“Open Innovation – Corporate Venturing And Monetizing IP”

Thursday, June 18th, 2009
Open Innovation – Corporate Venturing And Monetizing IP
Fremont Hills Country Club
12889 Viscaino Place
Los Altos, CA

Heidi Mason, Bell Mason
Paul Greco, Ocean Tomo
Jim Anderson, President SVB Analytic
Timothy Lohse, DLA Piper
Andrea Mariotti, R&D Manager, Ricoh Innovations
Debra Baker, Deloitte & Touche

Moderator: CJ Koomen, Band of Angels, Former President Philips Semiconductor North America

Description: The old Corporate R&D paradigm has been shifting with an accelerating pace in the past 10 years or so. The world moves to open innovation where new ideas can come from start ups, spin ins, corporate venturing, M&A. Corporate R&D more and more has the task of helping to sift the good ideas from the bad ones. Corporate structure is changing too. The panel will address the various aspects of open innovation such as the new corporate innovation structure, the role of IP in consortia, how to monetize and protect IP in an open innovation environment and the role of start ups.

For more information, please see here

My thoughts
The topics we covered in this panel and that were most interesting to me were:

• the corporate innovation problem: this is a widespread challenge to big and medium size corporation alike and Patty Burke, speaking on behalf of Heidi Mason, had a terrific cartoon capturing the point. The cartoon showed a medieval army intent on fighting an open field battle with spears and swords when a guy with a white coat approached the general showing him a machine gun. The caption read something along the lines "We do not have time for new things, I am fighting a battle here!" This is a common scenario in most companies especially those dealing with manufacturing of goods. It is often the case that the current development organization has no bandwidth to take what comes out of the company labs, game changing as it may be. So what can companies do about it? One option is to perform an acquisition and de facto spin off your new product line that way. I am sure many other strategies could also be considered that are more appropriate for specific scenarios. My point? Awareness that your company is experiencing this problem is half the solution.
• product maturity and cost of research: this was actually my presentation. In a nutshell all product life cycles presents a cross over point where the cost of doing R&D to continue to improve such product will no longer yield the desired increase in market value. In other words, no matter how much money you spend in research, your product's price is on the downward slope to become a commodity. Apple is a master at preventing this from happening, just look at their laptop lineup and compare it to the competition. They are investing millions in research and they can still charge a premium for their laptops whereas Dell or HP have to sell theirs for half the price. My point? You can stretch the life span of a product that has reached maturity by continuing to invest in R&D but it is risky and you better be as good as Apple at it. The reader should note that sooner or later your product will become a commodity, it is unavoidable. The message here is to make sure you are aware where your cross over point is and redirect your R&D resources elsewhere before you spend your way out of business. Case and point, Nikon in the digital camera industry, they almost spend their way out of business as they though they could prevent (their) digital cameras from becoming commodities. Today they scaled back considerably and moved into a niche market of high end product only.
  
• IP issues for US market: each market is different when it comes to IP protection. One word of wisdom from the panelists was to make sure you have your inventors sign a release of ownership for everything that they work on. Failure to do so can be very expensive as we were told stories of disgruntled employees holding their former employer for ransom during an M&A. This is particularly important for start up where it is easy to overlook these matters with potentially disastrous financial consequences. Ye be warned.

A proposal for sustainable innovation and growth
Given the above I advocate that a sustainable model for innovation and growth is as follows:

1. use evolutionary user centric innovation (more on this in an upcoming post) to generate new business opportunities
   
2. channel the outputs from (1) into existing product lines if applicable. If not, identify adjacent players in the field of the new business opportunity you wish to pursue and consider M&A after your IP is protected
3. rinse and repeat. Note that as some of your product lines reach commodity status, now you have a strategy in place to keep a pipeline of new opportunities thanks to (1) and (2).
   

[special thanks to ACG's Micky Robledo for the photos]