How to make open innovation work in Europe

‘Open innovation’ - collaborating on R&D in open, dynamic networks - is an increasingly popular approach to speeding new ideas into the marketplace. The man who first coined the term, Prof. Henry Chesbrough of the University of California - Berkeley and ESADE Business School in Barcelona, is launching a new industrial forum in Europe to discuss and perfect the technique, in collaboration with the Science|Business Innovation Board. Here, Chesbrough discusses the special challenges to open innovation in Europe.

Q. Let’s start with the basics. What is open innovation?

A. Speaking colloquially, open innovation is the idea that companies should make greater use of external ideas and technologies in their business, and take their unused internal ideas to go out to others in the market. There’s a more formal, academic definition that comes from a 2006 book I wrote, with Wim Vanhaverbeke and Joel West: The purposive use of inflows and outflows of knowledge, to accelerate internal innovation and expand the market for external use of innovation. There are many examples: BP’s Energy Bioscience Institute, here at Berkeley, brings the company in contact with the university and many other partners to develop biofuels technologies. In the Netherlands, Philips took its main research campus and literally tore down the fences as it expanded its work with small companies, suppliers, universities and others.

Q. What’s so hard about it?

A. The biggest challenge is that you really need to change the way you organise and operate the company. It isn’t just a matter of bringing in more ideas from universities, and everything else stays the same. You have to change the way you work: with your legal people, your suppliers, your customers and distribution partners. Typically, in many large companies, they don’t even share information very well within the company, across different units of the company.

Q. You have been running an open innovation forum in the US for years, but now you’re turning to Europe. What’s the state of play for open innovation here?

A. In northern Europe it’s as far evolved as anywhere I’m aware of. Cambridge and Imperial College London have done a good job in connecting world class research activities to vibrant communities of companies. KU Leuven in Belgium is very strong, and Finland with Aalto University. In Norway they are striving to do it; they have had so much success in natural resources, but trying to parlay that into knowledge activities is a challenge. By contrast as you move to the south of Europe or the east, there are things that are well behind that level.  Open innovation depends on a lot of things: The university system and how well connected it is to companies in the region;  or to what extent do we see start-ups and SMEs forming out of the university activities in the region. There has to be been an embrace of clusters, and the open innovation version of that: The clusters are circulating, with spin-outs, to translate the research findings into practical innovations. There are plenty of SMEs in southern or eastern Europe, but they are not well connected to larger companies and universities.

Q. Are there special challenges in Europe for open innovation?

A. In the European environment, there are some special characteristics, some positive, some negative. Many of the economies are smaller, and so there’s a higher level of trust and cooperation in industry, universities and government already in place, and that can be a very positive thing for more collaborative approaches to innovation. There are also some tremendously capable universities in Europe, for open innovation.  More negative are some of the intellectual property issues - the very high cost of patenting in Europe, that hits the small companies the hardest. The SMEs are some of the unsung heroes of open innovation: They make the larger companies more dynamic. What you see in an absence of rivalry, or stimulation, from the SMEs is that the large companies can behave more like oligopolists, moving more slowly and bureaucratically.

Q. How will your European forum work?

A. This is an invitation-only community. We meet twice a year, in confidence, to get the member-companies to talk in a safe environment about the things with open innovation that are working, and are not working - the lessons they’ve learned. This started in the US, but now comes Europe - and I am exploring possibilities elsewhere in the world, such as Singapore and Colombia. Our focus is not a bunch of academics from the US telling Europe how to be more like us. In fact, my partners on this are Prof. Wim Vanhaverbeke of ESADE and the University of Hasselt, ESADE itself, and the Science|Business Innovation Board in Brussels.

Q. Why Europe now?

A. The European Union’s Horizon 2020 plan is relevant. The discussion in Europe is: Are we investing enough in innovation for the future of the economy of Europe? But open innovation is a discussion about how the money is spent, in addition to how much is spent. The advice is that innovation in Europe move to a more open process, involving more participants and collaborations. Instead of concentrating the investment in a few of the largest sectors, the money might better be spent building a strong research capability among the research institutes and universities in Europe, and then finding ways to promote collaboration in different industries. This isn’t just a European phenomenon; it’s a discussion in many parts of the world. 

Q. How will open innovation affect European competitiveness?

A. Much of the focus of the competitiveness discussion has been on threats - from China especially, India secondarily.  What is sometimes lost in that discussion are the opportunities that come from dramatically rising incomes and consumption in these markets, and that the export side can be tremendous. Europe has not only a tremendous array of brands, but also a real advantage of design - of making things that, as your income rises, are attractive. Take the automotive sector as an example. In China, it’s not the lowest-cost models that are going to come from Europe; it’s when you come to the higher incomes that the higher level of engineering in Europe comes into its own. Europe has a lot to offer the world.

Chesbrough is a professor at the University of California-Berkeley, where he heads the Center for Open Innovation, and at ESADE Business School in Barcelona. He is launching the European Innovation Forum with Prof. Wim Vanhaverbeke and ESADE, in collaboration with the Science|Business Innovation Board AISBL.