3. Current Environment
Medical Innovation Centers
Most Centers offer
Innovation Conferences.
Internal Research.
The best models offer
education programs
and venture funding.
Examples: Tech Starts,
Y-Combinator, and LA
Corporations
Gov’t and Foundations
Want more applied research.
Increased funding for
interdisciplinary teams.
Incubators
LaunchPad.
Most started venture firms. CEOs worry
internal R&D is slow, and interested in
working with Universities. Source: CEOs of
large corporations
Confidential
Venture Capital Firms
A lot of funding and can’t do
small deals.
Billion Dollar Funds
Source: NSF
executive.
Universities
Entrepreneurship
is increasing and
is not a fad.
Ross B-School
– 21 courses.
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4. U.S. Challenges
The US is facing three critical challenges:
1. US national labs and universities concentrate on scientific research stopping at the patent
stage and have no development capability or charter to commercialize an innovation.
2. The US Fortune 100 corporations produce over 1,000 patents a year that are never
developed. The companies require a greater than 30% ROI in the first year of sales before
authorizing the development of a new product which is impossible to achieve.
3. Most Fortune 500 companies have limited or no resources to commercialize new products
because they outsourced the development and/or production process to foreign suppliers.
The Past Development Cycle (see below), shows how the linkage use to occur between the
three processes allowing corporations to find new ideas or additional features from
customers, suppliers, and employees during the production phase of the cycle.
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5. Technology Shifts
The technology world is moving away from apps, software, and circuit
hardware to data collection devices, learning tools, and medical solutions.
Another paradigm shift is beginning in the technology development arena.
The first “S” curve below shows how the current technological
developments are slowing because of the current technologies are limited
by new breakthroughs.
Technology Development
12/5/2014 Time
5
Existing
Technology
New
Technology
Newer
Technology
“S”
Curve
2000 2015 2025
6. Trend Process
Internet Search
Industry
Experts
Blog
Search
Conferences
Journalists
Competitors
Academics
Venture Capitalists
12/5/2014 6
7. Trend Assessment Research Flow
Expanded
Interviews
•
Distillation
of Trends
Trends
Filtration
Compilation of
Research and
Interview Results
Subject Journals
Web Research
Books
Identification of Subject
Experts
Conference Identification
Initial Interviews
Conference
Attendance
8. Open Innovation model
Welcoming Outside
Ideas into the
Internal R&D Process
opening up
boundaries to
Outside World
through licensing,
spin-offs & divesting
Exit; Exit need not be
to Kill the Idea
8
● Paradigm shift of
● Paradigm Shift of
● Every Idea has an
● Access to Variety of
IP & Technology
● Wider Portfolio at a
Lower Cost
Source: Henry Chesbrough’s work (2003) on Open Innovation and Open Business Models
9. Open Innovation Model - Benefits
12/5/2014 9
Source: Presentation PDMA 2009, adapted from Henry Chesbrough, Harvard Business School Press, 2006
10. Open Innovation Cycle
Limited
Funds
Limited
Resources
Pipelined
Products
Internal
Ideas
10
Broader portfolio
leads to increased
revenues and
reduced risk
New ideas and new
technologies feed
successful product
pipeline
Focused innovation
leverages more
resources
More resources and
collaborators allow
access to wider
resource base
● Suited for both Revolutionary & Incremental Innovation
● Effective Use of Resources
● Reduces Risk
11. Innovation Culture
• Innovation Culture has to
Start with Leadership
• Set goals which can Only be
Achieved using Innovation
• Infrastructure to adopt
Innovation as a Corporate
Culture
• Provide Resources (talent,
cash and time) to Support
Innovation
• Provide training in
Innovation Framework
• Define and measure
Innovation Metrics
Leadership Vision & Commitment
Innovation
Culture
Innovation
Fund
Deal
Sourcing
Screening
Process
Portfolio
Valuation
Portfolio
Management
“Don’t just talk about innovation, be about it” *
* Innovation To The Core by Peter Skarzynski and Rowan Gibson 11
12. Open Innovation Process
Deal Sourcing
Innovation
Accelerator
Open
Innovation
Collaborators
Company
Staff
Individual
s
Facilitator
s
Startups
Biotech
Universiti
es
Portfolio
Re-Valuation
Valuation
Valuation
Exit /
Write-off
Addition
al
Funding
Licensing
Spinouts
M & A
Portfolio
Management
Investment
Portfolio
Screening Process
Financial
Fit
Analysis
Strategic
Fit
Analysis
Quick Fit
Analysis
Initial Screening
Strategic Fit
Financial Fit
12/5/2014 12
13. Open Innovation Fund - Needs
● Current R&D spending is Focused mainly on
Incremental Innovation
● Current VC Fund is not aligned with R&D
needs
● Goals of Current R&D Spending and VC funds
are not aligned for Open Innovation
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14. Open Innovation Fund
Angel
Investing Venture
Innovation
Fund
Capital
Incubator
Line of
Debt
Private
Equity
Crowd
sourcing
Joint
Ventures
Debt Outsourcing
Acquisition
Research
Grants
University
Grants
Investment
Investment
Equity
Co-investments
12/5/2014 14
15. Open Innovation Ecosystem
15
Exit
Add’l
Funding
Status
Report
Alliance
Mgt
Financial
Fit
Balancing
Risk
Quick
Fit
Strategic
Fit
Other
Funding
Sources
Portion
of R&D
Budget
Leadership
Vision &
Commitment
Innovation
Fund
Innovation
Culture
Portfolio
Valuation
Portfolio
Management
Screening
Process
Deal
Sourcing
17. Implications for Michigan
A profound effect on Michigan’s economy from 1946 to 1972,
Willow Run Laboratories in the Ann Arbor area, was one of only six
labs existing in the US
• Creating hundreds of companies like Merit Systems (internet),
KMS Fusion, Sensors Inc., Clarke Instruments, and Irwin
Magnetics
• Bringing thousands of jobs to Michigan
Succumbing to political pressures the facility was closed in 1972
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18. Traditional R&D Cycle
Description
• Considered as Closed
Innovation
• Funding Depends on Year-to-
year Profitability
• Limited to Internal Talent
• Essentially a “Make”
strategy
• Fully Owned and Financed
by the Company
Key Issues
● Relatively Limited Portfolio
with Limited Number of
Leads
● Can only fund Limited
Projects
● Relatively difficult to get
Radical Innovations
● Missing the opportunities
to “Collaborate” and “Sell”
● Limited by Internal
Processes, Technologies,
Time Constraints, and
Methodologies
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20. Books List
• The Innovator's Solution: Creating and Sustaining Successful Growth by Clayton M.
Christensen and Michael E. Raynor (Sep 2003)
• Making Innovation Work: How to Manage It, Measure It, and Profit from It by Tony
Davila, Marc J. Epstein, Robert Shelton (August 1, 2005)
• Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business by
Jeff Howe (Sep 15, 2009)
• The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation
by A.G. Lafley , Ram Charan (April 8, 2008)
• The Myths of Innovation : By Scott Berkun (August 2010)
• Seeing What’s Next : Using the Theories of Innovation to predict Industry change by
Clayton M. Christensen (April 2004)
• Innovation To The Core – A blueprint for transforming the way your company
innovates by Peter Skarzynski and Rowan Gibson ( March 2008)
• Seeing What’s Next – Using the Theories of Innovation To Predict Industry Change
by Clayton M. Christensen, Scott D. Anthony and Erik A. Roth (September 2004)
• The Other Side of Innovation -Solving the Execution Challenge by Vijay
Govindarajan and Chris Trimble ( HBR Press 2010)
20