In an era with abundant and widely distributed knowledge, the corporate and managerial challenge is to successfully identify and internalize value from opportunities external to companies as well as the skillful deployment of internal discoveries to external markets (Chesbrough 2003). However, technology markets saturated of technology transactions and opportunities require either a well developed managerial force (an innovation champion) to recognize, filter, connect and internalize external flows of knowledge or an external innovation intermediary (of which NineSigma, InnoCentive, Yet2.com, Innovaro are prime examples) who actively forge links between companies searching for external ideas with locally distant,scientifically distinct and highly-qualified partners.
Yet, despite the substantial findings on open innovation, there has been no systematic effort to explore the innovation management implications of these emerging forms of intermediation and other complementary ones. Recently, Howells (2006) put forward the following encompassing definition of innovation intermediaries: “an organization or body that acts as an agent or broker on any aspect of the innovation process between two or more parties.”
Innovation intermediaries are relevant for companies because of the following provided services: (a) they unlock the potential of customers’ business models, (b) facilitate outward and inward technology commercialization, (c) connect innovation requests with potential innovation providers, (d) screen firms’ external market for potential start-ups, (e) segment customers’ needs, (f) foresee and diagnose technology markets, (g) facilitate internal knowledge processing, generation and combination, and (h) assist in articulating customers’ requirements.
This brief note aims to introduce different forms of intermediary organizations as well as explain how innovation practices are implemented. First, we want to contextualize the management and structure of innovation intermediaries studied in open innovation. Second, we explain the different kinds of incubators and how they help early-stage entrepreneurs. The third section presents the widely-known science and technology parks and how these benefit established companies.
Finally, we give some examples of public and Public-Private Partnerships, e.g., EIT and living labs facilitating innovation.
Innovation intermediaries are structured as an emerging form of broker that coordinates the flow of innovation requests and solutions across distinct, distant and previously unknown knowledge sources as well as provide managerial advise to internalize external sources of knowledge.
Approximately over the last 10 years, intermediaries such as NineSigma,YourEncore, IdeaConnection, InnoCentive, Innovaro, and Ocean Tomo have boomed in technology markets due to the need for artificial mechanisms to connect prevailing technological challenges from established companies such as P&G, L’Oreal and ubiquitous sources of scientific, entrepreneurial and experienced knowledge. For the former, intermediaries create value by offering them: (a) an entry point and connection into unknown industries or sectors without concealing the company’s technological weaknesses to potential competitors, (b) advice, to those companies lacking an appropriate business model to evaluate external opportunities and embed open innovation (c) possibilities to in-license, co-develop or acquire external IP or technologies.
On the other hand, scientific entrepreneurs or research labs interacting with intermediaries benefit by:(a) applying their scientific and technological discoveries to analogous problems; (b) selling or licensing proprietary technologies, reducing problems of revealing too much information; and (c) identifying possible market applications for existing technologies. As summarized by Chesbrough (2006), an intermediary is obliged to insulate clients from inadvertent exposure to external ideas, unless those ideas become paid solutions.
We believe innovation intermediaries are a powerful force for putting innovation needs and solutions within the reach of every company and entrepreneurial scientist. However, to earn returns from the inflows of external knowledge, companies must ensure their collaboration with innovation intermediaries dovetails with an overall innovation strategy. Companies’ internal organizations should make use of services and the growing variety of intermediaries offering them. The companies that will profit from open innovation are those that adapt their innovation processes and organizational structure in line with the new opportunities offered by innovation intermediaries.
Not too long ago, P&G decided to not only rely on external intermediaries but also set up its own intermediation platform (C+D) to collect potential solutions from external sources of knowledge as well gleaning direct feedback on P&G’s products and ideas from its users. Of course, this type of intermediary platform may have greater chances for companies with strong corporate brands, e.g., P&G, Unilever, Pfizer and L’oreal, because their brand names are sufficiently well-known to attract large numbers of external technology partners. However, smaller companies would find it demanding to create a technological community that is large and global enough in scope to be effective.
Incubators are spaces created and subsidized by private or public initiatives to allow entrepreneurs to stimulate the creation of new scientific,technological or business initiatives in cooperative environments that forge new partnerships, facilitate flows and share of talent, resources and market knowledge and facilitate preferential access to advisors. The key competence of these intermediaries hangs on the delivering massive education courses necessary for entrepreneurs to develop their early-stage technologies and privileged access to some sources of funding from VC, business angels, etc.
A recognized case in point, in Silicon Valley, is Plug&Play Technology Centre that facilitates the interaction of resident entrepreneurs through more than 100 events per year. These continuous events attempt to provide preferential access to internal and external funding, senior managerial advice from retired and active CxOs from large companies, fast- track corporate partnerships for their technologies and access to research centers. One of their key strategic competences is the expert knowledge from more than 20 executives in-residence as well as the internal VC fund for promising initiatives. On the other hand, Plug&Play represents a market entry for large corporations, operating in the ICT technology field seeking to acquire early stage technological initiatives or as an entry point for national and regional R&D agencies willing to allocate entrepreneurs in Silicon Valley to connect with other companies.
A private incubator is Siemens Technology- to-Business Centre (TTB) that provides connectivity between entrepreneurs developing disruptive technologies in areas such as clean energy. Its central headquarter is in Munich. The benefits of this incubator for Siemens are: first it allows Siemens researchers in different business units to have a first- hand licensing and insight of potential technologies and identify potential suppliers. Second, it facilitates investments in spin-in technologies that currently do not have an established market but have the potential to have it in the near future. Up to now, this initiative has produced around 15 spin-in Siemens technologies. On the other hand, entrepreneurs receive: free allocation and support from internal project development managers, links and advice from business and research units.
Worldwide science, technology and, recently, innovation parks have been refereed to as ecosystems that accelerate the development of new discoveries by providing exemplary facilities necessary to create new science, technologies or services, foster relationships to coordinate joint research projects and benefit from the prestige conferred by their high-profile sites. Currently, on the one hand, large corporations are motivated to have their research facilities at established science and technology parks, e.g., Stanford or Cambridge, because the location could: (a) strength their relationships with research centers as well as the possibility to hire graduate students and (b) closeness to a large network of VC that can finance entrepreneurial ideas. Particularly in Europe, the main reasons for established companies to re-allocate part of their research units include: strong brand of the park, fantastic infrastructure and environment, preferential location in the region, access to competent people and powerful business and innovation networks.
Up to now, European science and technology parks have tried to achieve an organic interaction among companies, VCs, entrepreneurs, universities, etc. through collaborative initiatives e.g. networking conferences that provide inspiration for knowledge sharing. Some interesting examples represent networks in marketing, HH.RR. management of innovation where the relevance of the sector decreases and the understanding of market dynamics prevails.
Additionally, research parks may many times work closely with the university Technology Transfer Office (TTO) to act as an interface between the property rights of technologies, local governments and business environment.
The high Tech Campus Eindhoven has become a typical of project how open innovation philosophy can take place. Over ninety companies and organizations are located at the site in Eindhoven where previously Philips research was located. The infrastructure is shared, and there is an interesting mix of multinational companies, small and medium-sized businesses and technology start-up companies.
Public regional, national and continental innovation agencies are widely recognized as facilitators of innovation systems that foster the generation and exploitation of ideas, enable the learning process, disseminate know-how, link and transform relations among players and coordinate activities between users and producers. These innovation agencies are relevant for overcoming the so-called European paradox that refers to the capability of European companies to create new discoveries and their unsuccessful ability to transform them into commercial technologies or services.
This paradox has forced policy- makers to turn their attention to the problem of how to foster innovation by developing different collaborative mechanisms at the regional, national and continental levels. One example is the European Institute of Innovation and Technology (EIT) that aims to gather together higher education (universities), research (research centers) and innovation (industry). This attempts to succeed by establishing Knowledge and Innovation Communities (KICs) to cross-link education and research to business opportunities, promote new business creation, educate business leaders, reinforce the knowledge triangle and create economic and societal value.
Other examples created in the year 2006 are the Living Labs that attempt to create, prototype and test new services or products in real-life contexts and establish new relations between companies, entrepreneurs, universities and users in Europe. Currently, the European Living Lab initiative is gathering steam by becoming involved in the early stages of innovation processes such as conception and creation, offering platforms for multi-stakeholder collaboration.
A nice example of open innovation, avant la lettre, is IMEC. This is a Belgium-based research institute in nano- electronics inviting large semiconductor companies to jointly execute their pre-competitive R&D, reducing in this way research costs and risks in a substantial way. IMEC was also a pioneer in developing IP systems for joint research. Their IP- fingerprint model was invented in the eighties: it is an intelligent way for companies that collaborate in R&D to deal with critical IP Issues (www.imec.be).
Open innovation implies that companies make much greater use of external ideas and technologies in the development of their own products and businesses, while they let their unused ideas be used by other companies (Chesbrough 2006). Open innovation offers the prospect of deploying firms’ knowledge bases more effectively, shortening the time to market, and lowering R&D costs and risks. However, as more external ideas flow in from the outside and internally-developed knowledge flows out, problems concerning the co-development and transfer of knowledge become greater than ever. This study focuses on one particular problem, to wit: how can companies seeking external technical solutions, IP, or other innovation-related resources can be helped in their search by innovation intermediaries.
In this brief note, we have brought together various forms of intermediaries and presented the insights from each of them to this new feature of the open innovation landscape. Now, as open innovation becomes more popular, companies face a growing number of competitors with equal access to non-proprietary knowledge. Open innovation has become a competitive necessity and it no longer automatically confers competitive advantage. Innovation intermediaries are a powerful force for putting external innovation within the reach of every company.
By Henry Lopez-Vega and Wim Vanhaverbeke
This article was originally published at www.exnovate.org and republished with the kind permission of professorWimVanhaverveke