Exploring the big picture of open innovation – concept, approach and value

Exploring the big picture of open innovation – concept, approach and value

Marcelo BravoOxford PharmaScience Group Plc

What is Open Innovation?

Is it just a buzz word or are there tangible results?

Why should you do it?

What can you learn from open innovation in other industries? i.e. pharma

"Open Innovation is the term that refers to the current thinking that companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions from other companies. In addition, internal inventions not being used in a firm's business should be taken outside the company."

- Transfer your inventions or other assets externally, i.e. opensource

- Collaborate with a range of partners to innovate, i.e. consortia

- Crowdsource innovation

- Crowd-outsource innovation

- Collaborate with a range of competitors to innovate

“Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively. [This paradigm] assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology.”

Henry Chesbrough, Open Innovation: Researching a New Paradigm

"...Companies can no longer keep their own innovations secret unto themselves; ... the key to success is creating, in effect, an open platform around your innovations so your customers, your employees and even your competitors can build upon it, because only by that building will you create an ongoing, evolving community of users, doers and creators."

Randall Rothenberg, editor, strategy+business (published by Booz Allen Hamilton)

Open Innovation is about bridging internal and external resources via collaboration at any point in the innovation process.

• highly effective use of connections and networks to exchange knowledge, expertise and ideas• external partners being involved at any stage, not just idea generation• equitable win-win business relationships where issues are tackled together• openness towards new business models to maximise the value of IP and other assets

Stevenage Bioscience catalyst

Is it just a buzz word or are there tangible results?

Open Innovation Choices –What is British Enterprise doing?Andy Cosh and Joanne Jin Zhang, June 2011

(sample of c 1,200 UK business with up to 999 employees between June 2010 and November 2010)

Traditional companies: those that made no external transfers, had few formal collaborations and were in the bottom half of firms in terms of their use of external knowledge.

Hunting cultivating‐ firms: had made no external transfers, but had engaged in external sourcing of knowledge and in formal collaborations moreactively.

Ambidextrous firms: those that had transferred knowledge and technology externally, but were found to also have engaged in hunting and cultivating

Why should you do it?

Companies that leverage OI innovate more and grow more, significantly more.

In some industries, i.e. pharma, OI is essential.

Pharma industry facing a triple curse...

Time to market...10+ years (IP life is only 20 years)

Cost... $1bn+ expense of bringing a new drug to market

Risk…at Phase 1 a drug has a 91% chance of failing

OI Reduces risk and increases efficiency – ultimately increasing the bottom line

A day in the Life of the Pharmaceutical industry

The pharma/biotech symbiosis

A deconstructed value chain..networks

An industry geared for partnering

OI in the Pharmaceutical Industry

Big Pharma companies in symbiosis with smaller biopharma.

Funds that can would normally be spent internally are instead spend externally via partnerships or acquisitions.

Pharma Company

Biotech

Patient/PayorBiotech

Biotech

Biotech

Biotech

Biotech

Pharma Company

Pharma Company

Biotech

Biotech

Biotech

Biotech

Biotech

Biotech

But it is much more complex than this..

A Deconstructed Value chain

CRO’s

CMO’s

Pharma Companies

RegulatoryConsultancies

Market AccessConsultancies

R&D/ClinicalyConsultancies

Universities

R&D Institutions

Drug Delivery Cos

Biotech Cos

CSO’s

Patient/Payor

Partner, Partner, Partner

Big Pharma geared up for partnering

Partnering Industry

- i.e. Bio speed-dating conferences, PLX, etc

New Models

- Consortia

- OI catalysts (ie Stevenage Bioscience catalyst)

- Crowdinnovating (i.e. Marblar)

Emerging business models for Pharma

“What competes in the market place is the network of cooperating companies”

- Partners with complementary capabilities that meet the needs of the market being addressed

- Shared interest

- Cultural diversity…cultural tolerance

(Professor Brian Smith, SDA Bocconi)

Open Innovation?

Unusual Business?

Business as Usual.. in a rapidly changing industry

Thank You

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