Open Innovation — A New Model for Industrial Innovation



so we have a lot to talk about and I know there's gonna be a tailgate starting here too so I'm in a dangerous position between you and the tailgate what I'd like to suggest is give me 20 or so minutes to kind of go through what I had to share with you I'll take questions as we go but I might defer them if it's a question of clarification I want to take it right now if it's a question about well what about this and what about that we'll take those at the end so we'll leave ourselves a good amount of time Teddy's gonna keep me honest here so as Frank told you I am the guy who coined this term and don't take my word for it Wikipedia in an article I did not write credits me for it and and here's why if you did a search back in 2003 when that book first came out and I did this on Google using the term open innovation I got about 200 page links back and what had happened was the word open and the word innovation had appeared in some sentence in some press release or story so a company opened an Innovation Center or office over here open an innovation boom but there was really no meaning to having those two things side by side at the time 10 years later I did the same search term on the same search engine and I got back like 453 million links I obviously did not look at all of those but going through the first few screens it was very clear that there was actually a particular meaning now ascribed to this so that's why I want to share with you it's kind of what was the what's the excitement about and what does it mean today I started open innovation with a critique of an earlier model a model of an innovation process shown here as a funnel turned on its side so think of this if you will as an innovation funnel so this is not a startup company this is a bigger company that's big enough to have multiple projects going on and each of these squares you can think of as a project inside the research and development activity of the company and the way this is drawn the project's start on your left and move through to the right to the marketplace and they start from a science and technology base and you'll notice the funnel narrows down as we go through the journey to go to the market and the reason it narrows is that we start more things than we finish and the stuff that we don't take through to the market kind of stays on the shelf so I call this a closed model and the reason I said it was closed was for two reasons there's one way in from your own science and technology base that's what you used to start the process and there's only one way out which is to the market through your own business your own business model your own business channels etc only one way in only one way out so ironically open innovation starts with a critique of closed innovation now to give you an example of a closed innovation process that actually worked very well for a long period of time I offer to you Bell Laboratories what you see here are Britain Bardeen and Shockley who in 1948 discovered the transistor and this became the basis for the whole modern electronics industry so all those electronics you're carrying around with you right now here's where it all began these guys got the Nobel Prize for Physics in 1956 it launched an entire sector of the economy phenomenal achievement by any measure but what you may not know is it took Bell Labs 10 years before they shipped a product that used a transistor so they spent all this time and all this money building up this research but it took them a full decade to actually use it so just because we invent it does it necessarily mean we're going to be the first to innovate with it so invention is not the same thing as innovation innovation involves commercialization it involves customers it involves markets it involves money and in the closed model Bell Labs just being inventive was not enough you've also got to be in the market with it now the first companies to use transistors were companies like Texas Instruments or a little startup in post-war Japan called Sony these guys did not have the research capabilities of a Bell Laboratories but they were able to be innovative with the inventions of somebody else so you you could say invention is neither necessary nor sufficient for innovation and so the closed model assume both were tightly connected together one way of thinking about open innovation is to sit markets between the research on the one hand and the development on the other so the Sony's the T is and the others can be innovative by accessing these technologies from somebody else so here is Bell Laboratories over on the left and over on the right is IBM TJ Watson's Research Center in Yorktown Heights and if you look at these facilities the very architecture I think tells you something about this closed innovation model these are things that are built high on a hill far far away from the daily cares and concerns of ordinary business and they're kind of a fortress to look at them they're built to keep these things in and to keep them from leaking out only one way in only one way out but a lots changed since the heyday of Bell Laboratories these are data from the National Science Foundation showing where R&D dollars are being spent in the United States and I've taken selected years going back to 1981 and I've organized the data by the size of the company doing the R&D spending so back in 1981 the companies of more than 25,000 employees were more than 70% of all the R&D spending done United States those were being done in those big fortresses 70% of all the Rd in the whole country meanwhile those little tiny companies less than a thousand people in 1981 were about four point four percent tiny so if you're in for the some of us are old enough to remember this so if you were working in a large company in the early 80s and you were looking for the state of the art like what's new what's important where's the cutting edge most of it was happening in the other big companies and you really didn't have to worry too much about the small little startups they didn't have much to offer you look how that's changed in the last 30 35 years the large companies today are less than thirty five percent of all the R&D spending so they haven't gone away but their share of all the spending has fallen in half in one generation meanwhile those little tiny less than a thousand employee companies collectively are now nearly a quarter of all the R&D spending being done so what these data show us is it's a much more level playing field today useful knowledge is distributed everywhere and no matter how big you are no matter how good you are most of the smart people work for somebody else is our build joy a Berkley PhD grad in computer science said this was also the conclusion of one of the leading pharmaceutical companies Merck this is taken from their letter to their shareholders explaining that you know we do a lot of work but we do about 1% of the world's biomedical research in as soon as you frame it that way we're doing about 1% it becomes almost blindingly obvious even a berkeley professor can see that if we're only doing 1% inside we've got to find a way to access the other 99% so this is what they're telling their own shareholders there's too much going on for any of us even as good and as big as we are to do it ourselves and so bill joy you already know Berkeley PhD founder of Sun Microsystems Sun standing for Stanford University Network startup company and today he's a venture capitalist so his own career I think mirrors this separation between research on the one hand and development on the other hand because as you may have noticed have any of you ever been to the office of a venture capitalist did you ever see any scientific and laboratory equipment in their offices no you don't they don't do any research in venture capital but they fund a huge amount of R&D turns out there's no are it's only D but there's a lot ID and that's one of the things that's driving this pattern there are other things driving it too but there's a lot of money out there these days for people who are have the desire to create something special and now can get access to money can get access to talent can get all the services they need from accounting firms and legal firms and the others to set up their businesses and go out and try it and I learned it we even got real estate service companies going and doing it too so this means that this closed model that I started with that was exemplified by Bell Labs is giving way to a new and different model and one way to visualize this is think about that innovation funnel but now we're going to put holes in the funnel the holey funnel hol Li Y notice this is not my representation this was stolen with pride from Professor Henry Chesbrough by a guy in Sweden of all places named Bank Yarra holt who's given me permission to steal it back and share it with you kind of an open approach in itself and there are lots of pathways in this model for how ideas and technologies take the journey from the laboratory into the marketplace and you can think of them in two general forms one form is the outside world coming into our organization the outside in the other way is where things that are inside our organization that perhaps we're not using ourselves are allowed to go outside for others to use in their organizations through licensing through a joint venture through a spin-off through a donations to an intellectual Commons all of these pathways become possible for ideas to go from a lab to the market so one way that you can think of this transition from the closed model to the open model is in the closed model the lab was your world in the open model the world becomes your lab so there are different ways to manage this and like many academics I get paid by the word so this is from another publication I won't read all these words to you but what I hope you'll take away is there's a different logic there's a different way of thinking about innovation in a world that has abundant knowledge in a world we're not all the smart people work for you in a world where venture capitalists have lots of money ready and willing to commercialize and capitalize promising new ventures if you're not going to use it inside your own company those engineers might go outside and try to find somebody else who's going to help them to use it so if you don't use it you might lose it there's a different logic here one thing I will talk about is intellectual property because this is something that often comes up when I talk about open innovation in the closed model the idea was we own it we put it in our fortresses only here it's a legal fortress instead of a building it's a legal structure saying I as a patent have the legal right to exclude you from using it so if you try to I can sue you that's how you think about intellectual property in the closed world I have it and you don't in an open world you think differently about IP you think about offense rather than defense instead of excluding you think about including and so we can profit from others using our IP through licensing maybe better business terms lots of ways we might transact that and we buy other's intellectual property if it advances our business so instead of trying to generate all of it ourselves we are engaged in a wider market for ideas and we participate on both sides of that market in doing it so there are a number of these points and I said I won't read them all to you but it's a different logic a different way of thinking so now you're probably thinking ok professor so what's an example I give you an old dog learning a new trick good old IBM a few of you are as old as I am can remember back in 1992 IBM was in a world of hurt they nearly went bankrupt or so actually the to be clear they nearly split into six different companies and they changed coming out of that crisis to the model I'm going to show you here and it's a great example of many of the elements of that new logic that I was showing you on the previous chart our friends at IBM do a lot of internal technology development they have led the United States for 22 years in a row as the company who's gotten the most patents from the US Patent and Trademark Office so let's dispel one notion right now open innovation is not about outsourcing and getting rid of all your internal R&D no it's a model about leveraging your internal R&D by joining it up with other stuff and getting even more value so IBM there's a lot of internal R&D but they also use a lot of external technology a lot of external R&D as well so here I'm showing a couple of things that some of you are familiar with Linux and Java open source languages IBM does not own these IBM does not control them but iBM has a huge number of internal staff working on these projects that they don't own and they don't control that's kind of odd why would you devote a lot of internal people to something that everybody gets see they all get to see it they all see everything you do why would you do that the answer is it's good business to explain the good business we have to go a little further into IBM out here iBM has an activity called Global Services and this is a business that is now half of all the companies revenue and iBM is a hundred billion dollar revenue company half of that money comes from this Global Services arm and their value proposition to their customers is no matter what you own no matter where you bought it we will service all of it for you and it just so happens that customers like having one-stop shopping and all that madness and craziness pulling their hair out I've even takes care of that and for IBM to make good on that they need to be able to access these kinds of broad languages and put in fixes and improvements in future versions as part of taking care of all that heterogeneous gear all over the world in their client base so they're not being nice guys they're not just doing these open source projects because they want to contribute to the world as our first session this morning was saying these are business opportunities by being more open so it's good business to do this rather than being charitable or nice the other thing I want to say about IBM is a lot of the patents they get here yes they they use them their own themselves in their own businesses but they're active in licensing out technologies as well in the semiconductor industry they do something that I think is very clever I call it n minus-1 licensing and is the current generation the new generation of semiconductor process technology that makes those chips smaller and smaller and smaller than the Moore's Law we've heard about when IBM is bringing up a new Jenner raishin of technology then and only then they license out the previous generation to others in the market including their competitors so they always keep one step ahead with their internal work but they get a second round of money from licensing out the older generation to everybody else that's that n minus one licensing so you're always staying one step ahead but getting money from letting your inside stuff go outside as well Proctor and Gamble in the consumer space they also used to be a very closed company in fact they're joke is we are so closed we invented not invented here I'm glad you see the humor in that I like that too they had their own little crisis in 2000 and their stock price went from a high of a hundred and fifteen dollars down to fifty four dollars in the space of less than three months so think about this this is a company that makes soap detergent toothpaste those kinds of very stable consumer businesses don't aren't supposed to go up and down in the stock price this is supposed to be a widows and orphans stock that's steadily trans upward and it didn't here and this is how CEOs lose their job and the CEO of the time indeed did lose his job as a result of this so the new CEO comes in an internal guy from the beauty care business named AG Lafley and he says you know the reason we got into that problem is we were running out of growth we were the number one or number two in all of our current businesses but where we were falling short is we weren't launching enough new brands enough new businesses to keep that growth going so what he did because of his experience in the beauty care business he said I am going to mandate to our research and development team that in five years half of all of our innovations will come from outside of P&G this is from the CEO of the company now over in the business development side they they got their word and they we don't care where they come from we'll work with all of them and inside the R&D group they also changed their tune they had seven or eight thousand internal R&D staff which they kept again we're not getting rid of them but they said there might be a million and a half people in the world who have useful knowledge that could help those seven or eight thousand do a better job how do we get access to them how do we get them on our side how do we leverage and tap into that so this became the basis of what became connect and develop so we're talking about research and development inside a Procter & Gamble they call this connect and develop this actually helped get the growth back into the company and that helped get the stock price back and it's been a huge success for the company a couple of examples that came out of this one was the Swiffer dusters here this actually was a billion dollar brand that did not come from inside P and G's labs this came from a small company in Japan called unit shark and it was already on the market in Japan but unit charm being a fairly small company had no distribution in the US or Europe or these other places so P&G had a group of Technology Scouts and one of the scouts saw this in the market in Japan contacted the company wrote them a very nice check to get the rights to distribute it everywhere else around the world and it within a couple years it became a billion-dollar business for P&G that started from outside another one's kind of fun is where P&G took some internal technology and let it go outside to a competitor so this one was outside in this one is inside out in the area of sandwich bags and garbage bags Clorox had a brand called GLAAD Procter & Gamble had a technology that could actually make these bags stronger and they were thinking about maybe launching a business themselves to compete with Clorox but they had some discussions about a partnership instead and they realized they're probably more money in it and there'd be less competitive resistance if they collaborated instead of competed so they created a joint venture in 8020 where Clorox got 80% in P&G got 20% and this too has become a billion-dollar business as a result of this collaboration so what is innovation we used to think of innovation as a product starting with invention and it was really the job of the engineers to be innovative and the rest of us would look on and cheer them in their process if you think about what I'm sharing with you we need a new way to think about it it isn't just about inventing something you've got to innovate you've got to commercialize it take it into the market to finish the innovation journey that means it isn't just your product it isn't just your technology it also includes things like your business model and it's gonna be everybody's job to do this not just the engineers what's happening over in Europe right now I just had the pleasure of nine months in Barcelona fantastic if you ever get a chance to spend nine months in Barcelona take it it's good what's going on in Europe is they have something they're calling open innovation 2.0 and what they have in mind is everything I was describing to you happening between individual firms but now moving up a level throughout the ecosystem of companies so we started with closed innovation we have this open innovation but now we also have these networks and ecosystems this is the 2.0 part of open innovation 2.0 so it's really spreading quite a ways and then the last area I want to share with you is that there's something interesting about innovation in services like real estate services that's I think also requires a new way of thinking about innovation here's our good old friend Michael Porter we all remember Michael Porter yeah some yes some no Harvard Business School professor very famous really defined a lot of the concepts in business strategy and a lot of his work is taught even today this is from his 1985 book called competitive advantage and it's called the value chain he's the guy who introduced this to the world and here's what he introduced you take something into the value chain and you operate on it you get it staged to go out you you mark it and brand it and sell it and here's your service here at the very end of the process and you have these other functions supporting it on top so if you look at this the first thing you notice is where is service it's at the very end of the process it's almost kind of an afterthought I used to work in a company that treated service this way I was a responsible first service at a company called Quantum in the hard disk drive industry back in the 1980s and 1990s when the disk drive industry was actually a cool industry to be in it's not so cool anymore and my job is running the service organization was to get the customers to keep the product don't send it back don't return it keep it and we'll give you anything you want free to get you to keep the product if it still doesn't work ok we'll swap it we won't charge you for the swap we'll just swap it but service was about getting you to keep the product as if you kept the product we could book the gross margin and that's how we made our money was on the gross margin it was all about gross margin in those days customer acquisition cost customer retention rate lifetime value of the customer none of that gross margin baby pure and simple we were thinking like Michael Porter look at this figure and tell me where is the customer the customer is off stage right now presumably the customer gives us the requirements to do all this work and hopefully the customer takes delivery and keeps it after they take delivery but the customer is not a big part of the value chain what we need to do instead in services in general and particularly if we're going to innovate services we need to put the customer experience front and center in what we're doing so instead of having the customer off stage this is the key focus of what we're doing and some of the things we do to engage with the customers we do inside our own firm but remember our holy funnel a lot of what we do is outside the firm as well this is not a unique idea I'm not the first person to suggest this one of Michel Porter's contemporaries Peter Drucker wrote something very much like what I'm saying to you now what a customer buys is never a product when they buy the product they want what the product does for them the utility of the product for those of you who've suffered through your first microeconomics class customer demand was always represented by the customers utility function and that's what Peter is saying – it's what the product does Ted Leavitt a colleague of Michael Porter at Harvard in the marketing group said it very simply when you buy a quarter inch drill what the value is is to make that quarter inch hole the drill is just the way to get to the hole the value the utilities in the hole you just need the drill to get there think about it with your own transportation like many of you I've got a car I Drive my car about 12,000 miles a year more or less I Drive an average of between city/highway maybe 30 miles an hour so I'm operating the vehicle about 400 hours a year well if you think about it for half a second there's over 8,000 hours in a year so I'm using this asset less than 5% of the time the other 95% it's just sitting idle I pay for the vehicle I pay for the parking and God knows at Berkeley the parking is really expensive I pay for the insurance I pay to service the vehicle on and on garaging it's also hard in Berkeley a hundred percent of the cost less than 5% of the utilization if we can find a way to pool that asset we can spread those fixed costs over more volume and unlock do economies we can do new things how many of you have taken an uber another example not uber but from Daimler of all people in Germany is something called car to go but very similar concept except in uber there's a driver coming to you here there's a all-electric vehicle with an onboard GPS and once you sign into the service you see the map of where these cars are located and you just go to one you don't need a reservation you don't need to make a deposit you've already got your credentials when you signed up etc so you get in the car you go drive it you need to return the car in that same city but once you return the car you've got that GPS on board so car2go knows where the car is if it needs fuel or not and then it's when the car is ready to be available to the next person in the network so we're just sharing and pooling this is really what the collaborative economy is about Amazon another great service company any of you shop at Amazon well if you buy books at Amazon Amazon actually stocks and delivers the books but most of the stuff that most of us buy in amazon is actually stocked by somebody else not Amazon a lot of us don't know that we get what's called one-stop shopping from Amazon for The Economist's among you this is called economies of scope but one-stop shopping will do and the more Amazon sells us the more purchases we make the more other retailers want to be with Amazon putting their stuff on Amazon too because that's where the customers are so it creates a nice virtuous circle to get us to buy more and more an Amazon gets more and more of our money but we're not done with Amazon because all those transactions go into these big server farms that Amazon has all over the world but Amazon did something very clever they've got these great service farms to take care of all these transactions somebody said what if we were to rent out space on this architecture and let other people put their websites on the same stuff now Michael Porter might have said that's ridiculous this is your core competence this is your core advantage don't offer this as a business to somebody else but this has become Amazon Web Services which is a very high margin very rapidly growing part of Amazon it's been a huge success for them you can think of it as inside-out open innovation taking things inside exposing them outside and letting others access it for them and so I've already mentioned the collaborative economy but some of you have already seen this but uber the largest taxi company doesn't have any vehicles air B&B the largest hotel chain has no real estate interesting real estate services play there Alibaba even bigger than Amazon no inventory and of course Facebook sells all this media but not one piece of Facebook's content is generated by Facebook it's none of it we're all doing it for them for free and they're taking the money there's a great saying in Silicon Valley if you're not paying for the product you are the product so there's some questions that come up about this and we're going to move to the Q&A one question is if I work in Rd do I still have a job with all this open innovation stuff what do you do about IP and I hope I've mentioned a little bit about those two what about small and medium businesses SMEs how do these big companies work with the small guys and vice-versa how do the small guys work with the big guys so there are lots of books out there you'll sleep very well with any of them the movie rights are still available for all of them and I very much welcome your questions thank you so this is the point in the program where if you have a question please go step to the microphone we got one here we have one in the upper deck also please hi I was just wondering and tell us your name my name is Ian Edgehill I'm here with my dad who is an alumni of Berkeley I live in Australia and I work for a cloud-based technology company and I was wondering what advice you might have for a small company that's looking to adopt an open innovation model so I have met some of these companies one thing is to become a specialist at something be very very good at one thing that you can do because that way you have something to offer what a small company can offer to a big company you are much more agile or at least you better be you're also much faster than a large company if you think about Charles Darwin it's not the survival of the species is not about who's the strongest it's not about who's the fastest or the most intelligent it's who's the best adapted to the changes in the environment so one of your key advantages is to be better adapted but in turn once you're better adapted to be open and that means to engage with these larger companies but not out of charity not out of being nice but as a good business practice and then I will also say and this is from my experience in the disk drive industry look at the business model of the large company and how that business model fits or doesn't fit with yours we were looking at taking a manufacturing partner from Japan this is back in the 90s when Chapman was gonna take over high-tech all over the world I know it seems crazy to say this now but that was really a thing and so we were looking at both machista and Kyocera as manufacturing partners machista had been doing contract manufacturing for Audio stereo TV video cassette recording companies have been doing it for decades Kyocera very powerful very strong company also a great manufacturing technology wanted to work with us but they were always doing things under their own brand so we looked those two companies who's the better long-term partner for us Kyocera wanted to partner with us but they really wanted to become their own brand and eventually compete with us much Schuster in other businesses had shown they had been a manufacturing partner for these companies for many years so we ended up choosing Matsu stem so look at the business model of the large company and make sure they're not really trying to put you out of business right thank you very much good question Thanks please they're in your Bell Labs example you talked about how it took them 10 years to bring a product to market and that it didn't like they weren't innovating because they hadn't commercialized it but wouldn't they have liked commercialized it like de-facto by selling their transistors to like Sony and these other electronic companies if indeed they had sold the transistors I would agree but they did not sell them oh it's so they just no no these guys I think the polite term is reverse engineering okay and then at what point like would they have been waiting to bring that to market for like a competitive reason or and how do you rhyme these things so one thing we forget is Bell Labs was part of AT&T and prior to judge greens order in 1984 and I know I'm dating myself here AT&T was a legal monopoly a legal monopoly which meant monopolies are really good really profitable businesses and for something like Communications we all have to use it so as a result the culture inside of AT&T they were in no real hurry to rush a new technology to market and to be fair to them they wanted to make sure it worked reliably and they want to be able to build it at scale they wanted to get the cost down so I'm sure in the internal reasons for why we wait a little longer there were some good reasons put forward but between you and me I think the biggest factor was there was no competition by law you could not compete with AT&T until 1984 by law so that legal monopolies are many things but fast agile aggressive not so much but thank you for the question please okay this one person then we'll go then we'll go to you my name is Manish I am a Berkeley House alum and have a company that is attempting this open innovation in a particular technology area bless you my son so this is really a two-part thing on one side you have people who are whom you have to convince to open up right their technology and come on your platform and on the other side you have customers I do have questions on how do you convince people incentivize and and so on to come to your platform and open up their piece of invention sure to the market right and how do you connect the dots so a really important question and one that I think every entrepreneur has to think about so I can't give you an exhaustive answer but I'll give you a couple of tactical suggestions one is if you have a particular prospect who you think would be an awesome customer start with the customer don't start with the partner start with the customer that's the first tactic because and it's because the partner will follow the money if they think there really is a business opportunity they're much more in collaborating with you if you can bring the customer relationship so how do we get the customer invite the customer in for free and work with them create something together try to keep the lawyers out as much as you can and what you create so start with the customer once you think you've got something that the customer says you know I'd buy that now you're ready to have your conversation with the collaborators too much early entrepreneurship is around what is sometimes called technology push I've got this cool widget this whiz-bang that does all these cool things do you want to collaborate with me and even people who like cool whiz-bang things might say that's a cool invention but where's the innovation you know where's the market demand where's the customer how much are they gonna pay for the UI 6 all that stuff here I'm sure you're sick of hearing about so if you start with the customer I think you really get the conversation off to a better start right and the customers nowadays are open enough for such conversations where no no remember Mike on to the comment here from the guy from Australia no they're not allowed so look at your customer's business model how do they make money there are lots of customers that make money in ways that are wonderful for you and that would be just you'd help them make more money you would be more successful you'd live happily ever after but there are other cases where you're fighting over the same stuff yeah so no they're not all the same so again look to their business models to predict how they're likely to behave ok all right thank you hi let me state monopoly I'm a house NBA 90-93 work for a reasonably large cybersecurity company we buy copies guys were classmates yes we we buy companies we buy IP we om IP we only am on own IP we built all kinds of different business model infrastructure we have a brand new senior VP of beast EV and what advice would you give them in terms of how do you structure how do you go about thinking about the portion of business value developed on the inside and we have multiple centers of innovation as well from inside this is what you buy your partner from the outside how do you find the right balance and structure to achieve that balance so I think this idea of having a customer perspective helps a lot one of the things I see in a lot of IP discussions is we've got a really cool thing that could let you do this and this and this in the real estate industry it's also the case though that that could have value in a whole bunch of other business areas that we don't care about so one easy deal is to say give me a non-exclusive but royalty-free right to use it where I want to and you keep all the rights for all the other uses because I have no way practically if using that anyway but in the meantime I'm not gonna have to tax myself by paying a royalty to you and the thing I can do and what you get is you get early feedback and maybe even some kind of a grant back on things I developed further in my use in real estate I can use that somewhere else so notice that no money is changing hands here and for startups and young companies cash is really scarce so things that do these kinds of arrangements are much friendlier and in some sense more innovative because you're not taxing things at the outset in other cases so if you are specialists you've got something you do very well and you want to enable these uses other places you can say you know for research purposes for pilot purposes royalty-free but if you want to use it commercially let's talk and then you know you start the meter running at that point but now there's a debt and identified use so you know how it might be used and you can do the analyses and we've got people at Hoss would love to help you figure out okay in this value chain you're gonna have this piece of it's gonna bring this much value how much should you take how much should you take one rule of thumb I've heard in the venture community is you should be trying to grow something or increase its capability by tenfold or 10x to really shorten the sales cycle and increase the rate of adoption if you can do that and get that fast rate of adoption then you can afford to take a small percentage as the technology supplier because you're getting a small piece of a big pie and one my final part of this is a small piece of a big pie is worth a lot more than a big piece of a small pipe thank you thanks we're gonna make this one the last one I think so let's make it a good one and tell us who you are my name is Haley I'm actually an undergrad right now not in Haas but um I actually was doing your you rap research last semester so I have a question that you have it tell us what your rap is though huh oh sorry it's undergraduate research apprentice program and I was actually doing some research on hackathon as a business model for under Henry and so solely on Kim so my question is does hackathon the platform is that something that could be part of open innovation concept and specifically I helped with launching a few of food hackathons as a part of those project and also my undergraduate Club on campus but there's always the question that pops up how do we handle the intellectual property of like the pitches the solutions and who takes that away or as undergraduate club we do it for like one specific client and solves what challenge they propose so everyone comes in and pitch all these great solutions so are they like do they get to just take it and use it and because everyone came up with the idea so a couple of things about hackathons first thanks for your help in the research by the way one thing that I say I would say in the last five or six years a big shift I'm seeing is a in the innovation landscape more generally is a big emphasis now on speed doing things faster so the exact opposite of the legal monopoly that was AT&T before 1984 so companies are creating colaborate or ease physical spaces where they will invite people in and create usually over a 90 day period of time create with them some new possibility and in most of the cases they do not take any IP at that point and the reason they don't take any IP is they want it to be fast they want it to be flexible and it would take more than 90 days just to negotiate out the IP and we're trying to be fast so let's postpone discussion and see if there's anything worth talking about first and then we'll have the IP discussion so that's the first thing I'd say hackathons have kind of grown up at the same time and they have kind of the same impulse which is let's be more open let's get lots more possibilities and ideas and so you typically invite people who are willing to stay up late drink lots of coke and redbull and eat lots of pizza to create possible things we could do together so Jung Kim who is I mentioned in your question has been doing these in wonderful areas like food chocolate salt things that you would not necessarily think about hacking but she's been hacking them and again if you get the IP discussion in too early it messes it all up so my general advice to large companies and small is postpone then the chances that some crystal pure idea is going to come out of the heavens and show up most of the value in all these innovations and this was true of the Bell Labs example – yes inventing the transistor was really important but all the hard work of putting it into production scaling up manufacturing marketing and distribution etc there's a huge amount of work in innovation but it goes way past the moment of that initial idea or invention so let's get faster let's get more open and then we'll create more value that way and then we still have to divide the pie at some point so you are gonna need some IP but you're gonna do better if you put that off a little longer thank you thank you you

4 Comments

  1. soarabh pathak said:

    Great and insightful thoughts by Prof Chesbrough . These holds lots of promise for not just organisations but for the countries specifically emerging economies . Open innovation will lead to faster , efficient and frugal business models with larger impact

    May 22, 2019
    Reply
  2. Tommaso Venanzoni said:

    I love Chesbrough, he is a great speaker and always explain his ideas clearly.

    May 22, 2019
    Reply
  3. Kristopher Driver said:

    You start off by claiming Google's search engine in 2003 is the same algorithm as 2013… Sorry, but I'm more of a scientist than you are, buddy.

    May 22, 2019
    Reply
  4. Myung Ja Kim said:

    Thank you for the insightful lecture!

    May 22, 2019
    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *