Open Innovation Workshop

OPEN INNOVATION
– a primer
An interactive workshop
bringing insights from the
life science and IT sectors
Jackie Hunter, Elisabeth Goodman, Michael Barnes - OI Pharma Partners

Granta Park, Cambridge, 11 Nov 2011 (#OICambs11Nov)

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open innovation in bioscience

Goals for today

1. Dispel some of the hype that surrounds open
innovation
2. Explore key themes
– Take a practical approach
– Mix of presentations, break-out exercises, case
studies and discussion

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A little background on
OI Pharma Partners
• Founded in 2010 by Dr Jackie Hunter
• Focus on adding value to Healthcare industries by
realising the power of Open Innovation
– Working with life science and healthcare companies on OI
strategy and implementation
– Developing OI in Healthcare strategy with EU Cyprus presidency
– Member of OI consortia
• What we offer*:
– Strategy – diagnosis, and development
– Implementation – accessing networks / partners, best practices
in collaborative project management
– Intermediary – IP brokering, novel ideas / technologies
Combined with scientific expertise..
pharma partners *see flyer for more details
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Topics for today
(broad timings)
09:30 – 09:45 Introduction (Louise Rushworth, Elisabeth Goodman)
09:45 – 10:15 What is meant by Open Innovation (Mike Barnes)
10:15 – 10:45 What Open Innovation can mean for you (Jackie Hunter)
10:45 – 11:30 How OI differs between large and small organisations,
providers and consumers: barriers & enablers (Jackie Hunter)
11:30 – 12:00 The ideal OI Ecosystem (Mike Barnes)
12:00 – 13:00 Discussions over lunch: What participants might do as
next steps within / outside their organisations to
implement OI as a strategy to create more value

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1. What is meant by OI?
What are the key principles?
(Mike)
• Do we have the same understanding?

Flip chart exercise

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“The lab is my world”

“The world is my lab”
A mindset based on trust
Dare to share future profits (or
losses)

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The Innovation Continuum

Internal R&D

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More than one model for Open
Innovation

OPEN INNOVATION
COMPETITIVE:
IP Model

PRE-COMPETITIVE:
Open Access Model

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IP strategies used in Healthcare
IP Strategy Description Examples
Rapid release of data into public databases; Human Genome; Open Access
Open Data Access sometimes with an embargo period journals, Chembl, Arch2POCM
Non-exclusive, royalty-free licenses; Not Open BioSystems; Biomarkers
Non-exclusive License commercially exploitable. Consortium
licenses that enable researchers to keep
their copyright but allow others to copy
and distribute the work provided that
credit is assigned in accordance with International Molecular
Creative Commons License specified pre-conditions. Exchange Consortium
Right of use on conditions encouraging
cooperation and further development,
Biological Open Source instead of royalties or other conditions
License that discourage creation of products. BiOS
Researchers from various organizations
controlling critical patents agree to the
Patent Pool formation of a patent pool. Knockout Mouse Project
Geographic-based restrictions with respect
Geographic-based License to patenting and licensing. MalariaGEN

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Understanding the continuum
between open access and OI
Community Potentially chaotic OPEN ACCESS
driven
Off-limits in some Burden of support
OS entities on Community
have legs ! IT organisations
(=no support?)
Community needs Free
A shared goal Altruistic?

Success dependent on Agreed standards
Quality essential
Open collaboration and sharing essential

Organisation
Transactional collaboration: Give to Receive
led
Fair pricing Lead needs
Burden of support Clear vision
On IP holder model
Controlled by
OPEN INNOVATION IP holder

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A Note on IP Management
• The greatest open innovation success stories
are non-exclusively licensed
– ARM holdings (Open Innovation)
• 98% of mobile phones use at least one ARM processor
– Android smartphone OS (Open source)
• Jan 2011 – 300,000 Android handsets activated daily

• OI is about proactive IP management
– Strategy depends on your competitive viewpoint
• Create and control strategic know-how and IP
• Make available non-strategic know-how and IP

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2. What Open Innovation can mean
for you (Jackie)

• Case studies– 10 mins
• Personal reflection – 10 mins
• Feedback and discussion – 10 mins

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Open innovation can have
measurable impact
Procter & Gamble –
BT – Open Innovation Principles
Connect + Develop
“It was clear to us that our invent- “[We will] use external sources to
it-ourselves model was not capable multiply our own innovation efforts,
of sustaining high levels of top-line deliver growth, reduce costs and get
growth” – P&G CEO AG Lafley to market faster” – BT’s ambition
statement
• 17 people are actively licensing
• 50% of initiatives in product BT technology to external
development have key elements companies, promoted on BT.com
discovered or developed • 5-10 technology scouts claim to
externally have contributed £500 million to
• R&D productivity increased 60% BT business plans through
• Innovation success rate doubled innovative products and services
since 2002

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Open Innovation can happen
anywhere along the value chain
external ecosystem: start-ups, universities, customers, suppliers…

‘Beta
testing’ and Crowd Partnership Corporate
External Problem getting sourcing/ program with investment
solving feedback idea start-ups and fund
generation entrepreneurs

Mix

‘Beta
Internal testing’ Crowd Intrapreneurship Spin-Offs /
Problem and getting sourcing/ program Licensing
solving feedback idea
generation

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Android: an open innovation
In the Red success In the Blue Corner
Corner
iPHONE:
ANDROID: Closed Innovation
Open Source
Open Innovation

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iPhone V Android :
Share of Smartphone Internet Usage (Apr 08 - Feb 10)

JAN 2011 – 300,000 Android handsets activated daily
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Lego reinvents itself
Mindstorms

Architecture

Bricks and paper

Cuusoo
1 p lac e: Shinkai
. 2. p lac e: Piano 3. p lac e: Pop -b and

Votes: 1182 Votes: 342 Votes: 178

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Philips Innovation and business
ecosystem: High Tech Campus

Corporate innovators Research institutes
Start-up companies Universities

Technical services Network organizations
Business support Venture funds

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Philips seen as a leader in OI
• Best practice in Inside–Out OI
– in making IP work harder for Philips & others
– in incubation, venturing, attracting investment
– in creating High Tech Campus Eindhoven, NL
• Extensive network of academic and clinical
research relationships
• Long-lasting engagement in public/private
partnerships
• Promising examples of Outside-In OI

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Unilever’s open innovation
Supplier University/ JV’s Science Parks Scouting Unilever NGO’s
Networks Contract Alliances Networks Corporate
Research Ventures

Entrepreneurs

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DSM is another OI advocate

• Interesting business option
recognised by DSM
• Not fit within internal business
strategy
• Founded in 2008 with DSM IP and
external funding
• Reduced risk by available know-how
and people
• Fast market introduction
• Delivering colour and flavouring to
food and beverage customers

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GSK Consumer Health
• Embraces OI across the pipeline
• See growth arising from a number
of areas:
– Ingredients
– Products
– Packs
– Processes
– Claims
– Routes to market
– Regulatory compliance
• Publicising what they need and want
• Maclaren Alliance

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GSK Consumer: ENIGMA launch
event (Sept 2007)
ENIGMA: External networking and innovation groups
for market advantage
75 external organisations
– Ingredient & packaging suppliers
– Research associations & institutes
– Development organisations
– Process equipment manufacturers
– Environmental companies
– Academic institutions
– Consultants & inventors
– Competitors & industry representatives
Q & A session, networking, mingling, conversations

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ENIGMA Think Tank 2009

• 2 key technical challenges identified by brand/R&D teams
• Brought together scientific experts to creatively explore
issues
• 24 organisations attended – academia & industry contacts
• Plus innovation experts from OUTSIDE food & drink
• 6 GSK facilitators from R&D, Marketing & Procurement
• Brainstorming type activities to stimulate creative
thinking
• Several potential areas identified for further
investigation

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Questions for reflection

– How could OI be relevant to my business?

– What are the barriers?

– What are the potential next steps for
implementing OI?

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3. Different perspectives on OI
(Jackie)
• How OI differs between large and small
companies
• OI from the perspectives of both the
innovation provider and consumer
• Barriers and enablers

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Large vs small

Large company Small company
• People - more • Entrepreneurial, risk
conservative; less risk takers
taking
• Medium time horizons • Short term
• Decision making by • Rapid decision making
committee
• Financially secure • Financial urgency
• Portfolio of projects • Focus on single
and collaborations projects
• Standard process for • Flexible processes
partnering
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Large vs small

Large company Small company
• Usually lot of support • Little or no support
eg IP, legal, alliance internally for
management collaborations
• Lot of experience in • Limited experience in
partnering partnering
• Range of capabilities • Limited capabilities in
in house house
• Broad range of IP • Limited IP

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Need to recognise different
perspectives
• Balance between separate and shared
interests

• Maximise outcome and value creation
for each party whilst minimising risk

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Collaboration Exercise
One half of room Other half of room
• Work in pairs • Work in pairs
– First half of session pair – First half of session pair
member 1 is large member 1 is innovation
corporate partner and provider and member 2 is
member 2 is consumer
academic/SME
– Reverse roles for second – Reverse roles for second
half half
– Present what you offer, – Present what you offer,
how is it perceived, what how is it perceived, what
are the expectations and are the expectations and
barriers for each party barriers for each party
• Plenary discussion on • Plenary discussion on
lessons learned lessons learned

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4. The Ideal OI Ecosystem (Mike)

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The Selfish Scientist
“A biologist would rather share their
toothbrush than their (gene) names”
Michael Ashburner
Professor Genetics
University of Cambridge
UK

Why should scientists cooperate?

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The Prisoner’s Dilemma
 Eachprisoners’ best strategy
regardless of the others’ is dominant.
 The dominant strategy is to defect Prisoner B
 Prisoners could do better by both
staying silent Silent (Cooperate) Confess (Defect)
 but once collusion sets in, each
prisoner has an incentive to cheat!
 The logical strategy is not always best

Silent (Cooperate) Each get 1 years A gets 15 yrs
B goes free
Prisoner A
Confess (Defect) A goes free Each get 3 years
B gets 15 yrs

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THE R&D Game: A Dominant Strategy
• The Nappy Industry Oligopoly
– A perfect fit for the prisoners dilemma
Proctor & Gamble Kimberley-Clark

v
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THE R&D Game: A Dominant Strategy
Dominant strategy for both firms is
to undertake the R&D. If one defects
the other will lose market share Proctor & Gamble
But both firms spending on R&D may
yield a lower total return than if both R&D investment No R&D
firms resist the temptation Investment
Factors other than profits are also
important
R&D Investment (+$5m, +$45m) (+$85m, -$10m)
Kimberly-
Clark
No R&D (-$10m, +£85m)) (+$30m, +$70m)
Investment What about Open
Access R&D?

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Reaching Equilibrium:
Open Access R&D
Closed Open Access
R&D R&D

Strong R&D Altruism, etc
budgets
Low hanging
fruit
High Predicted
Revenues

That Was Then.....
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Reaching Equilibrium:
Open Access R&D
Closed Open Access
R&D R&D
Cultural Change
Lack of disease
Weak R&D Understanding
Budgets
Uncertain Payer pressure
revenues
Perceived Risk

Is this now?....
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An Open Innovation Ecosystem

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Players in the OI Ecosystem
Tertiary Innovator
• Innovation super-consumer
• Industry and large SME
Secondary Innovator • Multidisciplinary
• Translational powerhouse • Highly networked
• Industry, SME • Tech-transfer and In-licensing
• May be resistant to change • May seek exclusivity
• Domain expert • Change agent
• Good network • Outlicensing
• Makes tech transfer work
• Publicises needs (Crowdsourcing)
• Partner with 1° Innovator
Primary Innovator
• Innovation powerhouse
• Academia, SME
• Specialist
• Close partnership with 2° innovator
• Avoid exclusive licensing
• Needs good understanding of
business reqs. of 2° & 3° Innovators

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An Open Innovation Ecosystem
Exclusively Internal IP Proprietary research
& Knowledge is key: but needs
Closed to be highly strategic
Single/Few Innovation
Partner These are the
Relationships Open Innovation foundation
(Under CDA, but require
shared IP etc)
Many cultural
Partners change
Open Access
Open
Sharing
Open Standards

Public Domain Data Generation

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Discussion over lunch (Mike)

• What might you do as next steps within /
outside your organisations to implement
OI as a strategy to create more value
• Slides from today available on our website

http://www.oipharmapartners.com
info@oipharmapartners.com
Tel. +44 (0) 7879 694 253

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