OB talks to Head of Corporate Open Innovation at Nesta

Christian Ahlert speaks with David Simoes-Brown, Head of Corporate Open Innovation at Nesta, about his interest in Open Innovation and where he thinks its going. The interview conducted on 20 October gives a couple of ideas about possible shifts in corporate innovation and maybe even a few ideas about good business practice in 2009 and beyond:

Christian Ahlert: The purpose of this interview is twofold. I’d really like you to share your thoughts on open innovation and the aims and activities of Nesta’s Open Innovation Programme.

David Simoes-Brown: Nesta has been conducting an experimental programme in Open Innovation for about three years now. We’ve worked with lots of interesting companies like Procter and Gamble, Virgin Atlantic, Mclaren, and Orange;  a whole range of different corporates. We’re trying to get them to co-create value, by encouraging them to find new ways of creating new value with other companies or individuals, their corporate customers or anyone else outside the company.

The reason we’re doing this is because we believe Open Innovation is a more efficient, effective and fair way of innovating. The big promise of Open Innovation is an innovation that is bigger, faster and cheaper from the corporate perspective and from the smaller partner’s perspective it’s a chance to reach a larger audience than they could already.

CA: Where does Open Innovation come from? and why are people so interested in it now as opposed to 10 years ago?

DSB: I think there’s a number of answers to that. The obvious answer is that the American professor, Henry Chesbrough , wrote a lot about it and popularised the theory. He also created a name for it, which I think is a pretty key thing.

Companies have been innovating from within for many years, but the term Open Innovation has really only been coined in 2002. In that way there’s a kind of trendyness to it. But that isn’t really the full answer because in a in a world of ever constrained resources, Open Innovation promises that you can do more innovation, you can save money, you can save time and you can get better things to market faster.

There are a number of long terms trends which have pointed in the direction of Open Innovation. There is the trend of outsourcing: almost nothing is made in the West anymore with corporates outsourcing to the East . Innovation is part of that whole movement towards decentralised corporations. This is a very different world to that of centralised manufacturing.

There’s also the fact that the scientific community is becoming more and more specialised. People can no longer employ all the best people because the more fields you cover the more money that will take. So there is a kind of realism to Open Innovation which says “Hey, we need to be outstaffing as well.”

And, of course, there is the networked world. Twenty years ago you couldn’t have the Del Ideas Storm, because you simply couldn’t connect people so easily and so quickly when the engagment mechanisms weren’t there.

All of these trends line up to promote Open Innovation and this is now especially relevant in our current constrained business environment.

NESTA has just done some research with UK based corporates which suggests that people are doing more innovating because of the recession, not less. The innovation may be on a smaller scale but actually overall there is more activity. And funnily enough more of that innovation is Open Innovation. I think that with the recession the economic balance is shifting and increasingly it is more effective to employ these new ways of doing things such as Open Innovation.

CA: From you experience in working with Nesta and multi-national corporates, what characterises a successful Open Innovation programme or project?

DSB: Naturally it depends on the kind of business but overall I believe there are three main things. Everyone is especially interested in ROI (return on investment) at the moment and although the financial case for Open innovation is still wanting to be proven in many countries, it does offer a great source of hope.

A successful Open Innovation project will be rather like the Virgin Atlantic one, VJam,  that NESTA supported earlier this year in which Virgin Atlantic are innovating with their customers and lead users such as the V-Flyer community.

The reason VJam  was a success is because customers themselves are picking up a lot of the work load and adding value to Virgin Atlanticwithout massive requirements from the Virgin Atlantic staff.  The rate of attrition  for deleted innovation is generally very high  – Procter and Gamble will tell you that only one in every 100 inventions and ideas that they invest in will ever get to market. This makes it expensive and unpredictable, so while proving a straight forward economic case for Open Innovation is difficult it has the potential for quick success if it can narrow these odds.

Another positive side of Open Innovation is its capability to foster long lasting partnerships and relationships, between a company, suppliers and a wider community. This can either manifest itself in licence arrangement or revenue share,  or a less transactional relationship which is about listening to a  community and reacting to their ideas.

The third thing is a shift in internal culture from the corporate perspective. Its about creating the capability to listen to the outside world and taking their ideas on.

CA: Where do you see the next big challenges coming from for Open Innovation?

DSB: The next big challenge for Open Innovation is in the area of Intellectual Property Rights. How to move from a culture which says “I own this and you need a license to work with me” to a culture and legal structure which supports trust interaction and sharing is a big question. How to share risks and rewards needs to be worked out carefully especially in the services space where IPR is often softer than a patent.  Increasingly, the battle-ground is shifting from IPR to collaborative business models, and making those work.

However, I would predict that Open Innovation and creating communities of innovators that support your company will become the mainstream way of doing things rather than the marginal and in order for that to happen business itself will have to go through quite a few changes in the way it organises itself and plans its future strategies. We are starting to work with an increasing array of forward-thinking companies such as ShopDirect, Orange and Tesco.com which makes the point eloquently.