As White Queen remarked in Lewis Carroll’s immortal story Through the Looking Glass, “…it takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” We all run after innovation just as fast as we can and sometimes we feel that it’s all we can do just to stay even with the competition. Sometimes it is good to pause for a moment and reflect on the role of innovation, what we’re doing currently and what we might do differently. The State of Ohio did exactly that in creating the Ohio Third Frontier’s Open Innovation Incentive, which they launched last year.
Open innovation (OI) is the systematic inclusion of parties outside your four walls and outside your existing networks. Companies practice open innovation because they want to reduce the time it takes to get to market, avoid getting trapped by their own thinking, and pursue with agility new opportunities outside their core expertise. Frequently the examples given for open innovation success are things like the iPod™, which wasn’t invented internally at Apple, or the Swiffer™ cleaning system that P&G acquired in its original form from a Japanese company. Those examples can cause one to lose sight of the value OI brings to non-consumer goods companies and to organizations smaller than Apple and P&G.
That was the thinking of the Ohio Third Frontier team when they considered what they could do to support economic growth in the State of Ohio. They recognized that open innovation is an important tool and a way to accelerate economic development in Ohio. The state also recognized that very large companies (greater than $1 billion in annual revenues) were doing this already, while companies in the $10 million to $1 billion range likely needed additional direction and support. They surmised that the expertise needed to incorporate these external technology searches didn’t reside in firms this size and that reliable partners were needed in the form of intermediaries with proven open innovation methods and processes. Thus was born the Ohio Third Frontier Open Innovation Incentive.
|An auto manufacturer finds a solution to a sensor need in the dairy industry.|
The first step in the process is to define the business or technical need. The technology search is written up as a Request for Proposal (RFP) and provides a concise, non-confidential statement of the need and business opportunity it represents for the sought-for external partner. Examples of needs seen in food manufacturing range from energy efficiency, to prevention and/or detection of bacterial contamination, to barrier packaging materials and means of preparing meat or dairy products.
One of the problems that these searches overcome is called “local search bias”, the tendency to look for solutions where you already are confident they exist. Asking people outside one’s own network affords the opportunity for accessing “tacit knowledge”; in this case, the answers that people didn’t know that they had until they knew there was a question. Of 40 proposals received in response to one sample RFP, many came from parties with water treatment expertise who had no prior interest in the water treatment issues associated with food manufacturing. This is not to give the impression that technology flows only in one direction. One of our favorite examples of an unexpected connection that derived from tapping someone’s tacit knowledge came from a search we conducted for an auto manufacturer.
The manufacturer’s goal was to build the engine so well that an oil change wouldn’t be needed for five years. But in order to ensure that something didn’t go wrong, an oil quality sensor good for five years was required. A leading proposal received in response to the technology search came from a dairy in Ukraine. Why would a dairy have a solution for a major automobile company? Because milk is a two-phase liquid (like engine oil contaminated with water), and for reasons of keeping milk fresh, pure and sterile, non-contact sensors were required. A non-contact sensor is more likely to survive for five years.
When seeking outside partners, intellectual property is an important consideration. Intermediaries can provide important safeguards for both sides. Having a non-confidential process allows both parties to get to know each other and develop confidence that more in depth discussions are warranted under a NDA. An intermediary’s experience in mediating these conversations can be critical to developing a new mutually beneficial partnership.
The Ohio Third Frontier’s Open Innovation Incentive is gaining momentum among middle market companies throughout Ohio. Current technology requests are visible on NineSigma’s website. If you would like to explore developing a similar program in your state, please contact Ms. Colleen Zupan (firstname.lastname@example.org) at NineSigma.