An Expert Perspective on Open Innovation

Over the past decade, Open Innovation has emerged as a leading business trend that has transformed the way enterprises approach all aspects of product development, from R&D through marketing and branding and even to post-sales support. By “opening the doors” to new ideas generated by others outside their own walls (including in many cases their customers!), companies have found new ways to leverage external knowledge to build better products.

However, in spite of the many successes Open Innovation has delivered in recent years, it still remains a relatively poorly-understood principle. To help us learn more about OI, our CEO, Helene Rutledge, Head of Open Innovation at GlaxoSmithKline.

Wyatt Nordstrom: Hi Helene. Thanks for taking the time to help us learn more about Open Innovation. We’re starting to hear a lot more about OI, but there seem to be conflicting views on exactly what it is. How would you describe it?

Helene Rutledge: There are many different definitions of Open Innovation, even within our own company. Open Innovation in the general sense is a practice of actively expanding a company’s value proposition to include external capabilities in a variety of possible relationships. The problem with arriving at a common definition is that the interpretation will vary based on the different value structures between industries, business models and company-to-company interpretations. For example, since external relationships vary along a spectrum from completely transactional to completely collaborative, some companies could consider elements of procurement as Open Innovation, where others would define that as a core business process and not significant enough to generate innovation value.

WN: Where does this come from? Who were the OI pioneers?

HR: GSK started Open Innovation about 6 years ago. At that time, P&G had been working with their Connect and Develop model for a few years. We benchmarked P&G and several other companies, researched Henry Chesbrough’s work, enlisted the help of Gene Slowinski and others and created a custom blend of best-practices and the associated Ways of Working that fit into the GSK structure and culture.

WN: What caused companies to start to abandon “Not Invented Here” and look outward for new ideas?

HR: The world is becoming increasingly competitive and with Moore’s Law and the acceleration of development of new technology it is impossible for an organization to learn quickly enough to have all of the resources it needs to compete internally. On the consumer side, demand for innovative new products has also increased and social media has led to instant feedback on products so to be responsive to changing requirements product development has to be both flexible and versatile. Utilizing external partners allows companies the ability to develop products in adjacent areas without having to build capital-intensive resources while maintaining internal core competencies for competitive advantage.

WN: Can you give us an example of an Open Innovation success story?

HR: Aquafresh Isoactive is an innovation that came together from a consumer insight, partnering with four external companies for the technical solution, and serendipity delivering more than the originally intended benefit. It started with consumers noting that a fair amount of toothpaste gets wasted when you brush and ends up in the sink where it needs to be cleaned up. An internal GSK colleague with aerosol product experience proposed a gel-to-foam technology solution that already existed on the market for shaving foams.  Using his networks and other GSK suppliers, potential partners were located to provide the solutions that were outside GSK’s core competencies. Ultimately, GSK worked collaboratively with 4 separate partners to develop the product. Serendipity came in when the product was clinically tested; the foaming action allows more penetration between the teeth, increasing the ability of the product to clean and prevent cavities over standard toothpaste. This is a classic example of Open Innovation where technology was borrowed from an adjacent category where there is deep expertise, the product was developed using externally sourced experts, and the final product was successful beyond original expectations.

WN: How do you/GSK practice Open Innovation?

HR: In GSK’s pharma division, they have taken an open source approach where enormous amounts of clinical data for neglected diseases has been donated to the public domain to encourage external scientists to work together to develop cures. This good will obviously benefits the patients but also allows GSK to form relationships with leading scientists.  Within GSK Consumer Healthcare, our concerns are different because of the shorter time to market and the regulatory complexity of our mix of products. We have products that span from nutritional supplements and cosmetics, medical devices, OTC medications and products that are regulated as prescription drugs in some markets. Often, the barriers to entry are not high enough for us to be as “open” as the open-source type model described above, so we have a more structured approach where we share non-confidential information widely to initiate searches, and then narrow the list to a proprietary network of trusted partners to further develop solutions under confidentiality agreements. We started Open Innovation in a very transactional way within the “Want/Find/Get/Manage” structure, and have expanded it to include earlier-stage collaboration and co-creation of IP.

WN: What are some of the tools you use to help generate new ideas?

HR: It is important to approach generation of Wants from both the consumer side and the technology side and find the sweet spot where a nascent technology meets an unmet consumer need. This is where the breakthrough innovations are found. Consumer insights alone are not the answer since consumers can’t define something they have never seen. The skill is in looking at the technology landscape, determining potential consumer applications, and doing initial testing to see if there is relevance to the lifestyle of a target market. Therefore, to generate ideas it is a multidimensional approach started with a very general brief and iterating based on modifying the scope of a search based on what comes in and the consumer feedback to initial concepts.

WN: When is OI not successful?

HR: OI is not successful if it is considered a separate activity. It should be part of the “mainstream” innovation effort as part of a “make/buy/partner” decision with strategic intent about keeping certain core competencies at the center. We find a good balance at 50% of our pipeline OI enabled. This metric will differ company by company, but knowing what you want to achieve and setting metrics to deliver those results is critical to success. In the same way, OI doesn’t work if it is only considered as a back-up alternate to internal development, or if targets are unrealistic because the solutions are not likely to exist, like chasing after a “holy grail.”

WN: What advice do you have for other companies thinking about starting an Open Innovation program?

HR: Senior management support of an OI initiative is crucial to allocate resources and ensure there is both motivation and a mandate for culture change.

WN: Thanks Helene!