Open market innovation

The new innovation framework

„The boundaries between the firm and its environment have
become more permeable.”

Presentation prepared by:

Gréta Sabján
Réka Gáspár
Péter Patócs
Balázs Gulyás

28 11 2012

Strategic Management
 Agenda
• Introduction and Overview
• New Framework of Innovation
• Open Innovation’s Unique
Potential
• Problem solving diversity
• Risk sharing
• Innovation marketplaces
• Historical Stage-Gate
Processes
• Innovation tasks: Internal and
External
• Distribution of activities
• Division of innovation activities
– PRESENT
• Division of innovation activities
– FUTURE
• Not-for-Profit Organizations
•Open medicines development
•NASA innovation framework
•Summary
 Overview and introduction
Current strategies
• People with needed skills
• Smart people outside
Problem
• Ineffective in tapping the
external environment
New approach
• projects into modules
• Involves external &
internal people
• Need for internal and
external expert
 Open Innovation Unique
Potential

„ Most of the smart people work for

someone else.”
 Case of Goldcorp.
Case
• Rob McEven listed perspectives – were not successful
• Offered up a prize money, 575,000$
• Competition has begun among 1000 groups and indiv.
• The winners was people out of the mining industry, not trained
geologist

Conclusion
• Need for innovation framework
• Open for external environment
 Risk Sharing

• Open innovation shares risk

• Closed cannot
• Sharing tasks among people means sharing
responsibility
• Winning position
 Innovation marketplaces

• why is the vast majority of ongoing corporate

research still carried out internally?
 Historical Stage-Gate
Processes
• Stage-gate process – current dominant
paradigm for internal innovation
• CDI – Challenge Driven Innovation
 Seven Stages of Challenge
Driven Innovation
1. Idea gathering
2. Filtering
3. Dissection
4. Channel distribution
5. Evaluation/confirmation
6. Assembly and integration
7. Launch
 Innovation tasks: Internal
and External

•The 80/20 rule

•NSF’s (National Science Foundation) report
•Reality: vast majority of innovation work is still
carried out internally
•However: steady increase in the use of
external/open innovation approaches
 Distribution of activities

 Important remark: there are many innovation

activities not captured by the NSF fractions
 Innovation activities: mainly consist of „data
generation” (two-thirds of the time and dollars
spent internally)
 Smaller fraction goes to: hypothesis or idea
generation
Division of innovation
activities – PRESENT
Division of innovation
activities – FUTURE
 Not-for-Profit Organizations
 „Orchestrators”

 Many not-for-profit organizations have seen their

role (through orchestrating) as primarily
stimulator and educator rather than producer
 Today: capability to locate the innovation and
production tools to convert intention to actual
products
Open Medicines Development

Industry on the boundary of commercial

and philanthropic activities
For profits – medicines for common,
widely spread diseases
Non-profits, governmental institutions –
rarer diseases for nieche markets
Open Medicines Development
(2)
Historical domination of for-profits
Wide range of tasks, careful integration, divergent
culture of basic and applied research
New era: low cost search, online collaboration,
electronic transactions, global engagement  huge pool
of potential employees for temporary employment, for
certain task, with low costs (HRM, tax, etc.)
Open Medicines Development
(3)
Effective medicine producing capability in
for-profits, governmental, non-profits
Decomposition of projects into modules 
lower barrier to entry  greater diversity
of approaches (new treatments, new
methods), lower costs
 Cases

National Institute of Allergy and Infectious Disease –

countermeasures against biological warfare – public
website, open disclosure  transparency
Nathan’s battle – rare disease, parents outside
pharma industry, online solicitation – gathering
knowledge
Malaria and tubercolosis treatment – collaborative
efforts
Nasa’s Innovation Framework

Constellation program – take humans back to

the Moon for months at a time
45% reduction in R&D budgets during
Constellation up and running
Forming alliances to leverage internal work
Define of whole project – which pieces to keep
inside versus outside
Nasa’s Innovation Framework (2)

Data-Driven Forecasting of Solar Events – 579

participants around the world, website
(transparency), predict storms, weather
condition, solar events
Bruce Kragin – plasma physics researcher –
15 years, radio frequency engineer – 13 years
 Summary – Open innovation

Reduced costs
Faster

Collaborate external workers, tackling their

knowledge and skills
Increased diversity (number of possible
solutions to choose)
Shared risk
Thank you for your attention!

Questions?