Open Innovation – Co-dev Conference 2009

I’m writing this as I fly home from CoDev 2009, the 8th annual MRT/PDMA conference on Open Innovation (OI) and Co-Development in Scottsdale, Arizona, which was held January 26 to 28. My company designs and develops new, technology-based products, many in the medical device field (see attended the conference to learn more about OI and how we could improve our services using OI methods and techniques.

So what is OI?There doesn’t seem to be a common definition.Here are a few I found littered throughout the conference…”crowdsourcing”…”collaborating with partners to solve business problems”…and “partnering with others outside of your organization to solve problems faster, in a more cost effective manner, that gets you to market quicker”.They all work.Ultimately, it’s a recognition that the marketplace doesn’t care if you invented something completely inside your shop or if twenty other firms helped.They only care if the product is something they want or need at a reasonable price.It’s a further recognition that our competitors are worldwide.They are fast, agile and aggressive.Anyone who wants to compete needs to be even faster, more flexible and willing to think outside the box (or, in this case, outside their company).The interest and buzz for the OI model seems to be coming from the larger, Fortune 100 and 500 companies that previously worked to keep everything internal to their organizations.The smaller companies have been doing this forever… it’s how we stay competitive.

One thing that hadn’t occurred to me is the breadth of this model.OI is being used everyday to reach out to the worlds’ best minds and companies to solve technical problems and challenges…looking for solutions where others might have proficiency or existing tools or systems that can help you find a product solution faster and cheaper.But OI goes well beyond this.Here’s an example: Pfizer developed Lipitor.They knew it was a game changing heart drug.They also recognized that their sales and distribution system wasn’t sufficient to handle the volume and coverage this drug might create.So what did the CEO of Pfizer do?Did he tell his sales and marketing folks to start hiring so he they could be ready to launch this drug in a year or so?No.He contacted Warner Lambert because he knew they had an existing sales, marketing and distribution system that would let them get to their target market faster.He gave away a piece of the pie because he knew the pie would be bigger and ready to eat a lot faster.Sounds straightforward after you think about it, but I’m not sure most companies think that way.

As you might expect, there are some drawbacks.OI means you’re working closely with another company, each bringing a particular expertise or unique offering to the table to co-develop, co-design, or co-deliver a product to market.Sometimes everything works out and there are no surprises but don’t count on it.Playing nicely in this sandbox requires some upfront agreements, e.g., which part of the sandcastle is each party going to build, what sand toys will each party get to use, who gets to direct the work and who gets to play in the moat…and ultimately, who owns the sandcastle when it’s all done.Intellectual property (IP) ownership is a big part of this.There’s IP that each party brings to the deal and new IP that each party separately and jointly will develop during the OI.Who owns all of the above if the deal goes south or if new markets spring up that hadn’t been considered?

Needless to say, I come away impressed with the potential of this model.It is not clear, at least to me, that this is something new.You could just as easily call this a joint venture or a partnership.More important though is the message.Time-to-market and cost efficiencies need to drive all of us.You may think you have reasonable competencies in-house to figure something out, but if it is not something you’ve been doing everyday, every minute, for the last ‘x’ number of years, then you ARE NOT the best.Get over it.Don’t try to become the best…you’ll end up being mediocre, which today means failure.Go and find the best in-class partner or partners and start creating that world class product.In my mind, each partner needs to have some skin in the game…a shared risk / reward model.Each partner needs to bring something unique and special to the table…a new technology, a process efficiency, a better mousetrap…and on and on.Define the roles, objectives, boundaries and financial obligations for each party.Think through the worst case scenarios.

If time allows, develop your OI model and elements beforehand so you have a framework to follow. You’ll find some good reading from Dr. Gene Slowinski, The Strongest Link and Reinventing Corporate Growth, and from Dr. Henry Chesbrough, Open Innovation and Open Business Models.It probably goes without saying, but if think you’re ready to pull the trigger and set up an OI project, I suggest you hire one of these guys for some consulting.

Brian Lipford

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