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                         Collaboration in R&D:
                         The Emerging Frontiers of Innovation1
                         The paper examines the growing diversity of sources and the global possibilities for research and
                         development. It notes a consistent trend towards collaborative and decentralized ventures which
                         emphasize risk sharing, cost optimization and managing complex business relationships. There are
                         clear indications that new opportunities in IT influence the changing shape of innovation while they
                         support knowledge sharing and enable working across timezones. The paper reviews the international
                         experience of collaborative innovation in corporations, universities and the public sector and
                         identifies intellectual property markets and open source production as important and developing
                         models. Findings show that agile management of R&D production requires organizational, technical
                         and human approaches to sustain knowledge sharing networks. The paper recommends that
                         companies understand and focus their strategic position within collaborative research networks.

                                                                                                              José Cláudio Terra, Dr.

                         InTRoDuCTIon                                                    arise from anywhere in the world and are more likely
                                                                                         to arise from collaboration (internal and external) than
                         The continuous growth of corporate Research                     from individual work. It is also increasingly common
                         and Development (R&D) is a key indicator of                     for cutting-edge technologies to be developed by
                         the emergence of a knowledge-based economy.                     a number of different institutions, combining the
                         Although expensed for legal accounting reasons,                 skills of small and large organizations and private
                         R&D is in fact one of the key investments that                  and public organizations. Innovation in isolation is
                         promote future growth for firms and countries. The              no longer a viable option. There are a number of
                         product of R&D is knowledge that turns into new                 reasons for this trend:
                         products and services and that are acquired by
                         researchers, thereby spilling-over to the rest of the           • Technological advances have made remote
                         economy. Companies in the developed world, and                  collaboration much easier;
                         more recently in developing countries are increasing            • A new generation of researchers has been raised
                         their investments in R&D at a faster rate than the              with internet access and expecting to work and
                         overall economic growth. For instance, data from the            collaborate virtually.
                         US Department of Commerce shows that corporate                  • The innovation process increasingly requires
                         R&D grew from US$ 93.6 billion in 1994, to US$                  a combination of different skills, technologies and
                         164.5 billion in 2000, which means a compounded                 disciplines;
                         annual growth of 7.9% over this period.                         • The erosion of vertically integrated supply-chains
                                                                                         and the rapid emergence of horizontal supply-chains
                         Despite this surge in corporate R&D, the evidence               that include multiple layers of companies working
                         suggests that new innovations and technologies can              on different parts, components, sub-systems and

                         1
                             The author acknowledges the strong support and research assistance provided by Dr. Rupert Brown and David Kato.



                                                                                         © TerraForum Consultores                              1
Gestão da Inovação                                                        Collaboration in R&D: The Emerging Frontiers of Innovation



                                                                                                                       biblioteca
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                     platforms of new product offerings;                             increased collaboration, we examine a set of
                     • The growing complexity and uncertainty of                     specific recent trends that are helping to shape the
                     innovation leads to risk-sharing among different                new collaborative and global environment for R&D,
                     players;                                                        namely:
                     • The dramatic reduction of product life cycles                 1. Decentralization of R&D in large corporations
                     and increased importance of new products as a                   2. Collaboration: academics, universities and
                     percentage of total revenues;                                   Intellectual Property (IP)
                     • Offshoring and outsourcing of R&D is now an                   3. Government support for collaborative R&D
                     attractive option with advantages in labor costs;               4. Open source product development
                     • An increased number of countries are enforcing                5. Emergence of (IP) markets
                     intellectual property rights and offering tax-breaks
                     for R&D investments. Thus, new countries are                    1. DECEnTRALIZATIon oF R&D In
                     becoming possible hosts of R&D activity;                        LARGE CoRPoRATIonS
                     • In certain types of industries, it is now possible to
                     increase the speed of research by working around                Not too long ago, governments provided most of
                     the clock through two or three time zones;                      the funding for R&D in developed countries. This
                     • The emergence of organizations for hire totally               has changed dramatically over the last decade.
                     dedicated to developing new ideas and inventing                 The private sector has now become the main
                     new products2 (skunk works for hire);                           driver of R&D worldwide. Very large multinationals
                     • The rapid growth in the number of incubators                  have rapidly moved away from “Ivory Tower” R&D
                     of technology-based companies and the lower                     centers. In order to reduce labor costs and find
                     capital needs in some fields that provide interesting           innovative local solutions, these multinationals have
                     opportunities for entrepreneurs in knowledge-based              shifted to developing centers of competence spread
                     industries;                                                     in many developed countries and increasingly also
                     • Information and knowledge are spreading globally              in developing countries (specially in more traditional
                     much more rapidly as individuals and organizations              industries).
                     have ample online access to journal and patent
                     databases;                                                      Data shows that a number of large organizations
                     • The open-source approach to software                          are already decentralizing R&D (especially those
                     development that has migrated to other fields (e.g.             small developed countries such as Sweden, the
                     medicine);                                                      Netherlands and Switzerland). Figures show a
                     • Globalization has increased the need for the                  ready basis for extending international research
                     rapid creation, diffusion and adaptation of new                 participation, partnerships and collaboration3:
                     innovations. In many industries it is not longer                • European firms have the highest proportion of
                     possible to innovate with a focus in just one market.           R&D abroad (about 30 percent) – much in other
                     Other markets cannot be an afterthought.                        European countries.
                                                                                     • About 10-12 percent of American R&D and
                     In this context with many forces pushing towards                about 10 percent of Japanese R&D has been

                     2
                         Walker Digital, Invent Resources, Generics Group, Sarcos Research, Deka Research and Development are good examples.
                     Source: Schwartz E. I. (2004). Sparking the Fire of Invention Technology Review, May 2004.
                     3
                         Rycroft R. (2002). Technology-Based Globalization Indicators: The Centrality of Innovation Network Data. Elliott School of
                     International Affairs, George Washington University.



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                     internationalized.                                              applications10;
                     • Around 15 percent of patents granted in the U.S.                  o     AstraZeneca, a leading British firm, is
                     are generated by foreign subsidiaries of multinational          rapidly increasing its investments in RD in India11;
                     companies (MNCs).                                                   o     E.piphany (a US$ 100 million California-
                     • The share of patents generated by foreign MNC                 based software company) is outsourcing 30% to
                     subsidiaries in Europe is about 30 percent.                     40% of their engineers in China12;
                     • The most internationalized patenting takes place                  o     Data provided by the Unites States’
                     in older manufacturing sectors such as food and                 Department of Commerce shows that between 1991
                     paper products, while the least internationalization            and 2001, U.S. companies participated in more than
                     is in more complex sectors like semiconductors.                 4,600 research and technology alliances involving
                     • It is expected that in 2004, U.S. patent filings from         foreign countries. These alliances were particularly
                     foreign entities will surpass those from U.S. entities          strong in the IT and biotechnology industries,
                     for the first time4.                                            confirming that the fast-moving industries are those
                     • In countries such as Canada and the UK,                       that demand more collaboration and sharing of
                     foreign-funded RD accounts for nearly 25% of total             risks.
                     industrial RD5.
                     • RD performed by American companies abroad                    Two interesting examples of collaboration in product
                     jumped from US$ 4.6 billion in 1986 to about US$ 20             development highlight the kind of decentralization of
                     billion in 20006.                                               RD indicated by the data above:
                     • Interesting corporate examples include:
                          o     Procter  Gamble that has 40 percent of its          The dispute between Brazil’s Embraer and
                     8,000 research staff are outside North America7;                Canada’s Bombardier.
                          o     Nokia that has 18,000 engineers doing
                     RD work spread across 69 sites from Boston to                  Embraer was almost bankrupt in the mid-nineties.
                     Bangalore8;                                                     Yet it made the unlikely comeback to become the
                          o     UTStarcom, which has more than 1,400                 third largest commercial aircraft manufacturer in the
                     engineers in China and 150 engineers in India9;                 world surpassing Bombardier. How did this happen?
                          o     Alcatel, the French giant, raised its RD            How did a company from a developing country,
                     investment in Shanghai to $100 million for work                 competing in a high-tech market beat a once
                     on third-generation mobile infrastructure and                   superior, profitable and domineering competitor

                     3
                         Rycroft R. (2002). Technology-Based Globalization Indicators: The Centrality of Innovation Network Data. Elliott School of
                     International Affairs, George Washington University.
                     4
                         Schwartz E. I. (2004). Sparking the Fire of Invention Technology Review, May 2004.
                     5
                         National Science Board  National Science Foundation(2004). Science and Engineering Indicators 2004.
                     6
                         Walsh K. (2003). Foreign High-Tech RD in China: Risks, rewards, and implications for US-China relations. Henry L. Stimson
                     Center.
                     7
                          Debra Knopman et al (2003) Innovation and Change Management in Public and Private Organizations Rand Organization.
                     8
                         Kaihla P. (2002). Nokia’s Hit. Factory Business 2.0, August 2002.
                     9
                         Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003.
                     10
                         Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003.
                     11
                         Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003.
                     12
                         Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003.



                                                                                     © TerraForum Consultores
Gestão da Inovação                                                          Collaboration in RD: The Emerging Frontiers of Innovation



                                                                                                                           biblioteca
       www.terraforum.com.br



                     in less than a decade? Many factors include to                     who participate in this program are paid to earn a
                     this success, but one is probably at the forefront:                Master’s degree. The result is the churning out of
                     Embraer’s relative lack of funding and technical                   a new generation of scientists and engineers every
                     resources led the company to embrace a much                        year that are already helping Embraer to develop
                     more collaborative product development process                     new generation of planes.
                     than Bombardier. Embraer developed partnerships
                     with American, French, German and Brazilian                        Océ’s RD Networks
                     universities and with small and large organizations
                     from South America, USA, Japan and Europe.                         From the Netherlands, comes the interesting case
                     These included: Piper Aircraft Company, United                     of Océ. Océ is a leading Dutch company with
                     Technologies, Northrop, McDonnell Douglas, Parker
                                        s
                                                                                        18,000 employees (with 1,500 in RD) that is a
                     Hannifin (USA); Aermacchi, Microtecnica, Latecoere                 key competitor to Canon and Xerox in the high-end
                     (Italy), Kawasaki (Japan); Liebherr (Germany);                     copier market. According to Professor Roel Rutten,
                     Gamesa Group (Spain); Sonaca (Belgium) and                         who did a comprehensive study of the innovation
                     Enaer (Chile). The company headquarters came to                    process at Océ, the company made the major
                     resemble a United Nations camp with suppliers and                  change from having a closed RD environment to
                     partners from different continents, speaking different             creating an open innovation concept13:
                     languages, engaged in rapid product development
                     projects through risk-sharing contracts. Indeed,                   “In the early 1990s, the main purpose of the fence
                     Embraer became very similar to some of the finest                  around the site of Océ RD in Venlo, the Netherlands,
                     Japanese auto-maker producers that through the                     was to prevent knowledge from leaking out. Today,
                     tradition of keiretsu, engage suppliers, partners and              some 250 people from universities, engineering
                     clients in very open, trusting and shared destiny                  bureaus, software developers, and suppliers work
                     commitments.                                                       side by side with Océ engineers inside that fence14.
                                                                                        He goes on to say: “The fundamental RD is often
                     Most recently, Embraer has shown how innovation,                   done on a global scale, using the knowledge and
                     talent and collaboration have no limits. In great need             expertise of leading institutes and universities.
                     of young talents to build and work on new products                 Whether these institutes are located in Japan, the
                     and realizing that there was enough of a supply of                 United States, or the Netherlands is irrelevant.
                     qualified aeronautics engineers in Brazil, the company             What matters is that Océ acquires the knowledge
                     set up a very innovative in-house Master’s program                 it needs”15.
                     in Aeronautics to attract the best to work for them.
                     In order to establish the program, it carefully studied            . CoLLABoRATIon: ACADEMICS,
                     every engineering and related discipline programs                  unIVERSITIES AnD IP
                     in Brazilian universities. Then, it convinced different
                     universities and departments to team up together                   The academic community has traditionally
                     with Embraer’s own PhDs in order to develop a                      collaborated across institutions, geography
                     unique program to attend to the company’s most                     and languages. It has been known as the most
                     pressing needs. The young scientists and engineers                 cosmopolitan of all working categories employed by

                     13
                          Rutten R. (2003) Knowledge and Innovation in Regional Industry: an entrepreneurial coalition Routledge.
                     14
                          Ibid, page 24.
                     15
                          Ibid, page 26.



                                                                                        © TerraForum Consultores
Gestão da Inovação                                                          Collaboration in RD: The Emerging Frontiers of Innovation



                                                                                                                         biblioteca
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                     industry. However, this open approach has achieved                their equity four ways: 30% to the investors, 20%
                     unprecedented levels in recent years. The National                to the management, 25% to the university and 25%
                     Science Foundation data, for instance, shows that                 to the academics who did the original research. The
                     collaborative efforts are responsible for an increasing           department that fostered the research sees a direct
                     number of patents and publications and that these                 payback, too, by receiving 15% of the university’s
                     relationships are also constructed and operate                    profit when it sells its stake.
                     across borders. Scientists from developed and
                     developing countries are also rapidly increasingly                As industry-academia evolves, we are witnessing
                     the number of co-authorships with colleagues from                 the emergence of hybrid organizations. These are
                     other institutions, countries and regions16.                      being formed when there is a need for a number of
                                                                                       types of institutions to mobilize a research project.
                     Another important development in terms of RD                     A recent example is a post 9/11 military project:
                     collaboration involving academics is the recent                   The Institute for Soldier Nanotechnologies at MIT.
                     emergence of IP licensing companies. These                        It involves 8 academic departments, 6 international
                     companies are helping to unlock much of the                       companies, 5 small enterprise partners, 3 army
                     value tied up in intellectual property and to ensure              research institutions and open participation from the
                     that universities miss fewer opportunities for the                public through an annual Soldier Design Competition.
                     commercial application of outputs. This trend has led             Outputs range from armor to waterproofing to an
                     to much greater collaboration between RD labs and                artificial liver20.
                     industry. The results are already striking: American
                     universities received $1.1 billion in IP license                  The above example, although definitely an exception,
                     income during 200017. In 1980, only approximately                 points to the frontiers of collaboration in RD. Most
                     20 universities had technology licensing and transfer             firms, however, that engage in RD need to start,
                     offices. By 1990, this number has reached 200 and                 if they have not yet, looking into and mapping
                     currently almost all research universities in the U.S.            what is happening in the best universities in their
                     have one18. The same kind of change (although                     knowledge areas. Opportunities for collaboration
                     not with the same intensity) is occurring in other                and outsourcing are abundant in many fields.
                     countries, including developing ones such as Brazil.
                                                                                       . GoVERnMEnT SuPPoRT FoR
                     An interesting example of innovative industry-                    CoLLABoRATIVE RD
                     academia partnership comes from Britain. IP2IPO,
                     a British venture-capital firm is making a US$36m                 Firms can also expand their networks of RD
                     investment in Oxford University’s chemistry                       collaboration through monitoring (and influencing)
                     department19. The department produces 80 PhDs                     government’s role in fostering RD collaboration.
                     each year and US$18m in research income, with                     Almost all governments from developed nations
                     a growing stream of spin-outs. The university owns                have been increasing their support for collaborative,
                     the IP, not the researchers, and spin-outs now split              pre-commercial RD collaboration. The U.S., for

                     16
                          National Science Board  National Science Foundation(2004). Science and Engineering Indicators 2004.
                     17
                          The Economist (2003). Reinventing Europe. Economist Technology Quarterly, September 4th 2003.
                     18
                          Colyvas, J. et al (2002). How Do University Inventions Get Into Practice? Management Science, Jan 2002, 61-73.
                     19
                          The Economist (2003). Reinventing Europe. Economist Technology Quarterly, September 4th 2003.
                     20
                          MIT’s Institute for Soldier Nanotechnologies (ISN) http://web.mit.edu/isn/



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Gestão da Inovação                                                         Collaboration in RD: The Emerging Frontiers of Innovation



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                     instance, has had major federal legislation since                 commercial innovations. The institutes receive
                     the 80’s that provides support for collaborative                  50% of their funding from the government, 25%
                     RD. It includes the Stevenson-Wydler Technology                  from universities and 25% from industry. They were
                     Innovation Act (1980); the Bay-Dole University                    created by tapping the universities for ideas and
                     and Small Business Patent Act (1980); the Small                   then defining a series of technology areas for each
                     Business Innovation Development Act (1982); the                   of the institutes to focus on. The industrial partners
                     National Cooperative Research Act (1984) and the                  then chose which areas to back.”
                     Omnibus Trade and Competitiveness Act (1988).
                     These Acts have all been amended recently either to               . oPEn SouRCE PRoDuCT
                     relax restrictions on collaboration or to stimulate the           DEVELoPMEnT
                     transfer of knowledge from universities and federal
                     labs.                                                             Open source is an undeniable new phenomenon
                                                                                       that is shaking up traditional notions of collaboration
                     Japan and the European Union have even stronger                   for RD and product development. Open source
                     incentives for collaborative RD. At the end of the               means that the content, substance or code of any
                     eighties, 80% of the Japanese government budget                   application is open to anyone to view, improve,
                     for RD was already allocated to projects that                    extend, customize or share within the author’s rules.
                     involved the collaboration of industry consortia,                 Yochai Benkler, law professor at Yale University
                     research associations, universities and research                  gives open source a precise technical definition of
                     centers managed by groups of firms. Promotion                     “non-proprietary peer-production of information-
                     of cooperation in community research has been                     embedding goods”22. It also implies a research
                     a longstanding goal of European research policy.                  and development process that is collaborative and
                     Among recent examples coming from Europe, the                     most likely virtual. Open source software is having a
                     case of the Netherlands is worth citing21:                        serious impact on the US$90 billion software market
                                                                                       and boasts more and more widely recognizable
                     “The government there has formulated a €200m                      brands, for example: Linux (34% of web servers),
                     plan, known as the Netherlands Genomics Initiative                Apache (67% of web servers23), OpenOffice, ITRON
                     (NGI), to undertake genomics research and extract                 Kernel24, Mozilla and MySQL.
                     value from it. Industry and the universities have
                     been asked to propose research projects that can                  A very interesting article entitled “An open-source
                     contribute to the global genomics effort. The request             shot in the arm?” in The Economist25 magazine
                     has led to tenders for ten projects worth €50m a year             argues that open source research can also have an
                     over a five-year period. The NGI approach is similar              impact in other fields and disciplines, for instance
                     to one taken in the formation of the Netherlands’                 in biomedical research and on generic drugs.
                     Technological TOP Institutes, which undertake                     Open source research can be used to exploit non-
                     pre-competitive research that is meant to lead to                 patentable compounds, drugs whose patents have

                     21
                        The Economist (2003). Reinventing Europe. Economist Technology Quarterly, September 4th 2003.
                     22
                        The Economist (2004).An open-source shot in the arm? Economist Technology Quarterly, June 10th 2004.
                     23
                        Netcraft (2004) Web Server Survey 2004. Netcraft.com.
                     24
                        3 billion installations, 1984-2003. Source: Krikke J. (2003). The most popular operating system in the world. Linux Insider,
                     October 2003.
                     25
                        The Economist (2004).An open-source shot in the arm? Economist Technology Quarterly, June 10th 2004.



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                     expired and in developing treatments for diseases            • A large user-base specifies requirements,
                     that afflict small numbers of people, such as                participates in design reviews, beta testing and
                     Parkinson’s Disease, or are found mainly in poor             implementation of new systems.
                     countries, such as malaria. In these last cases, there       • Source code and other artifacts are available to
                     is not a large enough market of paying customers             customers – for them to identify issues earlier in the
                     to encourage large commercial organizations to               project lifecycle and to create a greater sense of
                     develop commercial solutions. Some open source               ownership.
                     biomedical research projects have stated that                • More than 50% of open source developers
                     should they find and patent a new treatment, it will be      participate in two or more projects and another 10%
                     licensed cheaply to pharmaceutical firms to ensure a         participate in 10 or more.
                     supply of drugs at low cost.                                 • Archiving of as much of the development process
                                                                                  as possible to protect a team’s knowledge base, in
                     The same article provides a concrete example                 the event of participant drop-out and sickness27.
                     similar to the open source research approach.
                     It describes how Dr. Peter Lansbury, of Harvard              With the exception of pro-bono, government-
                     Medical School, is examining the therapeutic effect          sponsored or pure academic research, it is hard to
                     of a thousand approved drugs on which the patent             imagine large, for-profit organizations engaging in
                     has expired in most cases. His laboratory, which has         open source product development. However, paying
                     approximately 25 researchers and an annual budget            attention to this emerging model of knowledge
                     of $2.5m, focuses its work on neurodegenerative              creation is a must for all firms. It is a process that,
                     diseases, such as Parkinson’s and Huntington’s, to           in some cases, can involve thousands of people
                     which the major commercial drug companies devote             across the world and generally includes young
                     few resources because of the small potential market.         professionals motivated to be recognized as experts
                     Dr Lansbury refers to his work as “not-for-profit drug       or, more often, because they want develop a feeling
                     discovery”. He sees direct parallels with the open-          of belonging to a knowledge community.
                     source approach in that (1) his group places much
                     of its data in the public domain, and (2) its goal is to     The next section, deals with the emergence of
                     involve other scientists around the world.                   Intellectual Property markets, a “cousin” of the open
                                                                                  source concept.
                     George Dafermos has examined the management
                     of open source production. He has found virtual              . EMERGEnCE oF InTELLECTuAL
                     networked organizations where geographically                 PRoPERTY (IP) MARKETS
                     dispersed knowledge workers virtually collaborated
                     on projects with barely any central planning and             The advent of virtual auctions, online showrooms and
                     co-ordination26. A number of elements of these               secure transactions and communications has allowed
                     networked projects were reported:                            the design of online spaces where IP and ideas can
                     • They rely heavily on web tools as modes of                 be showcased and purchased. These market spaces
                     communication, with automated communications                 are entering a consolidation phase and three models
                     archives, mailing lists  wikis.                             of market spaces have taken hold:

                     26
                        Dafermos, G.N. (2001) Management and Virtual Decentralised Networks: The Linux Project. First Monday, v.6 n.11.
                     27
                        Barret L. and Schwaber C. E.(2004). Firms can improve success rate by learning from open source software development.
                     Computer Weekly, June 2004.



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                     (1) All-in-one service. Generally includes a                       chemists in the states of the former Soviet Union,
                     contacts database, a matching service for seekers                  in India and in China. InnoCentive is an attempt to
                     and providers, submission of RFQs and project and                  explore how to access those communities via a Web
                     payment process. NineSigma and CanBioTech are                      site that posts specific problems in chemistry and a
                     good examples;                                                     financial bounty for the first viable solution”.

                     (2) Shop window or auction. This model openly                      MAnAGInG RD CoLLABoRATIon
                     displays technology wants and needs according
                     to the areas where expertise is sought. The range                  As highlighted by the data, ideas and cases above,
                     of sites varies from highly speculative, such as                   small and large organizations alike are looking into
                     NewIdeaTrade.com, to more specific such as Yet2.                   new ways to collaborate in RD collaboration. Even
                     com, an Internet ‘dating service’ for IP users and                 those that understand the need for collaboration
                     providers. Finally, there are sites with an extremely              and open concepts of innovation, also understand
                     tight industry focus like PharmaLicensing.Com. or                  that effective collaboration is not a given. As Robert
                     “2Rentacoder”, which currently has over 80,000                     Rycroft puts it29: “Discovering, transforming, and
                     registered programmers in its database and offers                  applying relevant tacit and explicit knowledge can
                     an environment similar to E-bay, but exclusively for               be an intimidating technological and organizational
                     software development contract work.                                challenge. Yet once learning processes are
                                                                                        established that make repeated innovation possible,
                     (3) Reward or challenge. These are usually                         a network may have a sustainable competitive
                     biotechnology and pure science sites that offer a                  advantage. The dynamic capabilities that result from
                     bounty for those who solve a problem or challenge                  rapid learning are difficult for competitors to replicate,
                     posted on the site in exchange for the intellectual                precisely because they are constantly evolving,
                     property rights of the innovation. Innocentive                     emerging [and developed through cumulative
                     [www.Innocentive.com] is a market leader and                       experiences30]. Thus, the overall advantages of
                     is underwritten by Eli Lilly and with the strong                   innovation networks seem to be substantial.”
                     participation of Procter and Gamble plus Dow and
                     BASF.                                                              Research indicates that successful interactive
                                                                                        learning triggers further cooperation. Firms that
                     Some of the ideas that initially pushed Eli Lilly (a               succeed at networking may become not only
                     US$ 11 billion company, with an annual US$ 2 billion               more adept at learning about the technological
                     RD budget) to invest in Innocentive were nicely                   dimensions of collaboration, but also more skilled in
                     summarized by its CIO W. Roy Dunbar28: “We’re very                 organizational dynamics that foster open, committed
                     clever within Lilly in Indianapolis headquarters, but              and yet flexible relationships with different players31.
                     we also recognize there are a lot of other clever folk
                     in other places. There are communities of world-class              Collaboration is also a matter of being tuned into the

                     28
                        Dunbar W. R. Thinking out loud. CIO Insight, October 2, 2002.
                     29
                        Rycroft R. (2003). Self-Organizing Innovation Networks: Implications for Globalization. Elliott School of International Affairs,
                     George Washington University.
                     30
                        Added by the author
                     31
                        Rycroft R. (2003). Self-Organizing Innovation Networks: Implications for Globalization. Elliott School of International Affairs,
                     George Washington University.



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                     environment and constantly monitoring it in order                   of pitfalls in terms of IP ownership, confidentiality
                     to rapidly spot potential emerging technologies                     conditions and non-competition issues. All these
                     coming from the same industry, adjacent industries,                 issues need careful management. Nevertheless,
                     universities, research institutes, etc. Organizations               without the strong will of leaders that understand the
                     engaged in paths of increased collaboration                         imperative of collaboration and develop a common
                     need an even sharper understanding of their own                     and exciting vision, people can become completely
                     competencies, skills and expertise as a way of both                 “caught up” in endless disputes around legal details
                     protecting these assets and finding complementary                   and end up losing sight of the big picture and the
                     partners. It is important to stress that managing                   need for forging ahead.
                     collaboration is not just a matter of wanting it.
                     Resources and time need to be managed effectively                   Trust and risk management are two sides of the
                     through a range of methodologies (product life                      same coin in the RD collaborative space. Trust is
                     cycle methodology) and software. As competition                     an important currency in today’s fast moving markets.
                     continuously heats up, the winners are likely to                    RD projects, however, are risky by nature and
                     be those that manage these collaborating skills                     collaborating with third parties may increase the risk.
                     effectively and strategically. In this context, knowledge           Thus, sorting out who and what to trust is a skill that
                     management has made important in-roads into RD                     people working in complex RD projects will need to
                     management. In fact, no other business function is                  master in order to make fairly rapid decisions about
                     more knowledge-intensive and more likely to benefit                 entering and leaving partnerships and new markets.
                     from typical KM approaches such as Communities
                     of Practice, After-action Review, Lessons Learned,                  According to a number of studies, only a few
                     Knowledge Portals, Yellow Pages and advanced                        organizations have managed a complete transition to
                     collaboration  communications tools.                               an open innovation and flexible RD infrastructure.
                                                                                         Those that have built up experience in this area
                     Sustaining adequate learning and knowledge                          have been labeled “complexity masters”32, i.e.
                     sharing requires, however, purposeful, continual                    organizations that can maintain multiplex knowledge
                     attention. The governance of collaboration must                     interfaces and connections between innovation and
                     be one based on reciprocity and shared-destiny,                     RD; sourcing, manufacturing, and delivery; and
                     instead of directives. Organizations that choose the                marketing, sales, and after-sales service33. Crossing
                     path of collaboration with third parties need strong                the frontiers of innovation requires a commitment to
                     skills in terms of holding open communication and                   a comprehensive effort to open and improve these
                     handling conflict as overtly as possible. In many                   channels so that ideas can flow from anywhere. With
                     fast-moving industries, companies will need to move                 data showing that by 2010, products representing
                     ahead without all the legal formal apparatus to which               more than 70 percent of today’s sales will be
                     they were accustomed in the past. More and more,                    defunct34, companies that do not understand this
                     important alliances are established based on broad                  new paradigm will likely fade away.
                     principles decided by senior leaders. This does not
                     mean that legal and formal planning is not required.                As a final word on managing RD collaboration, it
                     Collaborative RD is increasingly complex and full                  cannot be stressed enough how important it is to

                     32
                          Deloitte (2004). Mastering Innovation: Exploiting Ideas for Profitable Growth. Deloitte Global Benchmark Study p.1
                     33
                          Deloitte (2004). Mastering Innovation: Exploiting Ideas for Profitable Growth. Deloitte Global Benchmark Study p.10
                     34
                          Deloitte (2004). Mastering Innovation: Exploiting Ideas for Profitable Growth. Deloitte Global Benchmark Study p.3



                                                                                         © TerraForum Consultores
Gestão da Inovação                                                  Collaboration in RD: The Emerging Frontiers of Innovation



                                                                                                          biblioteca
       www.terraforum.com.br



                     understand one’s own place in these networks. Some                             ***
                     companies are great at integrating technologies,
                     others at developing innovative components               José Cláudio C. Terra é presidente da TerraForum
                     or providing superior process or manufacturing           Consultores. Atua como consultor e palestrante
                     capabilities. Usually, only a few companies are able     no Canadá, nos Estados Unidos, em Portugal,
                     to drive the innovation process in complex supply-       na França e no Brasil. Também é professor de
                     chains by closely monitoring and delivering the          vários programas de pós-graduação e MBA e
                     needs of final clients. Many companies participate       autor de vários livros sobre o tema. Seu email é
                     in many different networks as they broaden their         jcterra@terraforum.com.br
                     competencies into different markets. Most, however,
                     are better-off developing a strong focused position in
                     a vibrant network or integrated supply-chain.

                     LooKInG AHEAD
                     As humanity’s problems, challenges and goals
                     become increasingly more complex (e.g. dealing
                     with global warming, deciphering the Human
                     Genome, exploring space), the need for collective
                     intelligence and global RD can only increase in
                     importance. Scientists have been known to be
                     moved more by opportunities to make an impact
                     than by financial rewards. Current advances made
                     available by globalization and the internet are
                     allowing unprecedented collaboration opportunities
                     for the scientific community, from universities
                     and government agencies to small and large
                     corporations. Whether we will continue to make
                     steady progress towards increased collaboration
                     across organizational boundaries, locations, regions,
                     languages and cultures will depend heavily on an
                     increased ability to manage complexity, ambiguity,
                     risk and shared ownership; the fostering of more
                     trusting relationships; and developing an appropriate
                     communications infrastructure that helps to connect
                     the brain dots scattered around the globe.




                                                                              © TerraForum Consultores                     10
Gestão da Inovação                                                  Collaboration in RD: The Emerging Frontiers of Innovation



                                                                                                            biblioteca
       www.terraforum.com.br



                     REFEREnCES                                               Ramo, A. (2003). The China Syndrome. CFO
                                                                              Magazin, October 2003.
                     Barret L. and Schwaber C. E.(2004). Firms can
                     improve success rate by learning from open source        Rutten R. (2003) Knowledge and Innovation in
                     software development. Computer Weekly, June              Regional Industry: an entrepreneurial coalition
                     2004.                                                    Routledge.

                     Colyvas, J. et al (2002). How Do University Inventions   Rycroft R. (2002). Technology-Based Globalization
                     Get Into Practice? Management Science, Jan 2002,         Indicators: The Centrality of Innovation Network
                     61-73.                                                   Data. Elliott School of International Affairs, George
                                                                              Washington University.
                     Dafermos, G.N. (2001) Management and Virtual
                     Decentralised Networks: The Linux Project. First         Rycroft R. (2003). Self-Organizing Innovation
                     Monday, v.6 n.11.                                        Networks: Implications for Globalization. Elliott
                                                                              School of International Affairs, George Washington
                     Debra Knopman et al (2003) Innovation and Change         University.
                     Management in Public and Private Organizations
                     Rand Organization.                                       Schwartz E. I. (2004). Sparking the Fire of Invention.
                                                                              Technology Review, May 2004.
                     Deloitte (2004). Mastering Innovation: Exploiting
                     Ideas for Profitable Growth. Deloitte Global             The Economist (2003). Reinventing Europe.
                     Benchmark Study                                          Economist Technology Quarterly, September 4th
                                                                              2003.
                     Dunbar W. R. Thinking out loud. CIO Insight,
                     October 2, 2002.                                         The Economist (2004).An open-source shot in the
                                                                              arm? Economist Technology Quarterly, June 10th
                     Evan I. S. (2004) Sparking the Fire of Invention.        2004.
                     Technology Review, May 2004.
                                                                              Walsh K. (2003). Foreign High-Tech RD in China:
                     Kaihla P. (2002). Nokia’s Hit. Factory Business 2.0,     Risks, rewards, and implications for US-China
                     August 2002.                                             relations. Henry L. Stimson Center.

                     Krikke J. (2003). The most popular operating system
                     in the world. Linux Insider, October 2003.

                     National Science Board  National Science
                     Foundation(2004). Science and Engineering
                     Indicators 2004.

                     Netcraft (2004) Web Server Survey 2004. Netcraft.
                     com.




                                                                              © TerraForum Consultores                           11
Gestão da Inovação                                            Collaboration in RD: The Emerging Frontiers of Innovation



                                                                                                   biblioteca
       www.terraforum.com.br



                                                                       A EMPRESA
                                  ARTIGoS RELACIonADoS                 A TerraForum Consultores é uma empresa
                                                                       de consultoria e treinamento em Gestão do
                                                                       Conhecimento (GC) e Tecnologia da Informação. Os
           Cooperação e Compartilhamento: Construção de Riqueza?       clientes da empresa são, em sua maioria, grandes
                                     Conhecimento e Colaboração        e médias organizações dos setores público, privado
                       Poder e Compartilhamento de Conhecimento        e terceiro setor. A empresa atua em todo o Brasil
                 Obstáculos ao Compartilhamento do Conhecimento        e também no exterior, tendo escritórios em São
                                         Análise de Redes Sociais      Paulo, Brasília e Ottawa no Canadá. É dirigida pelo
                                                                       Dr. José Cláudio Terra, pioneiro e maior referência
                                                                       em Gestão do Conhecimento no país. Além disso,
                                                                       conta com uma equipe especializada e internacional
                                                                       de consultores.

                                                                       PuBLICAÇÕES TERRAFoRuM
                                                                       Winning at Collaboration Commerce

                                                                       Gestão do Conhecimento e E-learning na Prática

                                                                       Portais Corporativos, a Revolução na Gestão do
                                                                       Conhecimento

                                                                       Gestão do Conhecimento - O Grande Desafio
                                                                       Empresarial

                                                                       Gestão do Conhecimento em Pequenas e Médias
                                                                       Empresas

                                                                       Realizing the Promise of Corporate Portals:
                                                                       Leveraging Knowledge for Business Success

                                                                       Gestão de Empresas na Era do Conhecimento




                                                                       © TerraForum Consultores                         1

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Collaboration in R&D The Emerging Frontiers Of Innovation

  • 1. Gestão do Conhecimento Gestão da Inovação biblioteca Collaboration in R&D: The Emerging Frontiers of Innovation1 The paper examines the growing diversity of sources and the global possibilities for research and development. It notes a consistent trend towards collaborative and decentralized ventures which emphasize risk sharing, cost optimization and managing complex business relationships. There are clear indications that new opportunities in IT influence the changing shape of innovation while they support knowledge sharing and enable working across timezones. The paper reviews the international experience of collaborative innovation in corporations, universities and the public sector and identifies intellectual property markets and open source production as important and developing models. Findings show that agile management of R&D production requires organizational, technical and human approaches to sustain knowledge sharing networks. The paper recommends that companies understand and focus their strategic position within collaborative research networks. José Cláudio Terra, Dr. InTRoDuCTIon arise from anywhere in the world and are more likely to arise from collaboration (internal and external) than The continuous growth of corporate Research from individual work. It is also increasingly common and Development (R&D) is a key indicator of for cutting-edge technologies to be developed by the emergence of a knowledge-based economy. a number of different institutions, combining the Although expensed for legal accounting reasons, skills of small and large organizations and private R&D is in fact one of the key investments that and public organizations. Innovation in isolation is promote future growth for firms and countries. The no longer a viable option. There are a number of product of R&D is knowledge that turns into new reasons for this trend: products and services and that are acquired by researchers, thereby spilling-over to the rest of the • Technological advances have made remote economy. Companies in the developed world, and collaboration much easier; more recently in developing countries are increasing • A new generation of researchers has been raised their investments in R&D at a faster rate than the with internet access and expecting to work and overall economic growth. For instance, data from the collaborate virtually. US Department of Commerce shows that corporate • The innovation process increasingly requires R&D grew from US$ 93.6 billion in 1994, to US$ a combination of different skills, technologies and 164.5 billion in 2000, which means a compounded disciplines; annual growth of 7.9% over this period. • The erosion of vertically integrated supply-chains and the rapid emergence of horizontal supply-chains Despite this surge in corporate R&D, the evidence that include multiple layers of companies working suggests that new innovations and technologies can on different parts, components, sub-systems and 1 The author acknowledges the strong support and research assistance provided by Dr. Rupert Brown and David Kato. © TerraForum Consultores 1
  • 2. Gestão da Inovação Collaboration in R&D: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br platforms of new product offerings; increased collaboration, we examine a set of • The growing complexity and uncertainty of specific recent trends that are helping to shape the innovation leads to risk-sharing among different new collaborative and global environment for R&D, players; namely: • The dramatic reduction of product life cycles 1. Decentralization of R&D in large corporations and increased importance of new products as a 2. Collaboration: academics, universities and percentage of total revenues; Intellectual Property (IP) • Offshoring and outsourcing of R&D is now an 3. Government support for collaborative R&D attractive option with advantages in labor costs; 4. Open source product development • An increased number of countries are enforcing 5. Emergence of (IP) markets intellectual property rights and offering tax-breaks for R&D investments. Thus, new countries are 1. DECEnTRALIZATIon oF R&D In becoming possible hosts of R&D activity; LARGE CoRPoRATIonS • In certain types of industries, it is now possible to increase the speed of research by working around Not too long ago, governments provided most of the clock through two or three time zones; the funding for R&D in developed countries. This • The emergence of organizations for hire totally has changed dramatically over the last decade. dedicated to developing new ideas and inventing The private sector has now become the main new products2 (skunk works for hire); driver of R&D worldwide. Very large multinationals • The rapid growth in the number of incubators have rapidly moved away from “Ivory Tower” R&D of technology-based companies and the lower centers. In order to reduce labor costs and find capital needs in some fields that provide interesting innovative local solutions, these multinationals have opportunities for entrepreneurs in knowledge-based shifted to developing centers of competence spread industries; in many developed countries and increasingly also • Information and knowledge are spreading globally in developing countries (specially in more traditional much more rapidly as individuals and organizations industries). have ample online access to journal and patent databases; Data shows that a number of large organizations • The open-source approach to software are already decentralizing R&D (especially those development that has migrated to other fields (e.g. small developed countries such as Sweden, the medicine); Netherlands and Switzerland). Figures show a • Globalization has increased the need for the ready basis for extending international research rapid creation, diffusion and adaptation of new participation, partnerships and collaboration3: innovations. In many industries it is not longer • European firms have the highest proportion of possible to innovate with a focus in just one market. R&D abroad (about 30 percent) – much in other Other markets cannot be an afterthought. European countries. • About 10-12 percent of American R&D and In this context with many forces pushing towards about 10 percent of Japanese R&D has been 2 Walker Digital, Invent Resources, Generics Group, Sarcos Research, Deka Research and Development are good examples. Source: Schwartz E. I. (2004). Sparking the Fire of Invention Technology Review, May 2004. 3 Rycroft R. (2002). Technology-Based Globalization Indicators: The Centrality of Innovation Network Data. Elliott School of International Affairs, George Washington University. © TerraForum Consultores
  • 3. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br internationalized. applications10; • Around 15 percent of patents granted in the U.S. o AstraZeneca, a leading British firm, is are generated by foreign subsidiaries of multinational rapidly increasing its investments in RD in India11; companies (MNCs). o E.piphany (a US$ 100 million California- • The share of patents generated by foreign MNC based software company) is outsourcing 30% to subsidiaries in Europe is about 30 percent. 40% of their engineers in China12; • The most internationalized patenting takes place o Data provided by the Unites States’ in older manufacturing sectors such as food and Department of Commerce shows that between 1991 paper products, while the least internationalization and 2001, U.S. companies participated in more than is in more complex sectors like semiconductors. 4,600 research and technology alliances involving • It is expected that in 2004, U.S. patent filings from foreign countries. These alliances were particularly foreign entities will surpass those from U.S. entities strong in the IT and biotechnology industries, for the first time4. confirming that the fast-moving industries are those • In countries such as Canada and the UK, that demand more collaboration and sharing of foreign-funded RD accounts for nearly 25% of total risks. industrial RD5. • RD performed by American companies abroad Two interesting examples of collaboration in product jumped from US$ 4.6 billion in 1986 to about US$ 20 development highlight the kind of decentralization of billion in 20006. RD indicated by the data above: • Interesting corporate examples include: o Procter Gamble that has 40 percent of its The dispute between Brazil’s Embraer and 8,000 research staff are outside North America7; Canada’s Bombardier. o Nokia that has 18,000 engineers doing RD work spread across 69 sites from Boston to Embraer was almost bankrupt in the mid-nineties. Bangalore8; Yet it made the unlikely comeback to become the o UTStarcom, which has more than 1,400 third largest commercial aircraft manufacturer in the engineers in China and 150 engineers in India9; world surpassing Bombardier. How did this happen? o Alcatel, the French giant, raised its RD How did a company from a developing country, investment in Shanghai to $100 million for work competing in a high-tech market beat a once on third-generation mobile infrastructure and superior, profitable and domineering competitor 3 Rycroft R. (2002). Technology-Based Globalization Indicators: The Centrality of Innovation Network Data. Elliott School of International Affairs, George Washington University. 4 Schwartz E. I. (2004). Sparking the Fire of Invention Technology Review, May 2004. 5 National Science Board National Science Foundation(2004). Science and Engineering Indicators 2004. 6 Walsh K. (2003). Foreign High-Tech RD in China: Risks, rewards, and implications for US-China relations. Henry L. Stimson Center. 7 Debra Knopman et al (2003) Innovation and Change Management in Public and Private Organizations Rand Organization. 8 Kaihla P. (2002). Nokia’s Hit. Factory Business 2.0, August 2002. 9 Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003. 10 Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003. 11 Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003. 12 Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003. © TerraForum Consultores
  • 4. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br in less than a decade? Many factors include to who participate in this program are paid to earn a this success, but one is probably at the forefront: Master’s degree. The result is the churning out of Embraer’s relative lack of funding and technical a new generation of scientists and engineers every resources led the company to embrace a much year that are already helping Embraer to develop more collaborative product development process new generation of planes. than Bombardier. Embraer developed partnerships with American, French, German and Brazilian Océ’s RD Networks universities and with small and large organizations from South America, USA, Japan and Europe. From the Netherlands, comes the interesting case These included: Piper Aircraft Company, United of Océ. Océ is a leading Dutch company with Technologies, Northrop, McDonnell Douglas, Parker s 18,000 employees (with 1,500 in RD) that is a Hannifin (USA); Aermacchi, Microtecnica, Latecoere key competitor to Canon and Xerox in the high-end (Italy), Kawasaki (Japan); Liebherr (Germany); copier market. According to Professor Roel Rutten, Gamesa Group (Spain); Sonaca (Belgium) and who did a comprehensive study of the innovation Enaer (Chile). The company headquarters came to process at Océ, the company made the major resemble a United Nations camp with suppliers and change from having a closed RD environment to partners from different continents, speaking different creating an open innovation concept13: languages, engaged in rapid product development projects through risk-sharing contracts. Indeed, “In the early 1990s, the main purpose of the fence Embraer became very similar to some of the finest around the site of Océ RD in Venlo, the Netherlands, Japanese auto-maker producers that through the was to prevent knowledge from leaking out. Today, tradition of keiretsu, engage suppliers, partners and some 250 people from universities, engineering clients in very open, trusting and shared destiny bureaus, software developers, and suppliers work commitments. side by side with Océ engineers inside that fence14. He goes on to say: “The fundamental RD is often Most recently, Embraer has shown how innovation, done on a global scale, using the knowledge and talent and collaboration have no limits. In great need expertise of leading institutes and universities. of young talents to build and work on new products Whether these institutes are located in Japan, the and realizing that there was enough of a supply of United States, or the Netherlands is irrelevant. qualified aeronautics engineers in Brazil, the company What matters is that Océ acquires the knowledge set up a very innovative in-house Master’s program it needs”15. in Aeronautics to attract the best to work for them. In order to establish the program, it carefully studied . CoLLABoRATIon: ACADEMICS, every engineering and related discipline programs unIVERSITIES AnD IP in Brazilian universities. Then, it convinced different universities and departments to team up together The academic community has traditionally with Embraer’s own PhDs in order to develop a collaborated across institutions, geography unique program to attend to the company’s most and languages. It has been known as the most pressing needs. The young scientists and engineers cosmopolitan of all working categories employed by 13 Rutten R. (2003) Knowledge and Innovation in Regional Industry: an entrepreneurial coalition Routledge. 14 Ibid, page 24. 15 Ibid, page 26. © TerraForum Consultores
  • 5. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br industry. However, this open approach has achieved their equity four ways: 30% to the investors, 20% unprecedented levels in recent years. The National to the management, 25% to the university and 25% Science Foundation data, for instance, shows that to the academics who did the original research. The collaborative efforts are responsible for an increasing department that fostered the research sees a direct number of patents and publications and that these payback, too, by receiving 15% of the university’s relationships are also constructed and operate profit when it sells its stake. across borders. Scientists from developed and developing countries are also rapidly increasingly As industry-academia evolves, we are witnessing the number of co-authorships with colleagues from the emergence of hybrid organizations. These are other institutions, countries and regions16. being formed when there is a need for a number of types of institutions to mobilize a research project. Another important development in terms of RD A recent example is a post 9/11 military project: collaboration involving academics is the recent The Institute for Soldier Nanotechnologies at MIT. emergence of IP licensing companies. These It involves 8 academic departments, 6 international companies are helping to unlock much of the companies, 5 small enterprise partners, 3 army value tied up in intellectual property and to ensure research institutions and open participation from the that universities miss fewer opportunities for the public through an annual Soldier Design Competition. commercial application of outputs. This trend has led Outputs range from armor to waterproofing to an to much greater collaboration between RD labs and artificial liver20. industry. The results are already striking: American universities received $1.1 billion in IP license The above example, although definitely an exception, income during 200017. In 1980, only approximately points to the frontiers of collaboration in RD. Most 20 universities had technology licensing and transfer firms, however, that engage in RD need to start, offices. By 1990, this number has reached 200 and if they have not yet, looking into and mapping currently almost all research universities in the U.S. what is happening in the best universities in their have one18. The same kind of change (although knowledge areas. Opportunities for collaboration not with the same intensity) is occurring in other and outsourcing are abundant in many fields. countries, including developing ones such as Brazil. . GoVERnMEnT SuPPoRT FoR An interesting example of innovative industry- CoLLABoRATIVE RD academia partnership comes from Britain. IP2IPO, a British venture-capital firm is making a US$36m Firms can also expand their networks of RD investment in Oxford University’s chemistry collaboration through monitoring (and influencing) department19. The department produces 80 PhDs government’s role in fostering RD collaboration. each year and US$18m in research income, with Almost all governments from developed nations a growing stream of spin-outs. The university owns have been increasing their support for collaborative, the IP, not the researchers, and spin-outs now split pre-commercial RD collaboration. The U.S., for 16 National Science Board National Science Foundation(2004). Science and Engineering Indicators 2004. 17 The Economist (2003). Reinventing Europe. Economist Technology Quarterly, September 4th 2003. 18 Colyvas, J. et al (2002). How Do University Inventions Get Into Practice? Management Science, Jan 2002, 61-73. 19 The Economist (2003). Reinventing Europe. Economist Technology Quarterly, September 4th 2003. 20 MIT’s Institute for Soldier Nanotechnologies (ISN) http://web.mit.edu/isn/ © TerraForum Consultores
  • 6. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br instance, has had major federal legislation since commercial innovations. The institutes receive the 80’s that provides support for collaborative 50% of their funding from the government, 25% RD. It includes the Stevenson-Wydler Technology from universities and 25% from industry. They were Innovation Act (1980); the Bay-Dole University created by tapping the universities for ideas and and Small Business Patent Act (1980); the Small then defining a series of technology areas for each Business Innovation Development Act (1982); the of the institutes to focus on. The industrial partners National Cooperative Research Act (1984) and the then chose which areas to back.” Omnibus Trade and Competitiveness Act (1988). These Acts have all been amended recently either to . oPEn SouRCE PRoDuCT relax restrictions on collaboration or to stimulate the DEVELoPMEnT transfer of knowledge from universities and federal labs. Open source is an undeniable new phenomenon that is shaking up traditional notions of collaboration Japan and the European Union have even stronger for RD and product development. Open source incentives for collaborative RD. At the end of the means that the content, substance or code of any eighties, 80% of the Japanese government budget application is open to anyone to view, improve, for RD was already allocated to projects that extend, customize or share within the author’s rules. involved the collaboration of industry consortia, Yochai Benkler, law professor at Yale University research associations, universities and research gives open source a precise technical definition of centers managed by groups of firms. Promotion “non-proprietary peer-production of information- of cooperation in community research has been embedding goods”22. It also implies a research a longstanding goal of European research policy. and development process that is collaborative and Among recent examples coming from Europe, the most likely virtual. Open source software is having a case of the Netherlands is worth citing21: serious impact on the US$90 billion software market and boasts more and more widely recognizable “The government there has formulated a €200m brands, for example: Linux (34% of web servers), plan, known as the Netherlands Genomics Initiative Apache (67% of web servers23), OpenOffice, ITRON (NGI), to undertake genomics research and extract Kernel24, Mozilla and MySQL. value from it. Industry and the universities have been asked to propose research projects that can A very interesting article entitled “An open-source contribute to the global genomics effort. The request shot in the arm?” in The Economist25 magazine has led to tenders for ten projects worth €50m a year argues that open source research can also have an over a five-year period. The NGI approach is similar impact in other fields and disciplines, for instance to one taken in the formation of the Netherlands’ in biomedical research and on generic drugs. Technological TOP Institutes, which undertake Open source research can be used to exploit non- pre-competitive research that is meant to lead to patentable compounds, drugs whose patents have 21 The Economist (2003). Reinventing Europe. Economist Technology Quarterly, September 4th 2003. 22 The Economist (2004).An open-source shot in the arm? Economist Technology Quarterly, June 10th 2004. 23 Netcraft (2004) Web Server Survey 2004. Netcraft.com. 24 3 billion installations, 1984-2003. Source: Krikke J. (2003). The most popular operating system in the world. Linux Insider, October 2003. 25 The Economist (2004).An open-source shot in the arm? Economist Technology Quarterly, June 10th 2004. © TerraForum Consultores
  • 7. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br expired and in developing treatments for diseases • A large user-base specifies requirements, that afflict small numbers of people, such as participates in design reviews, beta testing and Parkinson’s Disease, or are found mainly in poor implementation of new systems. countries, such as malaria. In these last cases, there • Source code and other artifacts are available to is not a large enough market of paying customers customers – for them to identify issues earlier in the to encourage large commercial organizations to project lifecycle and to create a greater sense of develop commercial solutions. Some open source ownership. biomedical research projects have stated that • More than 50% of open source developers should they find and patent a new treatment, it will be participate in two or more projects and another 10% licensed cheaply to pharmaceutical firms to ensure a participate in 10 or more. supply of drugs at low cost. • Archiving of as much of the development process as possible to protect a team’s knowledge base, in The same article provides a concrete example the event of participant drop-out and sickness27. similar to the open source research approach. It describes how Dr. Peter Lansbury, of Harvard With the exception of pro-bono, government- Medical School, is examining the therapeutic effect sponsored or pure academic research, it is hard to of a thousand approved drugs on which the patent imagine large, for-profit organizations engaging in has expired in most cases. His laboratory, which has open source product development. However, paying approximately 25 researchers and an annual budget attention to this emerging model of knowledge of $2.5m, focuses its work on neurodegenerative creation is a must for all firms. It is a process that, diseases, such as Parkinson’s and Huntington’s, to in some cases, can involve thousands of people which the major commercial drug companies devote across the world and generally includes young few resources because of the small potential market. professionals motivated to be recognized as experts Dr Lansbury refers to his work as “not-for-profit drug or, more often, because they want develop a feeling discovery”. He sees direct parallels with the open- of belonging to a knowledge community. source approach in that (1) his group places much of its data in the public domain, and (2) its goal is to The next section, deals with the emergence of involve other scientists around the world. Intellectual Property markets, a “cousin” of the open source concept. George Dafermos has examined the management of open source production. He has found virtual . EMERGEnCE oF InTELLECTuAL networked organizations where geographically PRoPERTY (IP) MARKETS dispersed knowledge workers virtually collaborated on projects with barely any central planning and The advent of virtual auctions, online showrooms and co-ordination26. A number of elements of these secure transactions and communications has allowed networked projects were reported: the design of online spaces where IP and ideas can • They rely heavily on web tools as modes of be showcased and purchased. These market spaces communication, with automated communications are entering a consolidation phase and three models archives, mailing lists wikis. of market spaces have taken hold: 26 Dafermos, G.N. (2001) Management and Virtual Decentralised Networks: The Linux Project. First Monday, v.6 n.11. 27 Barret L. and Schwaber C. E.(2004). Firms can improve success rate by learning from open source software development. Computer Weekly, June 2004. © TerraForum Consultores
  • 8. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br (1) All-in-one service. Generally includes a chemists in the states of the former Soviet Union, contacts database, a matching service for seekers in India and in China. InnoCentive is an attempt to and providers, submission of RFQs and project and explore how to access those communities via a Web payment process. NineSigma and CanBioTech are site that posts specific problems in chemistry and a good examples; financial bounty for the first viable solution”. (2) Shop window or auction. This model openly MAnAGInG RD CoLLABoRATIon displays technology wants and needs according to the areas where expertise is sought. The range As highlighted by the data, ideas and cases above, of sites varies from highly speculative, such as small and large organizations alike are looking into NewIdeaTrade.com, to more specific such as Yet2. new ways to collaborate in RD collaboration. Even com, an Internet ‘dating service’ for IP users and those that understand the need for collaboration providers. Finally, there are sites with an extremely and open concepts of innovation, also understand tight industry focus like PharmaLicensing.Com. or that effective collaboration is not a given. As Robert “2Rentacoder”, which currently has over 80,000 Rycroft puts it29: “Discovering, transforming, and registered programmers in its database and offers applying relevant tacit and explicit knowledge can an environment similar to E-bay, but exclusively for be an intimidating technological and organizational software development contract work. challenge. Yet once learning processes are established that make repeated innovation possible, (3) Reward or challenge. These are usually a network may have a sustainable competitive biotechnology and pure science sites that offer a advantage. The dynamic capabilities that result from bounty for those who solve a problem or challenge rapid learning are difficult for competitors to replicate, posted on the site in exchange for the intellectual precisely because they are constantly evolving, property rights of the innovation. Innocentive emerging [and developed through cumulative [www.Innocentive.com] is a market leader and experiences30]. Thus, the overall advantages of is underwritten by Eli Lilly and with the strong innovation networks seem to be substantial.” participation of Procter and Gamble plus Dow and BASF. Research indicates that successful interactive learning triggers further cooperation. Firms that Some of the ideas that initially pushed Eli Lilly (a succeed at networking may become not only US$ 11 billion company, with an annual US$ 2 billion more adept at learning about the technological RD budget) to invest in Innocentive were nicely dimensions of collaboration, but also more skilled in summarized by its CIO W. Roy Dunbar28: “We’re very organizational dynamics that foster open, committed clever within Lilly in Indianapolis headquarters, but and yet flexible relationships with different players31. we also recognize there are a lot of other clever folk in other places. There are communities of world-class Collaboration is also a matter of being tuned into the 28 Dunbar W. R. Thinking out loud. CIO Insight, October 2, 2002. 29 Rycroft R. (2003). Self-Organizing Innovation Networks: Implications for Globalization. Elliott School of International Affairs, George Washington University. 30 Added by the author 31 Rycroft R. (2003). Self-Organizing Innovation Networks: Implications for Globalization. Elliott School of International Affairs, George Washington University. © TerraForum Consultores
  • 9. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br environment and constantly monitoring it in order of pitfalls in terms of IP ownership, confidentiality to rapidly spot potential emerging technologies conditions and non-competition issues. All these coming from the same industry, adjacent industries, issues need careful management. Nevertheless, universities, research institutes, etc. Organizations without the strong will of leaders that understand the engaged in paths of increased collaboration imperative of collaboration and develop a common need an even sharper understanding of their own and exciting vision, people can become completely competencies, skills and expertise as a way of both “caught up” in endless disputes around legal details protecting these assets and finding complementary and end up losing sight of the big picture and the partners. It is important to stress that managing need for forging ahead. collaboration is not just a matter of wanting it. Resources and time need to be managed effectively Trust and risk management are two sides of the through a range of methodologies (product life same coin in the RD collaborative space. Trust is cycle methodology) and software. As competition an important currency in today’s fast moving markets. continuously heats up, the winners are likely to RD projects, however, are risky by nature and be those that manage these collaborating skills collaborating with third parties may increase the risk. effectively and strategically. In this context, knowledge Thus, sorting out who and what to trust is a skill that management has made important in-roads into RD people working in complex RD projects will need to management. In fact, no other business function is master in order to make fairly rapid decisions about more knowledge-intensive and more likely to benefit entering and leaving partnerships and new markets. from typical KM approaches such as Communities of Practice, After-action Review, Lessons Learned, According to a number of studies, only a few Knowledge Portals, Yellow Pages and advanced organizations have managed a complete transition to collaboration communications tools. an open innovation and flexible RD infrastructure. Those that have built up experience in this area Sustaining adequate learning and knowledge have been labeled “complexity masters”32, i.e. sharing requires, however, purposeful, continual organizations that can maintain multiplex knowledge attention. The governance of collaboration must interfaces and connections between innovation and be one based on reciprocity and shared-destiny, RD; sourcing, manufacturing, and delivery; and instead of directives. Organizations that choose the marketing, sales, and after-sales service33. Crossing path of collaboration with third parties need strong the frontiers of innovation requires a commitment to skills in terms of holding open communication and a comprehensive effort to open and improve these handling conflict as overtly as possible. In many channels so that ideas can flow from anywhere. With fast-moving industries, companies will need to move data showing that by 2010, products representing ahead without all the legal formal apparatus to which more than 70 percent of today’s sales will be they were accustomed in the past. More and more, defunct34, companies that do not understand this important alliances are established based on broad new paradigm will likely fade away. principles decided by senior leaders. This does not mean that legal and formal planning is not required. As a final word on managing RD collaboration, it Collaborative RD is increasingly complex and full cannot be stressed enough how important it is to 32 Deloitte (2004). Mastering Innovation: Exploiting Ideas for Profitable Growth. Deloitte Global Benchmark Study p.1 33 Deloitte (2004). Mastering Innovation: Exploiting Ideas for Profitable Growth. Deloitte Global Benchmark Study p.10 34 Deloitte (2004). Mastering Innovation: Exploiting Ideas for Profitable Growth. Deloitte Global Benchmark Study p.3 © TerraForum Consultores
  • 10. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br understand one’s own place in these networks. Some *** companies are great at integrating technologies, others at developing innovative components José Cláudio C. Terra é presidente da TerraForum or providing superior process or manufacturing Consultores. Atua como consultor e palestrante capabilities. Usually, only a few companies are able no Canadá, nos Estados Unidos, em Portugal, to drive the innovation process in complex supply- na França e no Brasil. Também é professor de chains by closely monitoring and delivering the vários programas de pós-graduação e MBA e needs of final clients. Many companies participate autor de vários livros sobre o tema. Seu email é in many different networks as they broaden their jcterra@terraforum.com.br competencies into different markets. Most, however, are better-off developing a strong focused position in a vibrant network or integrated supply-chain. LooKInG AHEAD As humanity’s problems, challenges and goals become increasingly more complex (e.g. dealing with global warming, deciphering the Human Genome, exploring space), the need for collective intelligence and global RD can only increase in importance. Scientists have been known to be moved more by opportunities to make an impact than by financial rewards. Current advances made available by globalization and the internet are allowing unprecedented collaboration opportunities for the scientific community, from universities and government agencies to small and large corporations. Whether we will continue to make steady progress towards increased collaboration across organizational boundaries, locations, regions, languages and cultures will depend heavily on an increased ability to manage complexity, ambiguity, risk and shared ownership; the fostering of more trusting relationships; and developing an appropriate communications infrastructure that helps to connect the brain dots scattered around the globe. © TerraForum Consultores 10
  • 11. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br REFEREnCES Ramo, A. (2003). The China Syndrome. CFO Magazin, October 2003. Barret L. and Schwaber C. E.(2004). Firms can improve success rate by learning from open source Rutten R. (2003) Knowledge and Innovation in software development. Computer Weekly, June Regional Industry: an entrepreneurial coalition 2004. Routledge. Colyvas, J. et al (2002). How Do University Inventions Rycroft R. (2002). Technology-Based Globalization Get Into Practice? Management Science, Jan 2002, Indicators: The Centrality of Innovation Network 61-73. Data. Elliott School of International Affairs, George Washington University. Dafermos, G.N. (2001) Management and Virtual Decentralised Networks: The Linux Project. First Rycroft R. (2003). Self-Organizing Innovation Monday, v.6 n.11. Networks: Implications for Globalization. Elliott School of International Affairs, George Washington Debra Knopman et al (2003) Innovation and Change University. Management in Public and Private Organizations Rand Organization. Schwartz E. I. (2004). Sparking the Fire of Invention. Technology Review, May 2004. Deloitte (2004). Mastering Innovation: Exploiting Ideas for Profitable Growth. Deloitte Global The Economist (2003). Reinventing Europe. Benchmark Study Economist Technology Quarterly, September 4th 2003. Dunbar W. R. Thinking out loud. CIO Insight, October 2, 2002. The Economist (2004).An open-source shot in the arm? Economist Technology Quarterly, June 10th Evan I. S. (2004) Sparking the Fire of Invention. 2004. Technology Review, May 2004. Walsh K. (2003). Foreign High-Tech RD in China: Kaihla P. (2002). Nokia’s Hit. Factory Business 2.0, Risks, rewards, and implications for US-China August 2002. relations. Henry L. Stimson Center. Krikke J. (2003). The most popular operating system in the world. Linux Insider, October 2003. National Science Board National Science Foundation(2004). Science and Engineering Indicators 2004. Netcraft (2004) Web Server Survey 2004. Netcraft. com. © TerraForum Consultores 11
  • 12. Gestão da Inovação Collaboration in RD: The Emerging Frontiers of Innovation biblioteca www.terraforum.com.br A EMPRESA ARTIGoS RELACIonADoS A TerraForum Consultores é uma empresa de consultoria e treinamento em Gestão do Conhecimento (GC) e Tecnologia da Informação. Os Cooperação e Compartilhamento: Construção de Riqueza? clientes da empresa são, em sua maioria, grandes Conhecimento e Colaboração e médias organizações dos setores público, privado Poder e Compartilhamento de Conhecimento e terceiro setor. A empresa atua em todo o Brasil Obstáculos ao Compartilhamento do Conhecimento e também no exterior, tendo escritórios em São Análise de Redes Sociais Paulo, Brasília e Ottawa no Canadá. É dirigida pelo Dr. José Cláudio Terra, pioneiro e maior referência em Gestão do Conhecimento no país. Além disso, conta com uma equipe especializada e internacional de consultores. PuBLICAÇÕES TERRAFoRuM Winning at Collaboration Commerce Gestão do Conhecimento e E-learning na Prática Portais Corporativos, a Revolução na Gestão do Conhecimento Gestão do Conhecimento - O Grande Desafio Empresarial Gestão do Conhecimento em Pequenas e Médias Empresas Realizing the Promise of Corporate Portals: Leveraging Knowledge for Business Success Gestão de Empresas na Era do Conhecimento © TerraForum Consultores 1