“It’s impossible for any organization to have all the best ideas”
~ General Electric, Open Innovation Manifesto
Open Innovation as an R&D strategy may seem counter-intuitive; traditional corporate culture dictates the use of secret R&D labs that operate in an information silo. However, open innovation can offer many competitive advantages, such as complimenting your company’s internal skills and know-how with external knowledge and ideas, lowering R&D costs, and increasing differentiation in the market.
For example, in 2000, the Canadian gold mining company Goldcorp Inc. crowdsourced gold prospecting in an under-performing mine; Goldcorp knew they were sitting on a literal and figurative gold mine but their geologists could not find the main deposits of gold. Goldcorp created a challenge for the general public; they released all Goldcorp’s geological data (going back as far as 1948) and offered $575,000 in prize money to the innovators that could find the elusive gold deposits. At the time, this type of open innovation was contrary to traditional mining practices: Goldcorp was admitting they were unable to find the gold and was releasing all their proprietary data. However, Goldcorp’s challenge led to more than 110 gold deposits that yielded over $6 billion worth of gold.
So, if that doesn’t answer why open innovation is a worthy consideration for any business, consider that patent filings in Canada have not increased significantly in the past ten (10) years. However, this stagnation is not an issue of lack of funding. Indeed, statistics from Industry Canada indicate that Canada is second only to the United States when it comes to venture capitalist funding.
Collaboration between companies and with the public at large should be considered to invigorate innovation in Canada. In another successful example of open innovation, Bombardier held a contest to solicit urban mobility designs. They created a social media open innovation community integrated with live, offline workshops. The contest rules stipulated that the winners must transfer their IP to Bombardier in exchange for a small prize. Bombardier also kept a right of first refusal for a year for all non-winning ideas. By creating a community around innovation, even outside their company, Bombardier created a sense of self-determination and pride in the community, that resulted in innovation pouring into Bombardier. Indeed, Bombardier received input from 2,486 participants from 102 countries that contributed 4,239 designs, 25,979 evaluations, 8,565 comments and 3,445 messages on Bombardier’s proposed urban transportation projects. As a bonus to uncovering a gold mine of innovation, Bombardier customers were very receptive to their more open and customer-orientated brand.
However, it is important to note that “open” innovation does not necessarily mean the innovation is in the public domain; the devil is in the details. IP ownership provisions should be clearly outlined in an agreement between all involved parties. The following questions can be helpful in outlining the preferred ownership details:
- Who will own the IP stemming from the project (foreground IP)?
- What about jointly created IP (joint ownership/management of IP assets should be approached with caution)?
- Consider motivation factor for crowdsourcing when innovators own their IP?
- Does a royalty-free license in perpetuity make sense given the motivations of the IP owner (i.e., the company or the innovator)?
- What IP do the innovators and the company already own (background IP)?
- Who owns the feedback stemming from the project?
- Should a right of first refusal be included for IP that is not exploited during the project?
The bottom line: open innovation can be a great way to invigorate innovation within your company without resorting to a significant increase in R&D funding.