The Future of Open Innovation

Paul Isherwood

21st October 2010

Agenda

OI – what is it, why do it, who is doing it?

Adding rigour to the “fuzzy front end” of the process

Bringing R&D and commercial teams closer together

Balancing technology push with market pull

Key trends, developments & challenges in OI

Conclusions & questions

Agenda

OI – what is it, why do it, who is doing it?

Adding rigour to the “fuzzy front end” of the process

Bringing R&D and commercial teams closer together

Balancing technology push with market pull

Key trends, developments & challenges in OI

Conclusions & questions

The growth of open innovation

CLOSED INNOVATION

“Use the best available”•Research networks

•Knowledge diffusion

OPEN INNOVATION

“Do it yourself”•Corporate research centres

•Knowledge concentration

What happens in R&D, stays in R&DSource: Harvard Business Review, December 2006

Getting unusual suspects to solve R&D puzzlesSource: Harvard Business Review, May 2007

Source: Chesbrough, H. (2003). Open innovation: the new imperative for creating and profiting from technology. HBS Press, Boston, MA

Biotechnology

Aircraft engines

Different industries & adoption of open innovation

Motion pictures

CLOSED INNOVATION

Oil & Gas

Nuclear reactors

Automotive

OPEN INNOVATION

PharmaceuticalsConsumer electronics

Clothing

Food & drink

Communications

Personal computers

Semiconductors

Mainframe computers

Investment banking

External innovation focus is essential

Innovation occurs outside large companies

Recognition of IP in small organisations

Reduced time for taking an idea to product

Increasing competitive pressure

Open innovation in practice

“We believe the next big advance, which may reshape the food industry, has already been invented by someone outside the company, and our goal is to be the first to find it”

• Source: Peter Erickson, Senior VP of Innovation, General Mills, February 2007

“Collaboration is key to innovation and we love working with the outside. Such an approach has seen the centre’s scientists evolve from inventors into translators”

• Source: Peter van Bladeren, Director of Science & Research, Nestlé, April 2007

“It’s not that we’re not innovative. We are very innovative, but the fact of the matter is that so are a lot of other people”

• Source: Steven Goers, VP of Open Innovation & Investments, Kraft Foods, March 2008

“Compete like hell externally, collaborate like family internally” • Source: AG Lafley (CEO Procter & Gamble) & Ram Charan, The Game-Changer, April 2008

Agenda

OI – what is it, why do it, who is doing it?

Adding rigour to the “fuzzy front end” of the process

Bringing R&D and commercial teams closer together

Balancing technology push with market pull

Key trends, developments & challenges in OI

Conclusions & questions

Ideation vs. Implementation

Ideation Stage

• Short-term led?• Commercially led?• Brand/product led?• Platform led?• Pillar led?• How to measure?

Activity Management Process

Activity management process well defined

Lack of similar rigour in pre-pipeline ideation stage

Respondent industry

Source: NineSigma Open Innovation Benchmark Survey, February 2009

Current focus of OI efforts

Source: NineSigma Open Innovation Benchmark Survey, February 2009

Type of open innovation practiced

Source: NineSigma Open Innovation Benchmark Survey, February 2009

Innovation sourced from anywhere…..

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Su

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Indiv

idual

Inve

ntors

Search Consultants

& Scouting

Literature/Patents

Aca

dem

ia

Small & Large

Companies

Organizations

Innovation pathway at GSK

Early stage assessment and feedback

Link external innovative technology to our brands

Process can result in a win for GSK and a win for innovators

Timings represent general guidelines rather than guarantees

An ideal open innovation target

Scientific proof of principle

Solid business case

Unique

Competitive advantage

Agenda

OI – what is it, why do it, who is doing it?

Adding rigour to the “fuzzy front end” of the process

Bringing R&D and commercial teams closer together

Balancing technology push with market pull

Key trends, developments & challenges in OI

Conclusions & questions

Open innovation team in GSK

OI team are responsible from concept to delivery

Co-located with scientists & marketing experts in Innovation Hubs

Timely assessment and development of idea or technology by key decision

makers

Innovation hubs

What’s the Hub really like?

“Greater sense of community in the group”

“Open workplaceleads to greatersharing of ideas”

“More of a team mentality”

“Creative eavesdropping is phenomenal”

““More innovative ideas and more relevant ideas”More innovative ideas and more relevant ideas”

Day 2 in the NHFG Hub – July 2010

Agenda

OI – what is it, why do it, who is doing it?

Adding rigour to the “fuzzy front end” of the process

Bringing R&D and commercial teams closer together

Balancing technology push with market pull

Key trends, developments & challenges in OI

Conclusions & questions

Industry/market perspective

Industry convergence

• Blurring of boundaries between industries creating new sectors

• eg nutraceuticals & functional foods

Industry differences

• Pharma & chemical - science driven technology intense R&D projects

• Food & drink - consumer focused and often purely market driven

Growth opportunities

• Working in tune with the marketplace not just the technology

• Innovation will be happening at the intersection of the two

Technology push vs market pull

Push – driven by ideas or capabilities created by R&D in the absence of any specific need that customers may have

Pull – driven by user needs and requirements (demand), rather than by ideas or capabilities created by R&D

Structured and Sustainable Pipeline Process

Consumer Insight

Superior Science

Consumer Insight

Superior Science

GlobalLaunch

ValidatedProduct

&Claim

High Launch Rate

Speed to Market

Energy science

Collaborations with 13 academic centers of excellence in psychology, cognition and physical energy; 25 publications

Strong linkage with GSK Pharma Neurology group

Brain and Body Energy claims launched in 2003 with strong science which have withstood regulatory scrutiny

Types of consumer claims we haveused based on the science

Advertising Standards Authority Approved (UK)

Committee of Advertising Practice Approved (UK)Mental Edge

Refuel yourself

Physical Edge

Brain and Body Energy

World leaders in blackcurrant breeding research

Vitamin C heritage and credibility

One of five a day

Exploring other berry bio-actives

Berry science

Global collaborations with 23 academic centres of excellence

2009: 6 oral communications, 2 publications, 7 submissions for peer review

Types of consumer claims we haveused based on the science

Rich in Vitamin C: A Powerful Antioxidant

Friendly to teeth

Naturally rich in antioxidants

1 of your 5 a day

Wildlife Trust and sustainable agronomic technology

100% recycled PET, 1st major brand to market

Sport science

Over 35 years research on sports nutrition with over 100 peer reviewed publications

Supported by Lucozade Sports Science Academy working with elite athletes and over 60 external agencies/partners

Pioneered contaminant testing regime for ATP assuring product quality for elite athletes

Recover quicker / train harder in subsequent sessions

Types of consumer claims we have used based on the science

Proven to give you an Edge

Proven to increase mental and physical performance

Gets energy to the muscles fast

33% longer

Proven to help build muscle in combination with resistance exercise

Agenda

OI – what is it, why do it, who is doing it?

Adding rigour to the “fuzzy front end” of the process

Bringing R&D and commercial teams closer together

Balancing technology push with market pull

Key trends, developments & challenges in OI

Conclusions & questions

How far will OI go, how long will it last?

Trends identified from recent research evidence & current practices:

• Industry penetration – from pioneers to mainstream

• R&D intensity – from high to low tech

• Size – from large firms to SMEs

• Processes – from stage gate to probe-and-learn

• Structure – from standalone to alliances

• Universities – from ivory towers to knowledge brokers

• Processes – from amateurs to professionals

• Content – from products to services

• IP – from protection to a tradable good

The era of OI has just begun & has a long life left ahead of it!Source: The future of open innovation, Gassmann, Enkel & Chesbrough, R&D Management, 40, 3, 2010

Sustainability trends

Designing with the end in mind

Carbon is king

Trash into cash

Breadth of external networks

Breadth of external networks

Collaboration with neighbours

FMCG open innovation forum

Share best practice & explore hot topics in OI along the FMCG value chain

From source to consumer with flexibility to include related or parallel activities

Participate in bi-lateral or multi-lateral OI collaboration projects

Accelerate OI progress, resolve challenges, create & capture value

Source: IfM’s Centre for Technology Management, University of Cambridge, July 2010

Core ForumMembership

Retailer ConsumerRaw MaterialsProcessedMaterials

FMCGProducer

Packaging

Support Networks

SMEs

Science Base

Intermediaries

Distribution, Logistics & Waste Management

Pushing several innovation buttons (1)

Unpreserved healthy drinks blended aseptically & vended on demand

Convenient resealable flexible pouches, fully recyclable

World’s first chemical free, self cleaning post mix system

Technology applicable to non-drink products inc household cleaners

Pouchlink™ can reduce the vending carbon footprint by up to 75%

Sources: packaging news.co.uk, July 2010, timesonline.co.uk, July 2010 & thegreendrinkscompany.com, July 2010

Pushing several innovation buttons (2)

Healthier planet: world’s first 100% compostable crisp bag

Made from more than 90% renewable, plant-based materials

Breaks down completely when placed in a hot, active compost bin

Solar energy instead of fossil fuel is used to make some products

Healthier you: 18g wholegrain/oz, 2g fibre/oz, 30% less fat, less salt

Source: http://www.sunchips.com/index.shtml , July 2010

One of the new biodegradable SunChips bags, after spending 12 weeks in a compost heap

Takeout from today

OI – what is it, why do it, who is doing it?

Adding rigour to the “fuzzy front end” of the process

Bringing R&D and commercial teams closer together

Balancing technology push with market pull

Key trends, developments & challenges in OI

Conclusions & questions

Embrace the unexpected

“If at first the idea is not absurd, then there is no hope for it”

Source: Albert Einstein (1879 – 1955)

Good relationships make absurdity easier to explain

GSK is changing

Visit our Annual Review, the world of GSK: http://www.gsk.com/annualreview2009/