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Open innovation is the new buzzword in R&D. But have we heard it all before? Paul Gander reports

Years ago, companies did all their own research and development (R&D) internally, did not need to look outside their four walls for innovation, kept themselves to themselves and did very nicely, thank you.

That, of course, is nonsense. Companies in the food and drink sector, as in other industries, have always worked with external partners, from long-term suppliers to trusted university departments. Licensing deals are nothing new and businesses have even been known to take the acquisition route to obtain intellectual property (IP).

So is all today's talk about 'open innovation' (OI) anything more than venerable commercial realities dressed up in snappy new clothes? Well, those companies claiming to have embraced OI list a number of changes to the fast moving consumer goods (FMCG) sector in particular.

These, they say, explain a qualitative as well as quantitative shift in attitudes to innovation.

At Unilever, collaborative innovation director Dr Graham Cross highlights speed-to-market as one of the key drivers. "OI has been around forever, but the pressures we're seeing in FMCG mean that the relevance of it to competitive advantage has changed. The complexity of modern innovation means it's simply not viable to do it all on your own. You need to get hold of key capabilities - and very quickly. You have no time to build them yourself. And, by the way, why should you if they're already out there?"

speed to market

Both Procter & Gamble (P&G) and Unilever acknowledge the debt they owe to non-food sectors such as pharmaceuticals, including companies such as Eli Lilly, which blazed a trail in exploring the potential of OI.

P&G makes the point that today's companies are so large, and year-on-year growth expectations so high, that internal R&D simply cannot keep up. By 2000, faced with a levelling-off in sales and sharp falls in share prices, this particular multinational woke up to the fact that something had to change. It also happened to have a new chief executive at the time.

Under that same chief executive, Alan Lafley, the goal was set to source 50% of innovations externally under a new Connect + Develop strategy. Currently, says P&G: "External collaboration plays a key role in nearly 50% of P&G's products."

Jeff LeRoy, external business development manager at P&G, sees Pringles Sticks as a prime example of the company's strategy in action. "A major food company in Japan had developed wheat sticks in a huge number of different flavours for its domestic market," says LeRoy. "We did a licensing deal for the US, developing four flavours of our own, and they have recently been launched in the south-eastern states."

Like P&G, General Mills has examples from its G-WIN Worldwide Innovation Network open innovation programme which are little more than marketing or brand licensing exercises. But just as often, the acquisition of new products will need to be followed up with further development work, says the company.

Last summer, it launched its Go-Gurt Fizzix carbonated yoghurt, which originated from a patent filed by Brigham Young University. General Mills signed a licensing agreement, but then went on to work on manufacturing and packaging issues.

In many ways, the logical extension of OI is close collaboration for further development. G-WIN director Jeff Bellairs quotes this example: "We had a very successful initiative with ingredients supplier Kerry, involving scientists from both companies working side by side to develop a product." The unnamed brand is already in the US marketplace, he reports.

If anything, the 'collaboration' element is even more important at Unilever, as witnessed by Cross's job description. "It's all about collaborating for open innovation, otherwise it's purely transactional," he warns. "If you want to do something that goes beyond what's already out there in the market, you have to collaborate. Patrick Cescau [Unilever chief executive] has said we want to collaborate with the best minds to make the difference that no single firm can make alone."

scouting for talent

According to Cross, Unilever's collaborative innovation follows a model of 'Want, Find, Get, Manage'. In this analysis, the starting point for OI has to be a question about what you want. "You might ask what additional capabilities you need in order to stretch what you can do already," he suggests. "Or you could ask: 'What would life be like if I could do the following?'"

Only then comes the process of finding the right partner. "Otherwise, it's like going shopping before you know what you want to buy," he says. "Once you know, it becomes a scouting exercise."

Intriguingly, this scouting process is now shrouded in much the same kind of secrecy that used to be drawn around internal R&D. It is, after all, in many ways today's equivalent. So General Mills will not even disclose how many individuals make up its team of technology scouts.

Bellairs will, however, reveal some of the places they go prospecting. "We work with a lot of innovation networks such as NineSigma, Yet2.com and YourEncore," he says. "They have different capabilities, and act as middlemen between us and inventive communities."

Last summer, in fact, General Mills announced that it was setting up a specific food services division within YourEncore, an innovation company based on a network of retired scientists and engineers.

Individuals and businesses are also encouraged to take the initiative and bring their properties to these innovation-hungry companies. All the major multinationals that benefit from OI have created dedicated web portals intended to facilitate this kind of contact from potential partners.

Dr Tim Minshall, lecturer at the Institute for Manufacturing (IfM) at the University of Cambridge, UK, is currently working with Unilever and others to explore OI. Once you arrive at the 'Find' and 'Get' stages of Unilever's paradigm, he says, trust is critical. "To generate a strong relationship based on trust, social interactions have to be increased. Primarily, people need to spend time together."

All the dedicated web portals in the world will not create a strong partnership, he suggests. "It is interesting that OI is often discussed as being enabled by various online tools, but the physical space for OI can also be very important. Science parks can provide the social environment for establishing trust in an easy way."

IP has been cited as one of the potential barriers to true collaboration. Letizia Mortara, a research associate at the IfM working on the OI research project, sketches out a familiar 'Catch-22' scenario. "You need trust to make a collaboration work, yet focusing on detailed IP issues at the outset may imply a lack of trust," she says. "But then, without agreement on IP issues, there may be no collaboration."

Today's champions of OI waste no time cutting through this knot. Bellairs at General Mills points out that his company is interested in technologies rather than raw ideas, not least because the former can be protected upfront, while the latter "risk becoming the subject of frivolous lawsuits further down the road"

Cross at Unilever firmly believes that the transactional stage where IP is protected and established needs to be cleared before the collaborative element can be agreed and entered into. "I work regularly with two-man companies," he says. "For them, getting it wrong could be fatal. My job is to make sure they don't get it wrong."

With change being the only permanent feature of companies these days, ensuring alignment within the organisation is another vital step, says Cross. Senior management needs to support each project.

Or, as Bellairs sees it: "The G-WIN team has to be the technology's advocate within our organisation. It has to guarantee a fair and equitable deal for us and our partners."

LeRoy at P&G explains that such care is not purely out of concern for the project in view: "The second or third deal with the same partner usually has more value than the first and will often take less time."

different skill sets

A cultural mismatch between the two partners can constitute another barrier to OI. But culture within the larger organisation may also be a problem in its own right. Bellairs says: "We're asking our developers to play a completely different role, to be facilitators rather than originators. There are changes in the skill sets we're looking for."

Meshing OI and external interaction with incentives and career progression structures is a vital part of this cultural change, Minshall argues.

He says: "You have to fight the 'not invented here' syndrome, involve people in the decision-making, improve internal communications and establish an appropriate reward system."

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