Is Open Innovation Over?

Posted by: Michael Arndt on December 9, 2009

Just as many of the world’s biggest companies are embracing open innovation, along comes James Todhunter, chief technology officer of software provider Invention Machine, to say it’s becoming yesterday’s idea. Chatting with me between presentations at the Open Innovation Summit on Dec. 4, Todhunter says, “The pendulum is starting to swing back.”

Granted, we all live in a world where information flows almost as easily as air. And granted, no company really has the brainpower and budget to innovate entirely on its own. But Todhunter argues that companies risk hollowing themselves out if they rely too much on ideas and expertise from outsiders. Taken to the extreme, they would end up with no intellectual property of their own, which in turn would leave them with nothing to differentiate themselves from competitors.

Another thing that many people have wrong, Todhunter tells me, is that China is a fast-rising innovation center. China isn’t today and never will be, he says, until its government relaxes control over the corporate sector to really let a thousand flowers bloom.

Todhunter, a software veteran and inventor who joined Invention Machine in 2002, offers this additional prediction: Hot fields for innovation in the near term will be in energy, water, food production.

Is Todhunter on the money?

Reader Comments

Graham Horton

December 9, 2009 5:36 PM

open innovation is certainly not over; on the contrary, i believe it will become a natural component of companies' innovation strategies.

however, open innovation is currently vastly over-hyped, leading to many problems such as misinterpretation and poor implementation. the results obtained are, in many cases, vastly underwhelming.

it will take a while for companies and researchers to figure out when open innovation is appropriate, when it is not, and how to implement it properly.

certainly, several of the types of open innovation we currently see will die out; in this sense todhunter is correct.

until then we will have to wait for the hype to die down and the dust to settle.

Chris DeArmitt

December 10, 2009 6:35 AM

As an innovator and two time Innocentive challenge winner, I am in total disagreement.

In house innovation means paying lots for R&D and having limited ideas come out (large fixed cost, low productivity).

Open innovation means getting ideas from all over the world and paying a nominal sum for them (low, variable cost).

Something that makes sense, still makes sense even after the initial surge of interest or buzz dies down.

Did the wheel go out of fashion just because it was old technology? No, we're still using them today.

I've seen the innovation that comes out of large companies left to their own devices. I've worked there. Frankly, it's pathetic. Open innovation is just the ticket.

There was a point made that open innovation leads to you having no intellectual property. It's quite the opposite, you buy all the rights and hold the patents so all the rights belong to the company.

As for a prediction that the focus will be on energy, water and food. I think a 10 year old could predict that.

Bob De Jonge

December 10, 2009 8:37 AM

Open Inno really never 'got started', nor is it 'over'. IMHO, a number of individuals created a new moniker & continue to make a living out of hyperbole based upon common business sense. Product development and marketing using inside+outside technologies has existed as long as I've been involved in engineering. Many new tools, such as that offered by James Todhunter's firm, attempt to optimize it using fresh technologies. The fundamental equation is a simple cost/benefit analysis. This topic used to be over-hyped using the 'vertical integration' moniker among others. I'm a simple person, always trying to boil any challenge I face down to its simplest form. I solve problems. Others use problems to create new 'industries' like 'open innovation consultant', etc.
My 2¢ -- others may see it as cynical. So be it.
Final comment: energy, food, and water - these being the fundamental necessities of life - have always been and will always be 'hot' innovation sectors ;)

Mike Drummond

December 10, 2009 9:47 AM

Todhunter’s insights aren’t terribly insightful. He cites no examples. He provides zero data to his belief that open innovation is a passing phase and the pendulum is starting to swing back. Have Procter & Gamble, General Mills, Northup Gruman, Netflix, PetSmart, Amazon, Walmart – just to name a few - announced any pullback from their OI initiatives?
One would think given Todhunter’s position at Invention Machine, he’d be able to offer some supporting evidence. Maybe he did and Michael Arndt didn’t have the time/space to include it.
In any case, if you’re going to throw something that provocative out there, you should have something to back it up. Just sayin.
As for his predictions about the hot fields of innovation, a previous post was correct, it doesn’t take a chief technology officer to figure that one out.

Stefan Lindegaard

December 10, 2009 11:28 AM

Graham Horton makes some points on this.

Open innovation is definitely hyped, but the value proposition of bridging internal and external resources is just too good to miss out on.

If companies focus on briding resources rather than trying to focus to much on external resources only, then they will also evade the problem of not developing IPR.

On China, I think James is dead-wrong. The Chinese government has already relaxed somewhat and this will continue gradually. More important; you cannot ignore the drive and eager of the Chinese people. They really want to climb up the value chain ladder and I do not see what will stop them.

On hot topics: Sure, that is a no-brainer that everyone can agree upon.

Michel van Hove

December 11, 2009 10:39 AM

Sounds as if Tod is confusing Open Innovation with outsourcing and companies that have been at the forefront of OI have learned (sometimes the hard way) that it isn't about that at all. Organisations like DSM, Philips and many others have a clear strategy around how OI is contributing to their overall innovation performance and are seeing the results of collaborating with others. On the contrary we see the need for Open Innovation increase when we work with clients, not just to deliver on the opportunities but to come up with them in the first place. OK, so it is hyped and not that not easy but if the rewards are high enough so what?

As for the prediction around 'hot topics' most if not all companies have these on their radar already...

Ian Pallister

December 11, 2009 12:09 PM

Rather than ‘taking innovation back inside’, I see OI as being something something that is going to become increasingly important to global businesses over the next 10 years - the ability to extract latent or underleveraged value at the intersection of product or service development needs and existing technologies is needed now more than ever!

So, rather than being seen as an old and tired concept, it is something that needs to be correctly understood, structured and implemented in organisations for it to release value. In that sense I am in agreement with many of the respondents.

Over the next 10 years global businesses will increasingly move towards a more open model in terms of the origination and development of their products and services. However it is certainly the case, and rightly so, that many organizations who are actively looking to embark upon an OI strategy are considering what that approach should be, and are looking to learn the lessons of the past 5 years, such as 1. be clear about the role OI plays within the overall business and innovation strategy 2. drive for internal ownership and transparent processes 3. ensure the right balance of reactive vs proactive activities and 4. foster an open culture and focus beyond technology.

Many organisations have rushed into OI approaches without thinking through the points above and have, as some commentators mentioned, failed to release the value that was expected.

And in terms of that value, the numbers are very compelling - the market for IP licensing and transfer is estimated as high as $100 billion globally and last year across the pharma industry, there were over 2000 licensing transactions. Even last week, Astra Zeneca announced a deal with the University of South Florida in what is expected to be a billion dollar product for the drug maker.

So rather than OI being a fad that is over, it’s likely to be become ever more important. And when implemented correctly, immensely valuable !

Nikhil Govind

December 12, 2009 4:54 PM

innovation is overrated, a tax retrospection pays to the guilt of undeserved, fake financial or scientific whiz-kiddery money

Robert Brands

December 13, 2009 3:57 PM

Open Innovation has been pushed and promoted primarily by the very large organizations for a multitude and obvious reasons and ultimately to their benefit and advantage. Information and knowledge sharing and awareness is becoming faster and easier.
Ultimately it is all about internal new product development or innovation that is developed from focus applied, the great know-how and knowledge that is invested in and ultimately what fulfills a customer need. This focus and expertize often leads to patented technology that creates true value, ROI and innovation.
Open Innovation will continue to have a future, since collaboration can expedite development. But those that invest to compete and deliver Innovation with internal resources will continue to be ahead of others and stronger marketleaders.

Darren Carroll

December 14, 2009 10:12 AM

This is a false choice. Open Innovation is not an "either/or" option - - - it is a set of valuable tools that innovators must consider using when deciding how to innovate.

For so long as innovation follows a Poisson distribution (systems characterized by a large # of possible events, each one rare, each independent), Open Innovation will provide the tools to access innovation wherever it occurs.

And speaking of "where it occurs", I'm not sure what China Mr. Todhunter is talking about. I visit monthly, invest in entrepreneurs there, and see increasing evidence of real innovation. They have a long way to go before they catch up to the US, but history shows that long distances can be covered in short times.

J.A. Ginsburg

December 15, 2009 7:13 AM

Small point off point, but one that speaks to design: This blog is dated: "posted December 09" Reading the comments, one can pick up that that means December 9, 2009, but it easily could have meant December, 2009. From curating TrackerNews.net, I have become a bit of a stickler for dating web content. It is amazing how much *isn't* clearly marked. It would be helpful if posts and articles included month, date, and year....

CesarCastro

December 17, 2009 2:33 PM

I'll start by giving my general impression of what open innovation means to me and how I relay this to my customers. Open Innovation for me consists not only of bringing in the best ideas from the outside but also extracting every possible source of innovation FROM THE INSIDE of corporations as well. This means that the receptionist, the manufacturing floor worker, the head of marketing, and your department's HR person can (and should) contribute to your company's overall innovation efforts. Open innovation is also about lasting culture change - about changing the way employees see themselves and changing the way companies reward/recognize their performance. Using this perspective, I WOULD STRONGLY ARGUE THAT OPEN INNOVATION IS FAR FROM OVER.

Chris DeArmitt

December 18, 2009 6:51 PM

Let's turn this argument around. Instead of defending Open Innovation, let me say this. If your company manages to solve all its problems internally and brings out tons of truly new products then great, forget Open Innovation. The thing is, I've never seen the company that can do either of those things and I have worked at some of the World's largest companies.

If you are so inclined, I invite you to read my recent article on why companies can't innovate and how to improve their chances.

Innovation in Industry:

http://www.phantomplastics.com/page8.php

Brian

December 21, 2009 12:02 AM

Seems like this james todhunter makes a little to much money! DEFINITELY NOT, right on the money! Seems he's lost touch with the world and reality.
As an Executive Business Owner, I can only say "OPEN INNOVATION HAS JUST ONLY BEGUN !!!" The baby steps are over and the World Changing has begun ! Perfection is at hand.
You can be a part of it, or sit and watch us from the cave.
Open Innovation like " InnoCentive " and others, will be a part of every business worldwide. Offering Cash money for ideas that profit your business or Change The World. Gazilions of ideas pouring in. I pay for the best one. Amazing, Very Profitable for ANY Business !!

James Todhunter

January 11, 2010 10:58 AM

Well, it appears my comment about the open innovation pendulum has struck a nerve. For more on this, see http://www.InnovatingToWin.com/innovating_to_win/2010/01/where-to-open-innovation.html.html

Thanks for initiating the dialog, Michael.

Best regards,

Jim

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