7 ways to make open innovation work in Europe

In 2010 the British government launched a novel approach to promoting innovation and economic growth – and it worked. Instead of funding top-down projects to support its East London Tech City initiative, it simply invited business leaders and university officials to connect and brainstorm at regular high-level meetings in the prime minister’s office. The government’s goal was to act as matchmaker, triggering projects that would accelerate the growth of a promising new technology cluster.

Imperial College London, University College London and Cisco Systems Ltd. were among the first to get involved in the meetings, and one year after the launch of the initiative the match-making clicked. On 10 November, they announced a three-way collaboration to create a joint innovation hub in Shoreditch called Future Cities Centre, focusing on intelligent, sustainable cities of the future, and mobility research.

The centre implements the idea of “open innovation,” a trend in the management of international R&D to form innovation partnerships – involving companies large and small, universities, government institutes and others. “It’s a great example of open innovation in the public sector,” said Edward Astle, pro-rector of commercial development at Imperial. Key to the collaboration, he said, was the ability of a government to create a network of introductions. “The magic ingredient is being able to sit together.”

The government can be a catalyst – that’s one of many lessons that are starting to emerge around the world as open innovation is practiced. To gather some of these lessons, the Science|Business Innovation Board, an association of university-industry leaders formed to promote innovation in Europe, organized a panel discussion on the topic on 6 December as part of the European Commission’s big Innovation Convention in Brussels. It also published that day a study of policy recommendations for open innovation, co-authored by academic experts in the field, Prof. Henry Chesbrough of ESADE Business School and the University of California - Berkeley and Wim Vanhaverbeke of ESADE Business School, Vlerick Management School and Hasselt University.

First, a reminder of what open innovation is. It’s a way of managing R&D to make ideas and collaborations flow more freely, and innovation proceed more quickly. Whereas in the past many companies centralised their research in big labs, today many open work to broad collaborations of companies, universities, research institutes and others. Some call it just research collaboration, but the ‘open innovation’ name has become an increasingly popular title for it. And it’s important to remember there are still lots of other ways to do innovation – including the familiar way: do it yourself. Regardless, open innovation poses special challenges to governments trying to push innovation forward, to create more growth and jobs.

It cuts across industries and disciplines – from energy, to ICT, to pharmaceuticals. In the latter, for instance, companies are starting to collaborate through open innovation to tackle the problem of attrition in drug development, which means that typically only one in ten projects makes it all the way through clinical development. “We need a better approach  to validating targets,” said Adam Heathfield, director of science policy for Europe at Pfizer Inc. and policy fellow of the Centre for Science and Policy at the University of Cambridge. 

Heathfield pointed to Europe’s Innovative Medicines Initiative (IMI) – a public-private partnership that pools information from research among competitors – as another example of open innovation that works. “Sharing information with your direct competitors may not seem natural, but once you start doing it, you realise not everything is really competitive,” said Heathfield. “At IMI, the fact that academics and SMEs bring new ideas adds huge value to the collective work. But the projects have to work for all partners, and what’s ‘pre-competitive’ for some is not pre-competitive for others ”

Here are seven of lessons in open innovation discussed at the Board’s meeting 6 December:

Lesson 1:  Make sure innovation clusters are focused and that academics are allowed to move between academic and commercial roles to bring innovations to market.

Often the challenge is not creating a technology cluster but getting a product out of the cluster and into market. Clusters in Europe tend to deliver fewer operational products and services to the market.

“If you want to move the knowledge, you have to move the people.  You have to allow professors to devote 15 to 20 per cent of their time to outside development. That’s important,” said Chesbrough.

Focus is key.  “We have a number of cluster activities with academic research partners in Europe including high-speed computing and computational biology,” said John Vassallo, vice president of EU Affairs at Microsoft.  “If you design clusters with focus, it’s easier to get products.” Microsoft designates 15 per cent of its basic research budget for collaborative research activities.  

Lesson 2:  Innovation can benefit from multiple large industry partners.

In sectors facing complex challenges, a range of diverse industry partners can help make a group more effective. “The energy industry is going through a period of tremendous change. Collaboration is key to addressing the large and complex challenges we face,” said Robert Sorrell, vice president of public partnerships at BP. 

BP is one of six multinationals that joined the Energy Technologies Institute (ETI), a public-private partnership launched in 2007 by the UK government. Industrial partners each invest up to £5 million per year to accelerate innovation in new energy technologies, and the government matches that investment.

“The six member companies have different perspectives and the value comes from the insights we gain around the table,” Sorrell said. “With the public sector as one of the partners these insights also help to have an informed debate about the policy issues.”

BP sees open innovation as managing an ecosystem – including all the components from research labs to joint ventures and venture investments. “Public-private partnerships like the ETI are an integral part of this innovation ecosystem,” Sorrell says.

Lesson 3:  With returns plummeting on venture capital investments, open innovation offers new funding models for getting smart ideas to market.

US President Barack Obama recently reauthorised the America Competes Act, which includes a novel provision allowing government agencies to run competitions to innovate - an offshoot of the X Prize Foundation approach.  “We supported this idea,” said Chesbrough. “It provides ways for a wide range of organisations and citizens to innovate, going well outside the usual Beltway Bandits.”

European universities could attract corporate R&D funding by leveraging their knowledge base. “I love the idea of universities …saying ‘let’s make money for Europe’ by commercialising science,” says Alan Begg, senior vice president, group technology development and quality at the Swedish engineering company SKF, which has set up four university technology partnerships, including one with Chalmers University of Technology on sustainable life-cycle development.  SKF’s open innovation partnerships with universities sponsor a minimum of five researchers for five years. 

Lesson 4:  Intellectual property rights don’t have to be a stumbling block.

When it comes to intellectual property rights, SKF has designed a win-win approach for open innovation partnerships.  It claims the right to the foreground technology for its future products, but allows the university to market the technology for other products. “We’d love to have the European Union help us do this kind of thing – because you can start to get real volume from the knowledge. We have some of the best universities in the world and we need to unlock it,” Begg said.

Pfizer works with selected universities to advance work in key technology areas, co-locating Pfizer scientists and academic teams in small biotech-like laboratories. “We normally retain first right of refusal.  If we don’t use it, our partners are able to,” says Heathfield.  “We’re looking for a sense of successful collaboration and structures that help the knowledge evolve.”

Lesson 5:  Governments can drive job growth by opening government data to promote innovation in services.

Government data is a huge untapped asset that can drive innovation in public services.  For instance, ESADE Business School in Barcelona is doing innovation on open government data and smart cities. Microsoft’s Vassallo says government data should be made anonymous and open to the world of would-be entrepreneurs; that will drive the creation of new applications, adding one job per small and medium-sized company. “This is a great opportunity for SMEs to benefit from innovation policy in Europe,” added Vanhaverbeke.

Lesson 6:  Government failures in open innovation provide valuable lessons.

One participant noted that strong competition between regional governments in Poland, where each is vying to have its own proprietary regional innovation strategy, has resulted in a closed approach to innovation where assets and knowledge are not shared across regions.

“We need knowledge about open innovation failure cases,” said Chesbrough. “It’s valuable for identifying the boundary conditions of when it will or won’t work, and why.”

Generally, added Jonathan Wareham, Vice Dean of ESADE, much research must still be done on the practice and policy of open innovation. “There are many unanswered questions that demand balanced, critical evaluation. Open innovation as a practice is still relatively nascent, and represents a minority of innovation practice. What we need is more time, experience and data before we can say too much about it in very conclusive language.”

Lesson 7:  Smart governments can be a catalyst for open innovation partnerships – but not through a top-down approach.

The Future Cities Centre is instructive on the catalyzing power of government. Imperial, UCL and Cisco probably wouldn’t have invested jointly in an innovation centre in Shoreditch without the meetings at No. 10 Downing Street. Indeed, the Tech City initiative and its open approach to innovation might have flopped had it been launched ten years ago, Astle said, because government would have been likely to take a more directive approach, and because the approaches to innovation between universities and companies were more rigid.

Now, with the government encouragement, the centre will start operations in four to six months and will develop ideas for making cities smarter. “Importantly, the new research centre is not located on the campus or corporate site of any of the participants,” Astle said.

“Instead it will be located in the heart of, and will work closely with, the vibrant and fast growing developer community in Shoreditch.”

How will participants judge the experiment at Silicon Roundabout?  “For Imperial and UCL, success will be that we get a cadre of research associates going on to start businesses of their own. For Cisco, it will be the development of products and services that wouldn’t have existed without the Centre,” said Astle.

The idea of government being able to convene potential innovation partners is powerful, agreed Chesbrough. “Universities can convene too – they can get discussions started that are much harder to get going in other settings,” by bringing different players into the same room that otherwise would not come together, including industry, regulators and government, he added. “It’s a great way to innovate innovation policy."