Open to Innovation: Using an OI Portal
This article originally appeared in Outsource magazine Issue #32 Summer 2013.
For many sectors such as life sciences, FMCG and technology, the ability to innovate successfully and speedily is integral to the commercial viability and value of a company. This puts enormous pressure on R&D functions to create and develop new ideas and products.
Outsourcing R&D is an area where organisations tend to tread carefully due to their desire to protect intellectual property and maintain secrecy. But with very high associated costs of R&D functions and an equally high risk of project failure, outsourcing is a potentially attractive option. Moreover some organisations just do not have the required in-house expertise to innovate in specialist areas, particularly where technical developments may be evolving extremely rapidly. Subsequently over the past two decades outsourcing R&D and product development has become normalised among large corporates.
The Open Innovation (OI) Portal Option
One of the most fascinating options for companies is to choose an open or distributed innovation path, either as the focus of their innovation strategy, or as an element within it. Open or distributed innovation around R&D usually involves partnering up with multiple external parties of specialists and academics. They can provide the ideas, creativity, flexibility and special technical skills to successfully innovate. In turn the enterprise provide the financial muscle, commercial nous, experience, distribution channels and their own in-house R&D expertise to successfully bring products to market.
Nurturing strong relationships with networks of specialist organisations, academics and individuals is important for OI to succeed. However creating a specific web-based channel – a portal dedicated to open innovation – also provides an opportunity for organisations to invite submissions of ideas outside these networks, often from right across the globe.
Websites and software which help to manage the submission of ideas are now a relatively mature practice, with some providers around for over a decade. Ideas portals, which are often hosted in the cloud, are commonplace both internally (inviting ideas and responses to challenges from employees), and externally. Externally, there are idea portals which are specifically aimed at consumers and have an element of community engagement (MyStarBucksIdea.com is a prominent example of this), but then there are others which are principally B2B and can help to stimulate open innovation.
How an OI Portal Works
An OI portal is usually fairly straightforward, in that it consists of information about the company, the type of ideas it is looking for and the innovation process. It usually has a form where an idea can be submitted, giving enough information for the organisation running the portal to evaluate the potential of that idea.
The advantages of running open innovation through a portal are several-fold. Firstly it helps to manage the process and make it more efficient. Some organisations, particularly if they are consumer-facing, can find themselves deluged by people’s “lightbulb moments”, the vast majority of which have no commercial value. The effective filtering of ideas at the first hurdle not only reduces the potential administrative overhead, but it also means it is easier to pass on the relevant ideas to different functions within the organisation. Secondly the organisation can also specifically express the types of ideas it is interested in on a “Wants” or “Needs” list. Thirdly a portal helps to reduce risks by ensuring the submitter and the organisation are protected, by going through any relevant steps involving T&Cs or confidentiality agreements. For example a risk which often needs to be addressed is the “contamination” of ideas. This is where an idea similar to those the company is already working on is then submitted by a third party, raising the question of who owns the original idea.
Connect + Develop
One of the first Open Innovation portals was created by Procter & Gamble in 2000. Branded as “Connect + Develop”, the site was created as part of a strategy to source 50 per cent of innovation to external sources, supplementing the company’s existing R&D operations. The driver for this was not only to reduce growing costs, but also to bring in the extra creativity required to stimulate more innovation in the company.
Today Connect + Develop is still going strong, contributing to more than 2,000 commercial agreements with external partners as part of the firm’s Open Innovation strategy. The strategic aim of sourcing half of all Procter & Gamble’s product initiatives with significant collaboration involving external parties has been achieved. The firm’s commitment to the project has also been underlined by a new website redesign, as well as the creation of an additional “co-creation” site. This operates a slightly different model in that multiple competitions and challenges relating to new P&G products are issued to a pre-registered community of innovators who then submit, vote on and discuss potential solutions.
Open Innovation at Tate & Lyle
Despite the success of some OI portals like Connect + Develop, there are still relatively few companies using this method to source opportunities for open innovation. One of the few FTSE 100 companies that use an open innovation portal is Tate & Lyle. The global ingredients provider set up a portal in early 2013, and is just one of its approaches to open innovation. John Stewart, Director of Open Innovation, and responsible for developing and delivering the company’s strategy in this area, explains:
“At Tate & Lyle, open innovation means developing and commercialising new products and technologies by partnering with external innovators. We have a dedicated open innovation team and use a range of approaches, such as licensing and co-development, which are very much in line with well-established business development practises. We source new opportunities and carry out due diligence, as well as negotiating and closing commercial deals. We also recently launched our second venture capital fund, which is a £30m fund investing in high-growth food ingredient technology companies across the world.”
Stewart continues: “Creating an OI portal expands our reach to innovators outside our existing networks. We also want to provide potential partners with information on the areas we work in, which are speciality food ingredients. The site also helps give a sense of what it will be like to work with Tate & Lyle, as we have included some case studies from some of our recent open innovation partners.”
The site not only provides background information, but is also the starting point for submitting an idea. Interested parties complete a form with initial details, which is then reviewed by the Open Innovation Team.
Stewart explains: “If the opportunity falls outside our scope, we will quickly notify the submitter that it is not for us. If it looks promising, we will contact the submitter directly so the evaluation process can begin. So far the response has been good. We’re pleased with the number of submissions, with some high-quality opportunities.”
While Tate & Lyle has chosen to invest in an OI portal, it is not regarded as a replacement for building strong relationships with potential partners. Stewart advises: “Don’t expect an OI portal to be a substitute for anything you are already doing. You still have to focus on expanding your external networks. Most of all, a web portal will not build trust. Only face-to-face interaction can do that.”
Tate & Lyle chose to build their portal in-house using their existing web functionality, and also did not feel the need to outsource the day-to-day management of the idea submission process. Stewart explains that this is partly because Tate & Lyle is primarily a business-to-business company so receives a lower volume of submissions than a consumer-facing company might.
An example of a company who have decided to partner with a supplier to produce its open innovation portal is Kraft Foods. The company recently relaunched its innovation portal as the Kraft Foods Collaboration Kitchen, using provider Brightidea. This not only has allowed for a more focussed submission of ideas based on published needs, but also has an additional feature of an online community which can discuss the idea. Brightidea’s software platform also has the ability to integrate with other technologies such as SharePoint.
Another provider is Inno360 who host global packaging solutions company’s MeadWestvaco open innovation portal called MWK Exchange. The hosted platform not only facilitates the submission of ideas, but allows people submitting ideas to invite other registered users to collaborate with them.
Meanwhile Unilever has decided to outsource the day-to-day management of its OI portal to another provider, yet2, who also host the platform.
Emma Hughes, Managing Director of yet2’s European division, believes there are several advantages in outsourcing an OI portal. “It saves a huge amount of time and resource for companies. For example, we can take as little as eight weeks to get up and running. Instead of having to take the internal time and effort to build process workflows across multiple people and multiple organisations, yet2 takes over almost all of that workflow complexity. Companies don’t need to provide much support themselves, other than by providing an internal contact within the organization to acquaint yet2 with the company’s preferred needs and to help facilitate evaluations for proposed solutions that seem promising.”
Besides providing the platform, a major element of yet2’s service proposition is being able to filter ideas at the first hurdle, and providing levels of protection. Hughes explains “We have an expert team skilled in filtering out the interesting solutions from the less-interesting. Essentially we filter out all rubbish, check quality of submissions, and gather more non-confidential information so corporates can make decisions on information provided.
“But most importantly we protect companies from intellectual property ‘contamination’, ie, receiving in confidential information on topics our clients were already developing internally themselves. Providing a single-entry-point for receiving all external ideas provides enormous protection to small and large companies that haven’t previously had a protective system in place. A managed service also deals with the issues such as what you do with the proposed information once you have it and how do you initiate a negotiation without immediately tying up both the proposing and receiving organisations in legal knots?”
Dipping Your Toe in the OI Pond
Another outsourcing option which may be attractive for companies wanting to experiment with open innovation is to run a competition, inviting submissions to very specific challenges, usually setting aside some prize money. There are a number of platforms available, generally with a pre-registered community, where challenges can be posted. Like P&G’s Co-Creation site there may be opportunities for different teams and individuals to comment and collaborate to work on submitting potential solutions.
One of the oldest sites of this type is Innocentive, which regularly features challenges set by companies like Thomson-Reuters and GlaxoSmithKline. Some organisations, such as NASA, have their own branded “pavilions”. Many of the challenges set are very technical in nature. For example at the time of writing this article, a typical challenge on the site was “Chemical approaches for the degradation of a pesticide in a dilute aqueous solution”.
Overall as open innovation becomes an established option in the outsourcing landscape, it seems likely more companies will follow suit and create an OI portal like Tate & Lyle. As long as strong partnerships continue to be nurtured and successful products developed and launched, while concerns over risk negated, this will be an attractive option for the right sectors.