Prof. Vanhaverbeke: 'Open innovation is a win-win because it is two-directional traffic'

Open innovation is a concept that has already existed for some time, but interest in it has only accelerated recently. Wim Vanhaverbeke, Professor of Digital Strategy and Innovation at the University of Antwerp, specialises in open innovation management and digital strategies. He took the time to share with us his insights on the benefits of open innovation and co-creation… and also the potential obstacles.

What is meant by open innovation, and why has this concept only recently aroused real interest?

Open innovation is a form of innovation that sees a company utilising valuable ideas from both within and without the firm. So, when it comes to innovation it not only relies on the expertise or resources available in-house, it also obtains ideas from external sources by sharing knowledge and/or working with other companies or organisations. The concept was first described some 20 years ago by Henry Chesbrough in his book Managing Open Innovation. He believes that open innovation can be used to improve product quality and variety and also to reduce the time it takes to launch a new product on the market.

The concept was relatively slow to gain traction, but eventually a few industries, such as high-tech, pharmaceuticals, consumer goods and automotive, set the ball rolling. Research and development in these high-end industries is risky and expensive, while knowledge expands so quickly that large companies might struggle to keep up – they cannot invest in everything. For them the important thing is to insource and integrate knowledge. Open innovation offers the advantage of allowing them to invest in new technology while the market risks are left to the high-tech startups, which are financed by venture capitalists.

For their part, these small companies can better leverage their knowledge and benefit from the production capacity and global presence of the big players.

But large companies also have a great deal of unused technology lying on the shelf, and open technology allows them to cash in on it through licencing the technology or by creating spin-offs. It's a win-win because it is two-directional traffic.

Is co-creation always the outcome of open innovation?

It can certainly lead to the joint development and design of new products, but also to the improved usage of existing technology, and licensing allows one to use it in fields other than the one it was created for.

Co-creation is not only beneficial for large companies but also for SMEs. A great example is Curana, which manufactures bicycle parts in West Flanders, and that developed an open innovation strategy with a range of partners so that it was able to design completely new products faster than anybody else in the sector.

So open innovation is not the exclusive preserve of major companies?

Definitely not. Open innovation can be successfully employed by small ones too, as the Curana example demonstrates. A partnership not only means that various skills are brought together, it also allows for the research and development costs to be shared, and so SMEs can also use this strategy to grow.

Unfortunately, many of these companies are unfamiliar with the concept, which is why the authorities are focusing on initiatives through VLAIO (Flanders Innovation and Entrepreneurship) and other bodies to encourage open innovation. This can be done directly by getting companies to join forces or indirectly through engaging specialists and spearhead clusters as intermediaries between the users and providers of technology.

Log!Ville, for example, is an efficient way of putting companies and organisations in touch with each other. Companies frequently face issues for which solutions are available that they are not aware of, and by giving them a place to meet they can track down the latest technology and make the necessary contacts to move forward.

Is open innovation more successful in a national or regional context than on the international stage?

Yes and no. Imec is an example of a success story when it comes to its approach of finding microelectronics partners around the world, with the company acting as a pivot, but one needs scale when creating such a network. On the other hand, there are also plenty of successful local initiatives, such as the living labs created by the Flanders Research Institute for Agriculture, Fisheries and Food (ILVO), through which the government works with local companies and end-users to encourage innovative research. There are many other such examples in Flanders – too many to mention.

Managers of SMEs frequently prefer local partnerships, in part because of the shared socio-cultural experience. For them a handshake is often enough to seal a deal, and they work on a basis of trust. Meanwhile, international partnerships or contracts involving major companies tend to be coupled with reams of legal documentation for overseeing intellectual property and other rights.

Is the intellectual property aspect the biggest obstacle to open innovation?

When knowledge is sourced outside of the company or is created together with others, the immediate question is who holds the IPs – your company, your partner, both of you? That is not always an easy question to answer, and while smart contracting means that knowledge does not always have to be owned by one or more parties in order to ensure the commercial use of it, this remains a bit of a blind spot in the field of innovation for many companies.

Another obstacle is the practical arrangements for a partnership. Smaller companies can generally shift gears rapidly, but they lack the financial resources for taking on a long-term development process. Bigger companies are more cumbersome and the innovation process takes longer, but they do have the funds. What this means is that, in principle, SMEs work better with other SMEs, although that does not always need to be the case. As long as proper agreements are reached, large and small companies can have great partnerships.

Will we see the lack of confidence in open innovation start to ebb?

Businesses like to keep their cards close to their chests because they fear knowledge leaks, and partners could indeed inadvertently or even deliberately share knowledge with others. But thanks to the Chatham House Rule and other mechanisms, one can ensure that sensitive information is not divulged. One creates, as it were, a closed space in which open innovation can be performed.

Imagine a firm is facing an issue that it is unable to solve and that could threaten its market position. Partners can openly discuss that issue together under the Chatham House Rule without having to fear leaks. Everybody is protected because disciplinary measures are in place.

Prof. Wim Vanhaverbeke (University of Antwerp).