1. The power of open innovation
Leo Wildeman
Amsterdam, 20 November 2008
Atos, Atos and fish symbol, Atos Origin and fish symbol, Atos Consulting, and the fish itself are registered trademarks of Atos Origin SA. July 2008
© 2008 Atos Origin. Confidential information owned by Atos Origin, to be used by the recipient only. This document or any part of it, may not be reproduced, copied, circulated
and/or distributed nor quoted without prior written approval from Atos Origin.

2. Agenda
» Open Innovation
» Innovation in networks
» C
Conclusion
l i
ms08_116LW - 2

3. Innovation – traditional approach
For years companies innovated using a Closed Innovation perspective
Research Development
Markets
Research
projects
Firm
boundaries
Source: Chesbrough (2003)
Closed Innovation refers to a situation in which all innovation is developed internally and kept inside the
company. No knowledge flows into or out of the company
ms08_116LW - 3

4. Open Innovation – new approach
Companies revise their innovation strategy by moving towards an Open Innovation
model
Research Development
New market
Markets
Research
projects
Firm
boundaries
Source: Chesbrough (2003, 2006)
“Open I
“O Innovation i th use of purposive i fl
ti is the f d tfl
i inflows and outflows of knowledge t accelerate i t
fk l d to l t internal i l innovation,
ti
and expand the markets for external use of innovation, respectively”
ms08_116LW - 4

5. Research method – research process
The translation from theory to our Open Innovation questionnaire
Research process
» A literature study revealed five elements to look at:
» The maturity of the innovation strategy
» Mechanisms to acquire knowledge from outside the organization (outside in)
» Mechanisms to commercialize unused knowledge from inside the organization
(inside out)
» The extent to which employees and companies are externally oriented
(mindset)
» The success rate of innovation
» Developing a validated 64 question survey
» Gathering data from innovation and R&D managers
» Online survey
» Personal interviews
» Analysis of the data from more than 100 responses (70% Dutch, 11% USA and
19 % mainly Western Europe)
ms08_116LW - 5

6. Management processes
Spider web of overall results
4. Mindset 1.1 Innovation strategy 1. Innovation
1 I ti
4.8 Alliance management 1.2 Lead or lag Strategy
4.7 CVC management 1.3 Value chain strategy
4.6 Problem solving 1.4 Innovation management
4.5 Rewards 1.5 Knowledge management
4.4 Sharing ideas externally
4 4 Sh i id t ll 1.6
1 6 Product portfolio development
4.3 Legal department 1.7 Evaluation
4.2 Top management support 1.8 Problem solving
4.1 Company support of open innovation 1.9 External knowledge
3.11 Alliances 1.10 Business models
3.10 Collaboration in region 1.11 Business model vs time to market
3.9 Information intermediaries 2.1 Customers
3.8 Time to license IP 2.2 Suppliers
3.7 IP protection 2.3 Universities
3.6 Licensing partners 2.4 Enter in funnel
3.5 Out-licensing of IP
3 5 O t li i f 2.5 CVC in start-ups
3.4 External VC for spin-offs 2.6 Crowdsourcing
3. Inside out 2. Outside in
3.3 CVC to create new companies 2.7 Information intermediaries
3.2 External sales channels 2.8 Alliances
3.1 Exit from funnel 2.9 Brainstorms
2.13 Licensing partners
2 13 Li i t 2.10
2 10 Innovation climate in region
2.12 In-license IP 2.11 Collaboration in region
ms08_116LW - 6

7. Results – Financial sector
Financials
1.1 Innovation strategy
4.8 Alliance management 1.2 Lead or lag
4.7 CVC management 5 1.3 Value chain strategy
4. Mindset 4.6 Problem solving 1.4 Innovation management 1. Organization
4.5 Rewards 1.5 Knowledge management strategy
4
4.4 Sharing ideas externally
4 4 Sh i id t ll 1.6
1 6 Product portfolio development
4.3 Legal department 1.7 Evaluation
3
4.2 Top management support 1.8 Problem solving
4.1 Company support of open innovation 2 1.9 External knowledge
3.11 Alliances 1.10 Business models
1
3.10 Collaboration in region 1.11 Business model vs time to market
0
3.9 Information intermediaries 2.1 Customers
3.8 Time to license IP 2.2 Suppliers
3.7 IP protection 2.3 Universities
3.6 Licensing partners 2.4 Enter in funnel
3.5 Out-licensing of IP
3 5 O t li i f 2.5 CVC in start-ups
3. Inside out 3.4 External VC for spin-offs 2.6 Crowdsourcing 2. Outside in
3.3 CVC to create new companies 2.7 Information intermediaries
3.2 External sales channels 2.8 Alliances
3.1 Exit from funnel 2.9 Brainstorms
2.13 Licensing partners
2 13 Li i t 2.10
2 10 Innovation climate in region
2.12 In-license IP 2.11 Collaboration in region
ms08_116LW - 7

8. Results - Financial sector vs Best in Class
Financials
Best in class
1.1 Innovation strategy
4.8 Alliance management 1.2 Lead or lag
4.7 CVC management 5 1.3 Value chain strategy
4. Mindset 4.6 Problem solving 1.4 Innovation management 1. Organization
4.5 Rewards 1.5 Knowledge management strategy
4
4.4 Sharing ideas externally
4 4 Sh i id t ll 1.6
1 6 Product portfolio development
4.3 Legal department 1.7 Evaluation
3
4.2 Top management support 1.8 Problem solving
4.1 Company support of open innovation 2 1.9 External knowledge
3.11 Alliances 1.10 Business models
1
3.10 Collaboration in region 1.11 Business model vs time to market
0
3.9 Information intermediaries 2.1 Customers
3.8 Time to license IP 2.2 Suppliers
3.7 IP protection 2.3 Universities
3.6 Licensing partners 2.4 Enter in funnel
3.5 Out-licensing of IP
3 5 O t li i f 2.5 CVC in start-ups
3. Inside out 3.4 External VC for spin-offs 2.6 Crowdsourcing 2. Outside in
3.3 CVC to create new companies 2.7 Information intermediaries
3.2 External sales channels 2.8 Alliances
3.1 Exit from funnel 2.9 Brainstorms
2.13 Licensing partners
2 13 Li i t 2.10
2 10 Innovation climate in region
2.12 In-license IP 2.11 Collaboration in region
ms08_116LW - 8

9. Results – Financial sector vs
total population
Financials
Best in class
1.1 Innovation strategy
Average total sample
4.8 Alliance management 1.2 Lead or lag
4.7 CVC management 5 1.3 Value chain strategy
4. Mindset 4.6 Problem solving 1.4 Innovation management 1. Organization
4.5 Rewards 1.5 Knowledge management strategy
4
4.4 Sharing ideas externally
4 4 Sh i id t ll 1.6
1 6 Product portfolio development
4.3 Legal department 1.7 Evaluation
3
4.2 Top management support 1.8 Problem solving
4.1 Company support of open innovation 2 1.9 External knowledge
3.11 Alliances 1.10 Business models
1
3.10 Collaboration in region 1.11 Business model vs time to market
0
3.9 Information intermediaries 2.1 Customers
3.8 Time to license IP 2.2 Suppliers
3.7 IP protection 2.3 Universities
3.6 Licensing partners 2.4 Enter in funnel
3.5 Out-licensing of IP
3 5 O t li i f 2.5 CVC in start-ups
3. Inside out 3.4 External VC for spin-offs 2.6 Crowdsourcing 2. Outside in
3.3 CVC to create new companies 2.7 Information intermediaries
3.2 External sales channels 2.8 Alliances
3.1 Exit from funnel 2.9 Brainstorms
2.13 Licensing partners
2 13 Li i t 2.10
2 10 Innovation climate in region
2.12 In-license IP 2.11 Collaboration in region
ms08_116LW - 9

10. Management processes
The most and least used in Financial services
Most used management Least used management
processes processes
» Use of information » Innovation management
intermediaries
» Evaluation of innovation
» Brainstorms projects (!)
» Use of crowdsourcing
» Use of CVC
» Licensing
ms08_116LW - 10

11. Benefits of Open Innovation
Does it pay to implement Open Innovation principles?
Companies that have implemented Open Innovation…
» … successfully combine internal and external knowledge
» … have a statistically significant higher success rate of new
product introductions
» … generate statistically significant more revenue from
recently introduced products
» … are more satisfied with their innovation performance
ms08_116LW - 11

12. Agenda
» Open Innovation
» Innovation in networks
» C
Conclusion
l i
ms08_116LW - 12

13. Alliance Network in Flat Screens
2006 2007
2006-2007
In only 2 years 75% of the firms in the industry are directly or indirectly connected
ms08_116LW - 13

14. Decentralized network:
Horticulture sector 2007
Region
Cooperative
ms08_116LW - 14

15. Becoming a network orchestrator
Network orchestrators perform
N t k h t t f
the next tasks
» Recruit the right partners
» Ensure all partners have the right
incentives
» Define standards
» Develop business process focused
at meeting customer needs
» Be responsible for end product
» Encourage learning in the network
» Ensure correct governance
g
structure (consensus, coordination,
conflict resolution, planning,
progress)
ms08_116LW - 15

16. The Olympic Network
ms08_116LW - 16

17. The Olympic Network (2)
ms08_116LW - 17

18. Knowledge and innovation management
in networks: the key challenges
How to motivate
partners to share
knowledge?
Motivation
How t prevent
H to t
companies learning How to ensure the
but not sharing? right knowledge ends
up with the right
ith th i ht
partner quickly?
Free-riding Efficiency
Boundary- How to overcome
Source: adapted from Dyer and Nobeoka, 2000 crossing cultural, time,
knowledge gaps?
ms08_116LW - 18

19. METRO Group and the
Future Store Initiative
» Third largest retail chain worldwide
» Based in Germany
» Ai C t th retail store of the f t
Aim: Create the t il t f th future, to test technology and to enable METRO
t t tt h l dt bl
to distinguish itself
» 3 months contract for Intel to create a common solutions framework
» Project initiated: September 2002
» Store open: 2003 (existing store with most loyal clients and near the head office)
» Continuous innovation and roll out of new concepts to other METRO stores
ms08_116LW - 19

20. About 50 partners came together to build
the Future Store
Other Services (10) RFID (15)
» Boston Consulting Group » Ch k i t
Checkpoint
» DHL » Avery Dennison
» Visa Europe » Philips
Software (5) Retail Technology
» SAP and Services (9)
» Oracle
» Algotec
» Microsoft
» Mettler Toledo
» Wincor Nixdorf
IT Technology
and Services (9)
dS i
» IBM Brands (10)
» Intel » Coca Cola
» Fujitsu Siemens » Gillette
» Henkel
ms08_116LW - 20

21. Examples of new technologies and
services
» Self check out (IBM, NCR, AlgoTec)
» Electronic advertising displays (Cisco, Cittadino)
» P l h i
Personal shopping assistant (Wi
i t t (Wincor Nixdorf, Al T
Ni d f AlgoTec, IBM
IBM,
Fujitsu Siemens, Loyalty Partners)
» Intelligent scales (
g (Mettler Toledo, IBM, Cisco)
)
» Information terminals (IBM, Cittadino, Cisco, Wincor Nixdorf, Sonopress; content
provided by a.o. Henkel Schwarzkopf, Procter & Gamble, Kraft Foods)
» Electronic shelf labels (NCR)
» PDA for the staff (Hewlett Packard, Microsoft, Cisco)
» Wireless LAN by Cisco and Symbol Technologies
» Core RFID technology by SAP, IBM, Intermec Technologies, Intel, DHL, Philips,
Avery Dennison, CHEP
y ,
ms08_116LW - 21

22. Olympics Challenges
Highly visible and critical
g y
» No second chance
Complex project management
» Fixed Deadline
» Leading a Consortium of partners and suppliers without hierarchical control
» Integration of cultures, ways of working
Co p e systems
Complex syste s
» Massive Testing Program
Information Security
» Heterogeneous environment
» Real Time Risk Management
Knowledge management & transfer
A complex mix
Operations Readiness of technology,
» Quick staffing ramp-up close to the Games processes and people
» Training
» Huge deployment in short period of time
ms08_116LW - 22

23. Olympic innovations
Impacting the organizers…
» Transport: GPS, EAM, NFC, Smartcards
» Security :Smart CCTV, smartcards, biometrics,
digital identity, g
g y, granular security monitoring
y g
» Green IT: Video conferencing; Telepresence;
Virtualization, less paper, energy savings
» Construction-GIS; EAM, Flow simulation
» Ticketing / Accreditation /Visas: RFID, NFC,
Smartcards,
Smartcards biometrics
» Multimedia: storage, search engines
» Volunteers and staff: LBS e-learning YouJob
LBS, e learning,
(video CV)
» Sport: 3D/telemetry judging systems/visualization
ms08_116LW - 23

24. Olympic innovations
Impacting the spectators…
» Mobile displays of Real-time games » Mobile Payments for merchandising
actions and F&B
» “All-in-one” electronic ticket (one ticket » Location Aware/Based Services (child-
( (
for all events, embedded ID, “Olympic” locate-via mobile, nearest restaurants,
digital cash, transportation pass, push technology to alert about services
RFID,...)) when you are nearby)
y y)
» Multi-language services
ms08_116LW - 24

25. Olympic innovations
Impacting home viewers…
» Interactive TV – be your own director
» Mobile TV
» W b
Webcast
t
» 3D viewing
» Interactive gaming
» Web 2.0/3.0
» Wikis
» Blogs
» Virtual Games (Second Life)
» YouTube
ms08_116LW - 25

26. Managing innovation and knowledge
flows
» Goal alignment
» Value distribution
» Interpersonal Motivation » Co-location
relationships » Printed and electronic media
» Modularization
» Pressure cooker
Free-riding Efficiency
» Network identity
» Interpersonal relationships
» Sanctions
» Absorptive capacity
p p y
Boundary-
Boundary
» Direct communication
crossing
Both hard and soft elements play an important role
ms08_116LW - 26

27. Agenda
» Open Innovation
» Innovation in networks
» C
Conclusion
l i
ms08_116LW - 27

28. Managerial implications:
How to keep your network innovative?
» Strategize: connect narrowly defined goals of partners
» Pressurize: create a sense of urgency
» L li d boundaries i ti
Localize: reduce b d i in time and l
d location
ti
» Customize: each network requires different solutions
» Overshoot: the more the better
more,
» Specialize: modularization diminishes the need for coordination
ms08_116LW - 28

29. Key lessons for innovative networks
» Some of the most innovative networks combine strong financial incentives with a
very informal way of working
g y, y
» Long-term view is necessary, but by building on existing relations fast g
g g gains can be
had
» Networks raise new questions and problems (where to position, how to manage)…
» … but we have tools and frameworks available that help us getting a grip on
networks
» Networks have deep effects inside companies
ms08_116LW - 29

30. For more information:
Leo Wildeman
Executive partner
Papendorpseweg 93 3528 BJ Utrecht, The Netherlands
P d 93, Ut ht Th N th l d
Phone +31 (0)88 265 8635 Mobile +31 (0)6 51 343 800
leo.wildeman@atosorigin.com
www.atosconsulting.nl
ms08_116LW - 30

31. The power of open innovation
Leo Wildeman
Amsterdam, 20 November 2008
Atos, Atos and fish symbol, Atos Origin and fish symbol, Atos Consulting, and the fish itself are registered trademarks of Atos Origin SA. July 2008
© 2008 Atos Origin. Confidential information owned by Atos Origin, to be used by the recipient only. This document or any part of it, may not be reproduced, copied, circulated
and/or distributed nor quoted without prior written approval from Atos Origin.