Open Innovation - Succeeding in an Economic Downturn

by: Tyron Stading


While we’ve all known the U.S. has been in a recession for some time, NBER finally made it official, admitting that the current recession began in December 2007. This revelation begs the question, “What now?” My last post described how past recessions have led to increased intellectual property litigation, but it didn’t cover innovation trends. The latest and most interesting of these trends is Open Innovation.

Open Innovation is most crucial in a down market when costs-cutting measures and layoffs are adopted and companies are once again required to do more with less. They no longer have the luxury of large R&D budgets and overhead expenses. Excessive budgets and long development cycles simply cannot be supported in such economic environments. Rather, companies need to get a product to market as quickly and inexpensively as possible — and Open Innovation represents a badly needed solution.

Today the term innovation tends to be overused business jargon that is meant to suggest a more effective use of business resources, but Open Innovation is actually something quite different. It’s a concept that acknowledges the reality that innovation happens everywhere — not just inside your corporate walls. Embracing Open Innovation means that you adopt the practice of acquiring innovative IP outside your company and merging it with your own IP pool.

The key to Open Innovation is where to find it. Ideas can be found everywhere, but finding those ideas that relate to a customer’s pain is difficult. Simply put, you need to know what you don’t know — a vexing task at best.

For example, pharmaceutical companies regularly work with universities to help harvest ideas and to commercialize them. But if you don’t have an established relationship with someone, how do you know when an opportunity even exists? While there is no short answer, the best advice I can give you is to seek out and discover customer pain.

In a down economic market, customer pain will speak the loudest. If a customer is not in pain, they won’t buy the aspirin. Focusing on customer pain will illuminate a path to its most appropriate solution.

To illustrate, let me provide a real-world example. One of our customers was considering a move into the Green technology space given its recent focus and customer demand. However, they soon discovered that there are many definitions for Green technology and the company needed to get to market quickly. Their conundrum: how do we meet this customer demand and fulfill their perception of the company as going Green, and still go to market without years of research delays?

The solution: rely on key words in your patent search that relate to the attributes of the problem (e.g. anti-microbial, recyclable, hygienic, odor controlling, etc). Doing so can yield opportunities outside your industry that you might not have considered. This company did exactly that and what they discovered was startling.

The results initially seemed incorrect because they were previously unaware that the IP they uncovered even existed — precisely because it was outside their industry. By asking why something showed up outside their industry within their innovation landscape, they were able to discover what they didn’t know existed. The ultimate result was that they found a medical technology comprising all the attributes of the solution they were seeking as a naturally occurring substance.

Having this information in turn enabled them to get to market faster, create a new product, partner with a leading supplier and innovate without having to create it all in house — a perfect example of Open Innovation.

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