 2011 FMCG open innovation forum Core Forum Membership Machinery Manufacturer Packaging Raw Materials Processed Materials FMCG Producer Retailer Consumer Distribution, Logistics & Waste Management Support Networks SMEs Science Base Intermediaries Share best practice & explore hot topics in OI along the FMCG value chain From source to consumer, flexibility to include related or parallel activities Participate in bi-lateral or multi-lateral OI collaboration projects Accelerate OI progress, resolve challenges, create & capture value Source: IfM’s Centre for Technology Management, University of Cambridge, July 2010 Agenda PURPOSE – why do you need to innovate? PROCESS – how do you go from concept to launch? PEOPLE – what roles & competencies are needed? PARTNERS – how external relationships can help? PERFORMANCE – which targets & metrics are key? PASSION – how to raise the probability of success? Philosophy on ‘good’ OI metrics The chosen few (keep focus on critical measures, avoid temptation to measure everything) Predictive measures (help predict, not just look back) Measuring what’s important, not what’s easy to measure Quantifiable, even if subjective turned objective –eg. external partner satisfaction ratings Balance of ‘output’ related versus ‘learning’ related Source: Venture2 inc, October 2007 External conferences – OI presentations Open Innovation Summit date: Thursday 24 November 2011 2010 IMR Conference Food Hydrocolloids April 25-27 2010, Berlin Open Innovation In The Life Science Sector Agenda PURPOSE – why do you need to innovate? PROCESS – how do you go from concept to launch? PEOPLE – what roles & competencies are needed? PARTNERS – how external relationships can help? PERFORMANCE – which targets & metrics are key? PASSION – how to raise the probability of success? Passion is the key! • • Highlights key drivers & inhibitors which influence enthusiasm at different stages of the innovation process Promotes the spreading of enthusiasm from OI champion through team & wider organisation Source: Creativity and Innovation Management, Volume 16, Number 3, pages 265-273, 2007 Passionate behaviour Generators of passion –Pass credit to subordinates –Share blame for mistakes –Focus on the strengths not the weaknesses Killers of passion –Greed, lawyers, conflict policies, committees –Big egos –Fights over budgets and responsibility –Politics (power more important than the right decision) Source: Soft factors in open innovation, presented by Bernhard Sabel, OI in the Life Sciences sector conference, Barcelona, April 2011 The Preston success formula Probability of success = Ps Pa = passion, Q = quality (t = technologists, m = managers, i = investors) Ps = (Pat*Qt) * (Pam*Qm) * (Pai*Qi) Rank each parameter between 0 and 1 All 1s guarantee success Any 0s guarantee failure Less important parameters include luck and timing! Source: John T Preston, Massachusetts Institute of Technology, 2005 Takeout & learnings from today PURPOSE – why do you need to innovate? PROCESS – how do you go from concept to launch? PEOPLE – what roles & competencies are needed? PARTNERS – how external relationships can help? PERFORMANCE – which targets & metrics are key? PASSION – how to raise the probability of success? Paul Isherwood Nutrition Category E: paul.d.isherwood@ gsk.com T: +44 7920 567660 www.gsk.com www.innovation.gsk.com