Apr04
Open Innovation: Partnering to Develop New Products and Reduce Costs
Point: Working with a partner in a different industry can yield innovative results
Story: Gabriel is a Danish manufacturer of environmentally-friendly upholstery fabrics. Founded in 1851, it’s one of Europe’s leading suppliers of furniture textiles and was voted the most innovative company in Denmark in 2007. Because Gabriel knows that it can’t create every idea in-house, the company uses open innovation to weave in the capabilities of outside partners. Open innovation means intentionally leveraging the research and technologies of outsiders, rather than only relying on internally-generated innovations. Gabriel is constantly looking for new materials, new production technologies, and new applications for furniture textiles.
In particular, Gabriel gives special attention to how it forms partnerships for open innovation. First, Gabriel ensures that its partners have the right competencies to match the innovation activity at hand. Second, partners sign a confidentiality agreement so that the ideas can be exchanged freely. Open innovation is even possible with competitors, provided that the companies create clear and explicit contractual agreements from the outset.
In one example, Gabriel looked at the manufacturing technologies used by the car industry to make car seats. After all, a car seat is like a chair on wheels. Together with furniture company Hay, Gabriel introduced a fabric electro-welding technology originally used by Fiat to make car seats. The method laminates tough exterior fabric covering and soft interior filler in a way that greatly reduces production costs of furniture.
Action:
- Look outside your company and outside your industry for people that have similar problems (and possibly useful solutions)
- Identify innovative products or methodologies for collaborative and adaptive projects.
- Create a partnership with the outside co-innovator to share ideas, results, or profits as appropriate.
For more information: Gabriel A/S
8 Comments »Case study, How-to, Innovation, New Product Development, Strategy
8 Responses to “Open Innovation: Partnering to Develop New Products and Reduce Costs”
Brett Borders Apr 6th 2009 at 08:49 am 1
I need to learn how to partner with other business people, of different specialties, better. I know there are huge advantages but, until now, I have found it difficult to meet people who work at my same general standard who ALSO aren’t already happily employed or booked up. I know lots of GREAT designers, developers, etc… but they tend to be quite busy and the ones actively seeking partnerships tend to be less skilled or professional. I need to break this thinking / pattern.
Andrea Meyer Apr 6th 2009 at 10:50 am 2
That?s an interesting point, Brett. I?ve found conferences to be a good way to meet new people of different specialties. They?re keeping up with their field and actively learning. Although they may not be actively seeking partnerships, opportunities can emerge from your conversations with them. Those great designers & developers you?re meeting may indeed be busy, but: a partnership with the right person could help both of you achieve something faster & better!
lawrence berezin Apr 6th 2009 at 06:49 pm 3
Andrea,
Excellent, thought provoking post, as usual. I think open innovation is a terrific idea. I question whether it is an executable strategy. I remember reading about GE vs. Westinghouse and the commitment GE made to R&D to promote long term growth; while Westinghouse disappeared. IBM out sourced much of its asset recovery business, and computer hardware business. But, it’s like letting the fox into the hen house.
Will co-equal partner’s trust each other? How will the fruits of their labor be shared? How do you prevent one party thinking the other party gained the better deal? How will it be managed. The contract may take longer to write then completing the project.
I always look forward to your insightful response.
Andrea Meyer Apr 7th 2009 at 05:53 am 4
Great questions, Larry! First, I think your point about contracts is key. Getting agreement at the outset about ownership of the intellectual property is a key factor in making open innovation an executable strategy. Gabriel A/S considers this aspect essential. Interestingly, Gabriel at times engages in open innovation projects with its competitors. Why does it do that? In those cases, the opportunity arising from the collaboration will bring more revenue and value than if both players tried to do it on their own and competed with each other.
To your point about IBM, IBM is actually pursuing open innovation in some areas (software) and not in others (advanced materials). Specifically, IBM embraced open innovation in software. Instead of registering hundreds (!) of patents, IBM made those patents available under “creative commons” terms. Why? Paul Horn, former head of research at IBM, said the company saved $400 million annually by using open-source software. (By using Linux, IBM taps the development power of thousands of programmers developing Linux at essentially no cost.) In the area of advanced materials, however, IBM continues to patent its innovations. In those arenas, IBM earns up to $1 billion in licensing fees. (Figures quoted from the Economist Report on Innovation, October 13, 2007) Why pursue a dual strategy? It may well be that in areas where high capital investment is required, the benefits of open innovation are outweighed by the benefits of direct R&D investment in equipping IBM’s own labs.
Christian de Neef (@CDN) has said that some companies are into open innovation because they BELIEVE in it, and others because they NEED it. As I see it, the cost savings or access to ideas may be the deciding factor. In either case, the contractual terms need to be established at the outset, so that it’s clear whether the resulting innovation will be owned jointly or not.
Christian DE NEEF Apr 23rd 2009 at 05:06 pm 5
Well, I have to react to this great post and conversation, because I’m mentioned above (Thank You!) but more importantly because I don’t feel comfortable with the actions presented (as conclusions?) after the Gabriel case:
– Looking for similar problems will probably lead to similar thinking, therefore similar solutions
– Most often the basis for innovation is technology (in the broadest sense), not products (which may however be jointly developed based on the technology)
As to WHY companies engage in Open Innovation, Alexander Schroll blogged about this several weeks ago already, to which I just replied: http://tinyurl.com/cxsuhs
@cdn
Andrea Meyer Apr 24th 2009 at 06:22 am 6
Thank you very much for your comments, Christian. ?My goals with the “Action” steps are not conclusions so much as suggested steps: if one wanted to emulate the company in the story, then these are the steps one might take.
Regarding your first point, I think that looking at similar problems outside your industry does provide an opportunity to find innovation: companies in different industries have been exposed to dissimilar materials, dissimilar manufacturing techniques, dissimilar manufacturing volumes, and dissimilar customer or consumer demands. ?Therefore, although one is looking at companies with similar problems, the environments and histories won’t be the same in those other companies and industries, and thus the solutions won’t be the same. I think there’s a fine balance: you want some similarity (so that the solution will work in your context) but not so much similarity that it’s not different from prior solutions.
I agree with your second point of clarifying the use of “product” in the broader sense: if you’re a plastic resin technology company, your “product” is the myriad formulations of plastic resins and the engineering services that help the buyer use those resins.
Christian DE NEEF Apr 26th 2009 at 07:52 am 7
Of course looking OUTSIDE YOUR INDUSTRY does provide an opportunity to find innovation! Not sure looking AT SIMILAR PROBLEMS is the way to go, though.
Solutions applied in dentistry could be applied usefully in automotive, or the other way around. That’s what many innovation management methods (such as TRIZ) are about! But then, it’s also not a panacea. It depends on what you need. And what you need can be defined on a continuum, from the simplest application of known solutions to the exceptional scientific discovery. KM is always a very important factor in this, especially for Open Innovation, because you won’t find what you don’t know exists! In our practice, we’ve given names to the Innovation levels (please note TRIZ talks about levels of Invention, not Innovation) and meaning also for KM http://tinyurl.com/c7jyb3.
@cdn
Andrea Meyer Apr 26th 2009 at 08:58 am 8
As I see it, the value of looking at similar problems is to maximize the probability of finding a workable innovation and minimize the cost of adapting that solution. This approach can be innovative (a new solution because you’ve adapted it from a different industry) and as well as practical (adapted at less cost and with greater chance of success than something far afield).
Thanks for your link (http://tinyurl.com/c7jyb3. ) — it looks like we’re talking about “borderling” here. I agree: innovation starts with a problem. The similarity of problem also may help in getting the conversation going: people are in different industries but share a common problem. That commonality can provide the starting point for conversation. But as you say, those conversations need to be nurtured & improved. Where else have you written about KM & Open Innovation? As a librarian by training, I’m particularly interested in that area. I’ve looked at http://www.processinnovation.blogspot.com/ and http://www.triz-journal.com/ but was hoping to find your views in particular on KM & OI.