Call for policies to help small businesses tap into Open Innovation

In 2010 when GE wanted new ideas to develop the smart electricity distribution grid it embarked on what may have been one of the biggest single exercises in Open Innovation. “We put out a call for ideas from anywhere in the world, from anybody in the world,” said Mark Little, Senior Vice-President and director, GE Global Research. This was, he said at this year’s Science|Business Academic Enterprise Awards and conference, “Very much an Open Innovation initiative.”

Along with a venture capital fund, GE agreed to back ideas that came from the exercise with up to $200 million. The call elicited almost 4,000 ideas from around the globe, with 70,000 people participating.

While the Open Innovation label has only gained currency relatively recently, many large companies will tell you they have been tapping into outside sources of ideas for years. Microsoft, for example, “Has been practising this for a very long time,” according to John Vassallo the company’s Vice President for EU Affairs.

While the topic is usually discussed in terms of large companies, universities and small businesses also need to think about how they can benefit from Open Innovation. While small companies will seek out ideas anywhere they can find them, their size means they are usually restricted to local sources, Vassallo noted.

Universities need to do more about Open Innovation

And the picture may not be so bright when it comes to the approach that universities take to Open Innovation. Barbara Haering, Executive Member of the European Research Area Board, feels, “Universities could do much more with open innovation, even though they are one of the most important sources of knowledge and research.”

Haering believes it is important to take an overall view of the innovation process, and to integrate teaching, research and implementation. “The innovation process is not a linear thing, but a circular thing that goes back and forth,” she said. Companies can’t just pick up university research and turn it into something useful without some input from academics from the very beginning of the process.

Before universities become involved in such activities, it is important to agree who has ownership of intellectual property rights (IPR). At Microsoft, Vassallo said, “We are very keen and eager to ensure that the rights are clear from the beginning of the relationship.” If the issue of IPR isn’t clear at the outset, he warned that companies will bring only, “a tiny bit” of their knowledge to joint activities, such as the European Framework Programmes.

Ironing out intellectual property rights

Ric Henschel of the law firm Foley & Lardner reinforced this message with his observation that as a lawyer, cases land on his desk where problems have arisen, “Because the IP issues weren’t ironed out at the outset”.

Dealing with IPR is one of the costs of adopting Open Innovation, according to Jonathan Wareham, Assistant Dean for Research at the ESADE Business School in Barcelona. “There are costs to practising open innovation. They are related to search, coordination, recombination, and, very importantly, protecting intellectual property rights.”

However, there are ways to reduce these costs, Wareham said. For example, intermediaries and trading platforms such as Innocentive and NineSigma have created “Common standardised markets for innovation, for knowledge.” An alternative approach is to have a “single sponsor platform,” such as those employed by GE and Microsoft, where a sponsor owns the technology core, “But invites the participation of external contributors, collaborators.”

In both approaches ‘innovation markets’ or single company platforms approach to Open Innovation, the objective is to standardise the process, so each new venture does not have to go through a time consuming process, reaching agreements on who gets what out of the activity, and how to deal with intellectual property rights.

But even when there is a standard approach, not all industries will have the same approach to IPR, Wareham warned. To pick just two sectors, energy and pharmaceuticals are very different. “Every industry, based on its different economic logic, has a different need for property rights protection,” said Wareham.

Policy needed to help SMEs practice Open Innovation

This one of the aspects of Open Innovation that Wareham and his colleagues at ESADE are currently researching.

Research that digs deeper into Open Innovation and how it works could contribute to the growing debate on the subject. For example, Vassallo pointed out Open Innovation has now entered the public policy arena, “where it actually belongs.”

One area where policy makers can help, says Haering, is by supporting SMEs and helping them to tap into Open Innovation. “We need to support SMEs because they just cannot handle these sorts of questions. There is big potential if we manage to get them into this loop.”