open innovation can help ohio companies to achieve success
The rapid-fire changes and daily vicissitudes of today’s economy are evidence of the old maxim: companies can’t survive and thrive without learning and adapting.
An innovative technology or business one day may be obsolete the next, and that’s one reason why large companies across the world are embracing open innovation. According to Henry Chesbrough, Director of the Center for Open Innovation at the University of California at Berkeley, the process “assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.”
The central thrust behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead utilize processes or inventions created by other companies. In addition, internal inventions not being used in a given business should be transferred outside the firm through licensing, joint ventures or spinoffs.
By creating an exchange of ideas and technology, open innovation can help companies remain innovative and bring their ideas to market more quickly.
In Ohio, one can see open innovation employed at Ashland Inc.
, a large specialty chemical company based in Dublin. Several years ago, Ashland’s customers were searching for ways to put less waste in landfills. To expedite the search for a solution in a cost-effective manner, Ashland put out a Request for Proposals (RFP) with NineSigma
, an open innovation services provider in Cleveland. The goal was to identify a technology that would dispose of hard-to-recycle composites in an environmentally friendly manner. The search led to a mutually beneficial relationship with a nearby company that solved Ashland’s problem.
Now that open innovation has been proven to be effective in helping large companies to stay competitive, proponents argue that the next step is helping middle market firms adopt this practice in order to stay relevant, as well.
Without open innovation, many experts say that middle market companies will falter. “They’re going to be left behind,” says Dr. Gene Slowinski, Director of Strategic Alliance Research at Rutgers University’s Graduate School of Management. Middle market companies must “take advantage of the fact that there are very innovative people … that work outside of your company.”
However, many middle market companies have been reluctant to embrace open innovation out of fears that revealing confidential research and development will compromise their businesses. Yet if middle market companies wish to retain a competitive advantage in a fast-paced economy, open innovation can help.
Although companies’ concerns about sharing cherished R&D information are certainly legitimate, open innovation practitioners have developed ways of addressing privacy concerns while helping businesses share resources.
NineSigma has been connecting companies with similar goals since its founding in 2000. In 2008, the firm ranked among the top 20 percent of companies on the Inc.
5000 list of the fastest-growing private companies in the U.S. Frank Evan, NineSigma’s Director of Business Development, says that the company has developed ways to address concerns about sharing private information.
“It’s all a matter of a propriety search process we use,” he says. “We don’t use Google. We have our own process to very specifically look for people that have knowledge in the area of interest of our client.” The firm’s worldwide database has over two million people, catalogued based on their areas of knowledge.
When a company approaches NineSigma with a problem to be solved, the most common approach is to put out an RFP. “That is a process where we develop a two-page, non-confidential description,” says Evan, adding that the RFP does not expose critical, sensitive material, thus helping to alleviate concerns about publicizing carefully guarded information. “In the thousands of projects we’ve done in 13 years, we’ve never had any breach of confidentiality,” he says.
Open innovation often results in an unusual yet rewarding pairing of companies. Take Nami Research, a small engineering firm located in Lorton, Virginia. Nami has employed NineSigma to help the firm monitor new business opportunities. NineSigma led Nami to Hamilton Beach Appliances, a North Carolina company seeking to reduce the noise produced by consumer and commercial blenders. Nami had experience in noise reduction technology, making the match a good fit. The end result was a valuable connection that benefited both businesses.
Such innovation opportunities should excite middle market companies interested in exploring ways to potentially transform their businesses using new ideas and technologies. “Those kinds of cross-industry solutions are occurring all the time” in larger companies, says Evan. “The scale of [open innovation] is proportional to the company,” he adds. “Smaller companies are typically more cautious.”
Open Innovation in Action
Company leaders at Ashland Inc. are believers in open innovation now that they’ve experienced how it has helped them connect with a local company. Joe Fox, Director of Emerging and External Technologies at Ashland, says that it helped them to find the solution to a key problem right in their backyard.
“My job is to look for companies, universities or federal laboratories with technology and products that compliment what we do, and we partner with them to get to market more quickly,” Fox says. Ashland hired NineSigma as the middleman that could help the company to solve a complex problem.
“Several years ago, we had an RFP with NineSigma to look for recycling technology for polymer matrix composites,” Fox says. “We were interested in finding ways that those types of materials can be recycled.” The RFP allowed Ashland to connect with firms with technology for recycling composites.
“[We] received more than 15 responses from around the world,” says Fox. Ironically, the solution was nearby all along. “We found [Polyflow
] through NineSigma. They are located in Akron, less than 100 miles from us, a company that had never been on our radar before." The two companies developed a mutually beneficial relationship that solved Ashland’s problem, allowing for a quicker turnaround than if Ashland had relied solely on internal innovation.
“This is the power of open innovation intermediaries,” Fox explains. “They can identify small and medium sized companies that you might never find yourself."
Engaging the Middle Market
To help more middle market companies to embrace open innovation, the Ohio Development Services Agency (ODSA) has launched an effort to engage them.
Mihaela Jekic, Senior Engineering Programs Manager at the Ohio Development Services Agency, says that middle market companies are a ripe target. “The reason we’re focusing on the middle market is because large companies are already extensively engaged in open innovation," she says. "Middle market companies are mostly engaged in internal and established network innovation.”
ODSA wants to help middle market companies tap into a “global pool of experts” to solve pressing problems, resulting in a quicker turnaround to market. “Accelerated time to market increases jobs and revenue in Ohio,” says Jekic.
To convince Ohio middle market companies to engage in open innovation, ODSA has created a program called the Open Innovation Incentive. “[The program] subsidizes half of the cost for an Ohio middle market company to engage with one of two open innovation intermediaries – NineSigma and yet2.com
,” explains Jekic. “The intermediaries help to define the open innovation challenge and tap into the global pool of solution providers.”
What remains to be seen, of course, is the appetite of middle market companies to pursue open innovation. Chris Keller, Program Director at Entrepreneurs Edge
, a nonprofit that works with middle market companies in Northeast Ohio to spur innovative practices, says that companies must create the right culture.
“I see the need for middle market companies to first develop an innovation strategy and make sure the company and its stakeholders are ready to embrace an innovation culture, which involves risk and chance,” says Keller. “Most Northeast Ohio middle market companies that we see have not set aside resources for innovation, often running lean and on a year-to-year budget.”
“Only once a company has embraced innovation as a practice… can they then begin to look outside for new solutions through open innovation,” Keller adds.
Keller cites Northeast Ohio companies such as CMSFlavorseal, Kichler Lighting, World Shipping and Lumitex that have redefined key products with the help of graduate students in the Entrepreneurs Edge Summer Fellows program. Companies like these could also utilize open innovation, he says.
Open innovation is a huge opportunity for Ohio middle market companies that are open to embracing it, Jekic says -- they're more likely to enjoy long-term success.
Using open innovation practices, Jekic says, will “result in a quicker launch of a new or next-generation product or process, and that in turn will result in increased sales and hiring, benefiting Ohio’s technology economy.”