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Henry_chesbrough

Collaboration for invention

A mantra for our business environment emphasising innovation and collaboration could be: "Collaborate to survive and invent."

Collaboration is as old as the first invention. Bill Bryson's remarkable book, A Short History of Nearly Everything, tells us in his 29th chapter about teardrop-shaped stone hand-axes.

These axes first appeared about a million and a half years ago and are certainly the most common technology for the vast majority of human history. They have come to be known as Acheulean tools.

horatio_alger_jr In some areas in East Africa they have been found in such large clusters as to make it certain that they were created in collaboration by our socialising ancestors. Certainly working in collaboration our ancestors took them out of Africa about 150,000 years ago.

A great deal of industry is devoted to convince us not to collaborate. In this industry in the lead are story tellers from the disciplines of literature, filmmaking and even history. From them we often read or see the heroic individual working and achieving against the odds. This is a simplification and mostly a myth.

The myth sells, as discovered in the United States in the 19th century in what became known as a "Horatio Alger story". The penny dime novelist, Horatio Alger (pictured) churned out 135 rags to riches stories about individuals achieving what became known as the American Dream. Yes, dreams are like myths.

The reality is that humans have achieved mostly due to collaboration. Certainly there are exceptional individual inventors, creators and thinkers. But generally that was centuries ago, at least in terms of industrial invention.

However, it is no longer the case that invention typically emerges out of large labs or in big company R&D facilities.

This was noted recently by Marshall Phelps. Phelps is one of the most senior lawyers working for Microsoft Corporation. His position title is "Corporate Vice President, Intellectual Property". Speaking at a gathering of IP licensing lawyers and executives, on 15 October 2007 he said:

"In today's world, after all, the centre of gravity of innovation is increasingly moving beyond the central R&D labs of large firms to outside networks of innovators, including smaller companies and independent inventors. That's because innovation is becoming ever-more heterogeneous, fragmented and unruly, and few if any companies today can hold all the pieces of even their own product technology in their own hands. As a result, firms are discovering that they simply must collaborate with others if they want to survive and prosper in today's increasingly diverse, multi-polar and interconnected technology environment."

Phelps referred to this new centre of gravity as "Open Innovation". In using that phrase he was making reference to the work of Prof. Henry Chesbrough.

Prof. Chesbrough is great at simplification. He is an academic with a background in the IT business.  In his insightful Open Innovation book he carefully pieces together the transition in the United States from the "golden age of closed innovation" to the new centre of gravity of open innovation.

open_innovation_paradigm_funnelFortunately Prof. Chesbrough visualises his ideas. Here then is his open innovation funnel concept.

The old model "closed innovation" he says fed resources into the funnel for inventions to emerge. From the late 19th century onwards large corporations became very good at this. He says they built "fortified castles in impoverished landscapes".

The impoverished landscapes he writes of used to exist because, for example:

  • smaller competitors were no match, and there was no venture capital for them to access,
  • most of the know-how and other essential resources were held by the large companies,
  • workers did not leave their company as often as they do today, and
  • there were not as many ways available as there is today for valuable information to leak out.

The landscape around the castles of big companies is not so impoverished now. Like other big companies Microsoft is surrounded by companies of various sizes which at least have a potential opportunity to raise capital, acquire substantial know-how or resources, hire pre-trained workers and benefit from information leaks they provide from the big end of town.

In this contemporary landscape companies of all sizes must operate to benefit from open innovation. The open innovation model is represented by Prof. Chesbrough as involving businesses, big and small, in keeping opportunities open as their efforts and resources feed through their funnel.

Thus an idea going through funnel development might head out the funnel side (eg "licence, spin out, divest"). Meanwhile another idea developed outside the funnel might head into the funnel via the side (eg "external technology insourcing"). We might say the opportunity for commercialisation or value creation for invention is funnel vertical and funnel horizontal. The funnel today is Swiss cheese, it's full of holes. This is part of what Prof. Chesbrough has captured with his phrase "open innovation".

For those active in providing business and intellectual property law advice, contracts and documents to clients, it was evident before Prof. Chesbrough's books that collaboration has moved towards the centre of gravity. For such advisers for a very long time there has been exponential growth in demand for advice on collaborative arrangements involving business models such as licensing, distributorships, joint ventures, strategic alliances, and franchising.

Open innovation and collaborative arrangements go hand in hand. It is because this new reality is so well established that we can end with a list of links to our own articles discussing the risks and virtues of collaboration for survival and invention.

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Photo: Prof. Henry Chesbrough


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