The innovation handbook how to profit rrom your ideas

Our vision: a world where the UK is an innovation leader and a magnet for innovative businesses.. Library of Congress Cataloging-in-Publication Data The innovation handbook : how to pro

the

Innovati n

Times may be challenging

But through innovation, businesses can gain competitive advantage, benefit from new markets and prepare for the upturn How can the Technology Strategy Board help? By being a catalyst By providing leadership By connecting partners and investing in new ideas Our vision: a world where the UK is an innovation leader and

a magnet for innovative businesses

Find out more at www.innovateuk.org

www.innovateuk.org

Publisher’s note

Every possible effort has been made to ensure that the information contained in this book is accurate

at the time of going to press, and the publishers and authors cannot accept responsibility for any errors

or omissions, however caused No responsibility for loss or damage occasioned to any person acting,

or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or any of the authors.

First published in Great Britain and the United States in 2008 by Kogan Page Limited

Second edition, 2010

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses:

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© Kogan Page and individual contributors, 2008, 2010

The right of Kogan Page and the individual contributors to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.

ISBN 978 0 7494 5687 0

E-ISBN 978 0 7494 5920 8

British Library Cataloguing-in-Publication Data

A CIP record for this book is available from the British Library.

Library of Congress Cataloging-in-Publication Data

The innovation handbook : how to profit from your ideas, intellectual property and market knowledge / [edited by] Adam Jolly 2nd ed.

p cm.

Includes bibliographical references and index.

ISBN 978-0-7494-5687-0 ISBN 978-0-7494-5920-8 (e-bk) 1 Creative ability in Management 2 Technological innovations Management 3 Industrial property Management I Jolly, Adam

HD53.I564 2010

658.4'063 dc22

2010002757

Typeset by Saxon Graphics Ltd, Derby

Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall

Founded in 1910 we are proud to have over 100 years of experience

in the protection and commercialisation of all aspects of Intellectual Property rights and we continue to lead the field with our consistent strategic insight, innovation and quality

For a free initial consultation on how we can assist you to use

IP to boost profits and gain competitive advantage contact us: T: +44 (0)20 7830 000

E: mail@mathys-squire.com

MATHYS & SQUIRE LLP,

120 Holborn, London, EC1N 2SQ, United Kingdom

Times may be challenging

But through innovation, businesses can gain competitive advantage, benefit from new markets and prepare for the upturn How can the Technology Strategy Board help? By being a catalyst By providing leadership By connecting partners and investing in new ideas Our vision: a world where the UK is an innovation leader and

a magnet for innovative businesses

Find out more at www.innovateuk.org

www.innovateuk.org

Patents, Trademarks,

Your Full-Service IP Partner

The Hague • Munich

Johan de Wittlaan 7P.O Box 87930

2508 DH The HagueThe NetherlandsTelephone +31 70 416 67 11Fax +31 70 416 67 99patent@vereenigde.comtrademark@vereenigde.comlegal@vereenigde.comwww.vereenigde.com

Contents

Jonathan Kestenbaum, NESTA

The bottom line 3; Where innovation happens 4; Measuring

innovation 4; Forging links 5; Getting it right 5

Tim Nicol, Make Innovation Happen

Rationale 8; Definition 9; Benefits of OI 10; Issues 11;

Consequences 12; Conclusion 12

Phill Allen, Welsh Assembly Government

Maximizing your intellectual property 15; Good design is good

business 16; Supporting manufacturing 17; Increasing

opportunities for commercial success 17; Summary 18

Miles Rees, Intellectual Property Office

The national and international IP systems 20; IP rights for

business 20

 viii Contents  _

Ian Wilkinson, Invest Northern Ireland

How should you start? 27; What can go wrong? 27; Things can

go right! 28; Is IA management expensive? 28; Conclusion 29

1.6 How to maximize the value of your intellectual property 31

John Pryor, CPA Global

Realizing value 34; Value structures 34; Conclusion 35

Allyson Reed, Technology Strategy Board

Connections 40; Partnerships 40

Clare O’Neill and Cathy Garner, Manchester: Knowledge Capital

When two worlds collide 44; How universities can support

business innovation 44; Examples in Manchester 45

Clare O’Neill and Cathy Garner, Manchester: Knowledge Capital

Peter Matthews, Nucleus

Branding innovation 53; Protecting innovation 53; Funding

innovation 53

Ben Goodger, Rouse Legal

Your IP strategy as part of your overall business strategy 57;

Look ahead 58; Know what you’ve got 59; Get it right from

creation 59; Manage your portfolio efficiently 60; Leverage

your IP to make it into a profit centre 60; Be prepared to enforce

– intelligently 61; Conclusion 61

David Fry, Agile IP LLP

Ilya Kazi, Mathys & Squire

J J Hutter, Nederlandsch Octrooibureau

Software and the European Patent Convention 74; Mechanics,

electronics, software 75; Conditions 76; Coverage 76; Business

case 77; Conclusion 77

David Bott and Paul Whittemore, Technology Strategy Board

Building an innovation infrastructure 82; Innovation platform

development 83

Paul Tiltman, University of Exeter

So what are the options? 85; Using higher education institutions

for your research? 86; Revenue sharing 87; So what about the

IP? 87; IP as a passport? 87; Non-disclosure agreements – a

basic tool 88; Conclusions 88

Peter Ives, Business Dynamix

Changing markets 91; Production and distribution 91; People

92; Open Innovation 92; Benchmarking 93

Leo Rayman, DDB

Becoming relevant 94; Innovative sources of customer insight

95; Traditional sources of customer insight 96; The limits of

user engagement 97; In conclusion 97

Andrew Fennell, Pera

Jane Clark, Mathys & Squire

Confidential information 105; Copyright protection 106;

Registered design protection 106; Patent protection 107;

Trademarks 108; IP freedom-to-operate issues 108;

Conclusion 109

 x Contents  _

Paul Rodgers, Ithaka Life Sciences Ltd

What are the current commercial and technical limitations on

realizing the potential? 111; What are the different models and

techniques that enterprises might now consider? 113;

Conclusions 116

Chris Harrison, Low Carbon Innovation Centre,

University of East Anglia

Public funding schemes for innovation 120; Other supporting

initiatives: Intellectual Property Office (IPO) 121; The role of

venture capital (VC) funds and business angels 121;

Opportunities in China 121; Low-carbon collaborative projects

122; Construction 123; Combined heat and power and biochar

123

David J Rhodes, Health Protection Agency

Open innovation and health outcomes 127; Stimulating an open

innovation culture 127; Governance of external relationships

128; Public health challenges to innovation 128; Conclusions

129

Michael A Dalrymple, MRC Technology

CTD: a new model for early-stage drug discovery 132; The

current capability of CTD 133; Examples 134; In conclusion 134

Bettina von Stamm, Innovation Leadership Forum

Part A – the argument 137; Part B – what it means to lead for

innovation 138

Garrick Jones, Ludic

Innovation is a group sport 143; Spaces for innovation 144;

A physical environment 144; A virtual knowledge

environment 145; Prototyping, simulation and play 145;

Flexibility and communication in a value web are directly

related to the quality of interpersonal relationships – establish

multiple opportunities for these to develop 146

Your most powerful board piece is

your US patent Did you know that

she can move like no other,

inclu-ding travelling back in time to

de-fine the prior art one year earlier

than possible in Europe?

Yet, if you fail to file first in the

US, you may needlessly be

shack-ling your Queen (Ignorance of her

powers is a sure recipe for failure)

See facing article for further

in-formation.

Contact Moetteli & Associés Sàrl,

US and European Patent Experts

in Europe, for your patent and

trademark needs both in Europe

and the US.

DON’T SHACKLE YOUR QUEEN!

US- und internationale Patent- und Markenrechts-Anwälte US and European Patent and Trademark Attorneys-at-law St.Leonhardstr 4 CH-9000 St.Gallen Switzerland Phone +41 71 230 10 00 Fax +41 71 230 10 01 www.moetteli.com Projekt2:Layout 1 31.12.2008 12:44 Uhr Seite 2

 xii Contents 

Viktor Dörfler, University of Strathclyde Business School

Evolution of organizations 150; Fitness of innovations 151;

Achieving harmony 152

Nikolai Bisgaard, GN ReSound

When is it innovation? 155; Creating an innovative

environment 156; Matching market needs to technology 157;

Cost–benefit analysis 157; Designing the product portfolio 158

Mark Thompson, UMIP

Open innovation for large companies 163; Open innovation for

smaller companies 164; Innovation-seeking tools for

companies, large or small 164; Summary 168

Dominic Elsworth, Hargreaves Elsworth

Why collaborate? 170; Considerations for potential

collaborators 171; Who brings what to the collaboration? 171;

How will the collaborative venture be managed? 171; Who gets

what? 172; How is intellectual property resulting from the

collaboration to be owned and what will be done with it? 172;

People 173; Who pays? 173; What about other work? 173; The

golden nugget 173; Conclusion 174

Marco Serravalle, Serravalle sas

What is a patent? 176; Patentability assessment 176;

Freedom-to-produce assessment 177; What to do if the

freedom-to-produce assessment is negative 178

Bart van Wezenbeek, Vereenigde

The priority system 180; The priority system now 181; Is your

priority valid? 181; Enablement 182; US provisional

applications 182; Lessons to be learnt 182

Jonathan Watkins, Alta Innovations

So you have an idea for making money? 187; Where do ideas

come from? 187; What sorts of ideas are there? 188; What turns

an idea into a business proposition? 188; What types of

opportunity are there? 188; What factors need to be

considered? 188; What are the most important factors? 189;

How do you make the decision to proceed to the next step? 190;

What next? 190

8.2 Making money by licensing your intellectual property 192

Alastair Swanwick, Innovate Product Design

What is licensing? 192; Why should I license? 193; How can I

get a licensing agreement? 194; Conclusion 194

Lynn Martin, Manchester Metropolitan University

Three routes? 197; Business start-up 198; Spin-out or

spin-off? 198; Licensing 199

Dominic Hickman, Rouse Legal

Established multinational businesses 202; Expanding

international businesses 202; Outsourcing 203;

Enforcement 204; Common themes 204

Stephen Carter, Mewburn Ellis

What are the key assets? 209; Are the key assets yours? 210;

How and where? 210; A ‘Swiss cheese’ approach 211;

Spreading the cost 211; International patent applications 211;

Clearing the way 212

Adam Kenney, Thomson Reuters

In the beginning 214; The ‘next great idea’ 215; Important

decisions ahead 215; The ‘IP life cycle’ 216; Better decisions

through collaboration 217; IP management systems 217;

Summary 218

 xiv Contents  _

Peter Kylin, Hynell

General aspects 220; Validity 221; Design registrations 221;

Patent protection 221; Speed and the PCT system 222; Speed

and the EPO 222; Extra speed via utility models 222; Fast

enforcement of IP rights 222; Express speed in Germany 223;

Concluding remarks 223

Sangwani Nkhwazi and Rohan Patel, Mancunium IP

Examples of different problems 227; What IPR is

required? 227; Where is the IPR necessary? 229

A core technology on a limited budget for IP makes you vulnerable Marianne Holme at Holme Patent A/S looks at your options.

John Moetteli, Moetteli & Associés Sàrl

Understand and research the IP landscape carefully 236; The

advantage of local knowledge 236; Test the IP system 237;

Know your competitors 237; Use lobbying 237; Innovate 238;

Make friends, many friends 238

Feature: Patent filing strategy to maximize portfolio value 240

John Moetteli, Moetteli & Associés Sàrl

Introduction 240; The 10 most compelling reasons for filing

first in the United States 242; Exceptions 246; Conclusions 247

Elizabeth McNabb and Christi Mitchell, Highbury

The basic idea: balancing anticipated risks and rewards at a

point in time 253; Thinking about valuation: the three ‘Cs’ and

one ‘R’ 254; Context 254; Content 255; Communication 256;

Royalties – the integration of all the elements 256

Elizabeth McNabb and Christi Mitchell, HighburyWhat kind of

transactions? 259; Approaches to negotiation 260;

Planning and preparation 260; The negotiating process 261;

Follow-up 262; And finally 262

Alan Watts, Halo, the NI Business Angel Network

Why pitch? 266; What’s the purpose of the first pitch? 266;

When to pitch? 266; Who to pitch to? 267; How does the

investor see things? 267; What’s the right valuation? 268; What

must the pitch cover? 268

Peter Kaldos, Hungarian Patent Office

Value your IP assets 273; Strategic exploitation of your IP

assets 273; Methods 274; How do companies value their IP

assets? 275; Conclusion 276

Larry Cohen, Latham & Watkins

The first question – is there infringement? 279; The second

stage – getting started 280; Rules of court and procedure 280;

The pleadings stage 280; Getting ready for trial – order for

directions 281; How to establish infringement in patent cases –

product description 281; Discovery (disclosure) generally 281;

Experts 282; Factual evidence 282; Pretrial preparation 282;

The trial 282; Judgment 283

Campbell Forsyth, Forsyth Simpson

Conditional fee agreements 286; After-the-event insurance 287;

Third-party funding 288; Patent County Court or the IP County

Court 288; Conclusion 288

Larry Cohen, Latham & Watkin

Anti-trust litigation 290; Standards litigation 291;

Pharmaceutical patents 292; Trademarks – survey evidence 292;

Copyright and design right 293

12.4 Firm-based strategies for protecting innovations 294

Sara McGaughey, University of Strathclyde, and Stuart Macdonald, University of Sheffield

Firm-based strategies for protecting intellectual property 296;

Illustration: IP strategies of CDM and INCAT 296

 xvi Contents  _

12.5 Meet the challenge of counterfeiting and piracy 301

The Italian Patent and Trademark Office

Innovation offers opportunities to businesses and it gives them the ability to develop and adapt not just new products, process or designs but their operations and business models.

The difficulty for most organizations is not in generating ideas but in pursuing the right one at the right speed on the right scale Alongside flashes of brilliance, innovation depends on combining strategic insight, inspired leadership, suitable funding, adept marketing, motivated teams and appropriate intellectual property in the right business model Innovation is just as likely to lie in changing a business process or improving the experience for customers as in anything more tangible

Ideas are easily lost and decisions are delayed For small enterprises, the risk often lies in deciding in which direction to take an innovation and in what time frame to expect a return For example, by using their intellectual property (IP) assets, organisations can buy and sell the commercial rights in innovation, allowing them greater scope to specialize in what they know best and add on any extra improvements from outside Attracting investment is also a key factor Without a clear commercial application combined with an effective development and exploitation strategy a new innovation is unlikely to excite the venture capital community

Of course for any small enterprise the hope is that they will grow into a large ongoing concern, and innovation implementation can help manage this growth This book is designed as a practical guide to the effective management of ideas and knowledge for leaders of organizations who want to move ahead of their competitors and offer new sources of value to their customers Drawing on a wide range of experience and expertise in strategy, technology, brands, intellectual property, finance,

 xx 

PART 1

The innovation premium

 2

1.1

How innovation drives growth

Jonathan Kestenbaum, CEO of NESTA, shows how innovation leads to company growth, and why a broad understanding of innovation is needed to get your company strategy right.

Many companies now see innovation as an essential part of business strategy – a cupboard item on a business plan Yet there are still those that see it as a luxury that is all too easy to cut out in times of economic downturn Our research has found that innovative firms grow almost twice as fast, both in employment and in sales, as those that do not innovate Those high-growth companies that invest in the right kinds of innovations will be the ones driving not only their own bottom lines but the economic prosperity of the UK

store-The bottom line

Those companies concerned about their bottom line should be concerned about innovation NESTA research shows that firms that introduced a product innovation in 2002–04 experienced a 10 per cent sales growth during 2004–07, almost double the rate experienced by those that failed to innovate.1 Not only is innovation driving business growth, but it has wider employment benefits A high-growth company that sees a 10-percentage-point increase in the share of sales from new products adds almost 1.5 percentage points to its employment growth rate

 4 The Innovation Premium 

Where innovation happens

Research and development (R&D) is an important part of innovation, but there is much more to innovation than R&D; many types of innovation will have an impact on performance

NESTA’s work on the Innovation Gap uncovered the ‘hidden innovation’ taking place in the UK – the innovation activities that are beyond traditional indicators of innovation, such as investments in formal R&D or patents awarded.2 Hidden innovation

is often the innovation that matters most to the success of a sector To understand the dynamics of hidden innovation, NESTA conducted a detailed analysis of sectors that

do not undertake much, if any, ‘traditional’ innovation, such as R&D What it found was that ‘being innovative’ can mean many different things An ‘innovative organization’ can play one or more of four different roles:

An organization might be a generator of new ideas

In November 2009, NESTA launched the Innovation Index pilot, a whole new way

of measuring innovation This is the first step in attempting to understand the wider benefits of hidden innovation for the UK Measuring innovation effectively is important, for if the UK’s innovation performance is to be improved it first must be measured

an average of 1.8 percentage points per year A significant part of this productivity increase came from ‘non-traditional’ types of innovation, such as design, the development of innovative skills, brand equity and organizational innovation This means companies need to be conscious of the innovation strategies they take

 How Innovation Drives Growth 5 

Forging links

Collaboration with external partners, whether they are suppliers, customers, researchers

or other businesses, is important in stimulating innovation NESTA’s practical work has shown that cooperation between businesses is a rich source of profitable, innovative ideas It is crucial that businesses are able to identify, assimilate and exploit this knowledge from the wider environment Sixty-six per cent of respondents to the Community Innovation Survey (CIS) in 2007 cited ‘customers’ as a source of information for innovation Rather than open and closed innovation being viewed as distinct entities, collaboration should be thought of in staggered degrees that need careful consideration Businesses need to understand the opportunities and pick a strategy that will best enhance their potential for business growth

Strengthening and exploiting relationships and linkages

Successful innovation is fundamentally collaborative, with different perspectives helping make problem solving easier and the idea generation process broader and more radical Research published by the CBI (Confederation of British Industry) found that, since the economic downturn, 76 per cent of business leaders had been shaken by concerns over their suppliers This concern has led to 68 per cent

of firms saying they want to strengthen relationships with suppliers over the coming years Outward-facing supply chain linkages are a key source of idea generation and a vital component of the innovation mix

Businesses can also look beyond the supply chain NESTA’s Corporate Connections programme has worked with hundreds of organizations including numerous multinational corporations, universities, start-ups and social ventures.4 Two of the companies taking part in the Corporate Connections programme – McLaren and NATS – have begun a major new business collaboration as a result of the programme NATS, the UK market leader in air-traffic control services, has adapted race control computing developed by Formula One race team McLaren to aid the management of aircraft on the ground This venture into Airport Collaborative Decision Making (A-CDM) software could significantly enhance air-traffic efficiency and be marketed

on a global scale The basis of these collaborations is that open innovation provides access to new ideas, solutions and markets

Getting it right

Those companies that get it right will have a disproportionate impact on the economy

as a whole Just 6 per cent of the UK businesses with the highest growth rates generated

 6 The Innovation Premium 

half of the new jobs created by existing businesses between 2002 and 2008 These businesses, which came from every sector of the economy and from across the entire country, all shared one thing in common: they were far more likely to be innovative, and this innovation was a source of growth

Innovation is starting to look less and less like a luxury It is part of a company’s growth toolkit Innovation, be it in terms of product, service or organizational innovations, should be at the forefront of every entrepreneur and businessperson’s agenda

About the author

Jonathan Kestenbaum is Chief Executive of NESTA, the National Endowment for Science, Technology and the Arts, a unique body with a mission to make the UK more innovative NESTA invests in early-stage companies, informs and shapes policy, and delivers practical programmes that inspire others to solve the big challenges of the future Further information about NESTA can be found at www.nesta.org.uk.

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In this chapter we look at what Open Innovation is (and what it isn’t), what it could

do for you and what some of the pitfalls might be

Rationale

The pressure to innovate has never been higher and the need to manage the process efficiently and effectively has never been so great The mantra of ‘doing more with less’ has driven the resource and activity planning of most R&D divisions in the last 10 years, not to mention the last two However, innovation is the key driver of growth for most businesses in most market categories, large or small Significant innovation can drive market growth by attracting new users In flat markets, gaining share is the only way to drive sales, and innovation that provides a better solution to a consumer need is generally preferable to cutting prices or increasing promotion spend

 Opening Up Innovation 9 

P&G: Connect and Develop(sm)

Procter & Gamble is not only the world’s largest packaged consumer goods company, with 23 $1-billion-plus global brands; it invented brand management and is now widely regarded as the leading exponent of Open Innovation (OI) P&G has achieved spectacular sales growth in the last 10 years in tough consumer markets and ascribes much of this growth to OI In 2000 P&G’s then new CEO, A G Lafley, set an astounding goal for the hitherto inward-facing and secretive corporation – 50 per cent of all innovation was to be generated from outside the company P&G’s argument was (and still is, under a new CEO) that, even with around 9,000 well-resourced and qualified research and development professionals globally, there were as many as 1.8 million similarly resourced and qualified individuals in the outside world, many of whom could help P&G to come up with game-changing innovations P&G established the

‘Connect and Develop’ programme, and it has so far been responsible for such innovations as Olay® Regenerist, Febreze® Candles, and the Oral-B® Pulsonic® Toothbrush, among others, along with a string of alliances and collaborations that have created a ‘two-way street’ of intellectual property P&G has, by its own admission, gone from being the inventor of ‘not invented here’ (NIH) to the main proponent of

‘proudly found elsewhere’, and now more than 35 per cent of its new products in the market have elements that originated from outside P&G, up from about 15 per cent in

2000 According to a P&G-authored article:1

Our R&D productivity has increased by nearly 60 per cent Our innovation success rate has more than doubled, while the cost of innovation has fallen R&D investment as a percentage of sales is down from 4.8 per cent in 2000 to 3.4 per cent today And, in the last two years, we’ve launched more than 100 new products for which some aspect of execution came from outside the company Five years after the company’s stock collapse in 2000, we have doubled our share price and have a portfolio of twenty-two billion-dollar brands.

Little surprise then that many other FMCG companies have followed P&G’s lead, and now corporates such as Nestlé, GSK, Unilever, Kraft, Cadbury and Reckitt Benckiser have OI websites with processes and resources in place behind them to seek and evaluate ideas from outside their businesses Technology-driven businesses and software houses have arguably been leading the curve for many years with the practice

of ‘open sourcing’ and external collaborations, especially with universities, but the widespread adoption of true Open Innovation by consumer goods companies is something else

Definition

The leading writer on OI is Professor Henry Chesbrough, of the Haas School of Business at the University of California, Berkeley He defines Open Innovation as: ‘A paradigm that assumes firms can and should use external ideas as well as internal ideas and internal and external paths to market, as firms look to advance their technology’ In

 10 The Innovation Premium 

his three books and many presentations on the topic he clarifies that OI is not the same

as open-source development of software like Linux and Java and it’s not just appointing

a university to work on a research project Nor is it just about outsourcing R&D – P&G

added to its own internal R&D capability by going outside as well as continuing to research and develop inside OI is the collaborative development of ideas and technology with people and companies outside your own It is working with partners not just to invent, but to innovate, that is, to bring the ideas to market all the way down the supply chain It encompasses the seeking of ideas, the development of concepts, the production

of prototypes and products and crucially also the external trading of ideas from inside

to out That is to say, any ideas or projects that for whatever reason don’t make it through the internal development funnel can be sold on outside the business and royalties or licence fees generated as a return on the R&D investment

to be told to think outside the box; they already live outside the box In addition, most disruptive ideas and new consumer insights come from making connections between two previously unconnected thoughts or observations The random nature

of suggestions from a wide constituency gives an organization a much higher potential to make the kind of unique magical connection that has the potential to drive a genuinely disruptive innovation

Speed.

z

z Working with others can speed things up – at least if they are committed to speed themselves, and they probably are Outside collaborators are likely to be more single-mindedly focused on an idea, and as well as representing additional resource

_ Opening Up Innovation 11 

for the organization that’s seeking them they are probably further advanced in a particular area of development than the client organization An ideal collaborator is one who is just further down the path than you are

Risk reduction.

z

z By harnessing the know-how of others an organization can reduce the people investment needed to bring about an innovation and deploy internal resources elsewhere Additionally, by involving more brains you reduce the risk of later discovering something you should have thought of Chesbrough talks of using

‘smart people outside the business’ – which can give rise to the challenge of having

to admit internally that not all the smart brains are inside the business

Wider networks.

z

z Networks are an asset, and not just for people, but for companies Unexpected benefits come from being in contact with other people or businesses, and access to their networks in turn allows a business to benefit from the cascade effect into a broad community of valuable contacts and connections

Culture and personalities.

z

z Some corporate cultures just can’t handle the idea of allowing outsiders to share their innermost secrets, and some inventors will never share their ideas with anyone until they are sure of a watertight agreement that guarantees them riches Private companies and independent entrepreneurs tend to

be driven by principles of ‘going solo’, and OI will be a step too far for some, although some of the historically more private corporations are at least appointing internal managers responsible for Open Innovation, which is in itself a measure of the spread of the practice There may also be issues of individual personality clashes between corporate personality types and SME or entrepreneur types that get in the way of developing genuine mutual trust and cooperation

Internal resistance.

z

z Typically OI can be seen by internal R&D management as more

of a threat than an opportunity If its implementation and communication are mishandled or misdirected, people can feel threatened or the subject of implied criticism The ‘NIH’ barrier to external ideas may extend to the process of OI itself, and it may be seen by some as just another management buzz-phrase, although the evidence points to it being something more fundamental than that

 12 The Innovation Premium 

Consequences

A strategic approach.

z

z From the SME or corporate ‘seeker’ point of view, an initiative

on the scale of OI, with all the attendant implications for corporate behaviour, process and systems, risks, and resource allocation, clearly cannot be undertaken lightly OI initiative has to come from the top, with commitment and support throughout the business It has to be implemented in a strategic context, supported

by a process and legal agreements that not only protect the seeker but offer genuine mutuality to the supplier It is easy to make a judgement about how ‘fair’ a corporate might be by looking at its OI microsite

Changing relationships with corporates.

z

social responsibility are driving a change in relationships between corporates and all their stakeholders Consumers expect to have more involvement in what goes on inside businesses now, and the media feed more and more business news and comment that fuels the perception of a corporate brand OI is part of that move towards democratization of consumer-facing businesses, and the direct communication that accompanies it can only accelerate the growing trend in corporate transparency

Role of intermediaries.

z

z An industry of intermediaries has become established to facilitate the relationships and transfer of IP between seekers and suppliers Businesses like InnoCentive, NineSigma, Yet2.com and YourEncore are the corporate equivalent of dating agency, wedding planner, minister and marriage guidance counsellor rolled into one, and can provide matchmaking and IP solutions that unlock OI for many corporates Other suppliers can facilitate the outward transfer of concepts or off-strategy IP from one corporate to another or to a venture capitalist There is even an online auction provider for trading IP, Ocean Tomo, which styles itself as an Intellectual Capital Merchant Banc® firm Intermediaries such as this have effectively created a global market for marketable products and concepts, and the facility for businesses to generate some return from IP that they cannot or will not commercialize themselves At the very front end of the process, ingenious propositions like ‘Wiki Solutions’ and ‘Ideas While You Sleep’ now organize global groups of creative problem solvers to generate new product ideas or solutions to intractable problems

_ Opening Up Innovation 13 

About the author

Tim Nicol is Managing Director of MIH–Make Innovation Happen He is a ‘rounded and grounded’ marketer with an international blue-chip FMCG background and his own successful marketing services business His corporate experience was gained over nearly 20 years at Mars, where he developed and launched the hugely successful Dolmio® brand, and he was subsequently responsible for food marketing strategy and NPD activity across 22 markets He established MIH in 2002 as an innovation services company to help consumer goods clients all over the world deliver efficient and effective NPD and innovation Tim is a business studies graduate and a member of the Chartered Institute of Marketing, the Market Research Society, and the Product Development and Management Association He is a sought-after conference speaker and a Business Champion for the East Midlands, and has published articles on innovation in the trade press Contact MIH (tel: +44 (0)20 7379 3340; e-mail: tim@mihcentre.co.uk; website: www.mihcentre.co.uk).

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Innovation plays a vital role in maintaining and improving the competitiveness of a business No matter whether that business is a lone inventor or a start-up, a small business focused on the local economy or a well-established business with a significant turnover and global reach, developing new products and processes and successfully bringing them to market are the route to success.

Yet innovation is not easy In a difficult economic climate, more and more businesses are focused on the day-to-day challenges of running the business They rarely have enough resources to do everything they want and often lack expertise in areas that are not core to the business

Support for innovation and growth, particularly in a knowledge-based economy, is essential to these businesses to ensure they are in the strongest position possible to drive their success

Maximizing your intellectual property

Every business owns some form of intellectual property (IP) However, far too few know how to protect these intellectual assets and exploit the value they bring to the business The first step is to identify what the business has that is of value and then to put a plan in place to protect those valuable assets

One business that is proactively managing its IP is PS Inventions Peter Brooks invented Skiweb, a special strap to carry awkward ski equipment, because he was

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fed up struggling to carry sets of skis and poles for all the family on skiing holidays Peter and his partner Sian quickly discovered that inventing and developing the product was the easy part With Business Innovation support, Peter and Sian followed

a step-by-step process that took him through each stage of the development process

in a structured way This included the all-important patent application process and protection of the trademarks, enabling Peter and Sian to build the business from a single product to an extended range of successful products

Another example highlights how important protecting IP is for businesses developing products based on new technology Solus Sensors specializes in innovative sensor solutions for the chemical, petrochemical and water industries Solus Sensors’ director Dr John McCormack explains:

Developing our own technology meant we needed to protect the intellectual property and apply for patents This can be an expensive and complex process, which for a small company with limited resources is tough We had assistance to apply for two IP grants – one for a UK patent and a second for

a PCT patent.

We also had help to draw up a grant proposal for a feasibility study of the new technology Having successfully completed this, we are now drawing up proposals for developing a working model of the new technology.

Good design is good business

Thomas Watson, President of IBM, famously said, ‘Good design is good business.’ But what is ‘good design’ and how does it make for ‘good business’?

On a functional level, good design implies a product that is ‘fit for purpose’, performs well and is reliable and cost-effective On a deeper level, individual aspects

of design such as colour, texture and shape will subconsciously influence the receiver’s assumptions and opinions

Designing attractive products that look ‘fit for purpose’ and that accurately communicate a product’s attributes gives a company competitive advantage at the point of sale But good design must achieve much more than this High-quality design results in more reliable products with fewer returns or less service time It reduces production cost and time and improves profitability, whilst simultaneously building the reputation of a manufacturer and its brands

One business that sought support to consolidate good design into good business is magnetic nerve stimulator business Magstim Magstim maintains a strong commitment

to R&D and product improvement and recognized that without good design it would struggle to compete and sell products in the highly competitive global medical technology market Everything that the company produces – its equipment, literature, website and even exhibition stands – must convey the message that the products and services are of the highest quality and reliability and are safe, whilst also being technologically superior to the competition This cannot be left to chance, and Magstim has put a huge amount of effort and resource into getting that message right – an investment that has paid off and positioned it at the leading edge of its market

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Supporting manufacturing

The challenges facing today’s manufacturers are increasingly complex Stiff global competition, increased uncertainty and rapidly changing markets mean innovation in products, processes and technology is essential to growth and competitiveness

For one South Wales manufacturer, specialist support has resulted in a more positive positioning for its future This well-established manufacturer had recently centralized manufacturing, administration, sales and distribution into a new state-of-the-art facility At the same time, the company upgraded plant and machinery, logistics and IT capabilities With cutbacks in the sector due to the economic climate, the business was eager to take full advantage of the new facilities

An initial diagnostic helped identify areas of the business that needed immediate attention, as well as highlighting areas where the company had clear strengths The company then had support to develop a prioritized action plan, which covered:

control of manufacturing costs, particularly energy-related costs;

Increasing opportunities for commercial success

Developing new products and processes and successfully bringing them to market are vital if businesses are to remain competitive and continue to grow However, research reports continually highlight the alarmingly high failure rate of new products in the majority of industries By developing a more proactive approach and bringing investors and businesses together at a much earlier stage in the new product development process, the opportunities for commercial success of a new product are significantly increased

On one side the Business Innovation Project connects with investors, potential customers and commercial partners to find out what they are looking for and to introduce them to a range of exciting and innovative products, technologies and processes being developed by local businesses On the other side, Business Innovation is in contact with individuals, businesses and academic institutions in Wales that are developing new products, technologies and processes, providing them with up-to-the-minute market intelligence to help them direct their new product development to more appropriately meet the needs of the market This unique approach demonstrates a win–win position with a constant flow of innovative, cutting-edge ideas that can be developed into commercial reality more quickly, more often and with a higher potential

of success

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Summary

To stay competitive, businesses must put innovation at the heart of their strategy Whilst the innovation process starts with an idea and ultimately leads to a successful and profitable business, it is not a linear sequence, and business support needs to be flexible and available at different stages of the process The results are a support environment that increases the ability of companies to innovate and develop new, cutting-edge ideas, and achieve greater success in translating those ideas into commercial reality

About the author

Business Innovation is a pioneering programme that is part of the Welsh Assembly Government’s Flexible Support for Business It is designed to help businesses turn innovative ideas into commercial realities The programme is highly targeted and provides support in all aspects of the business – from developing new products and managing intellectual property assets, through design issues and manufacturing, to full commercialization A highly experienced team of specialist managers with extensive industrial experience undertake a review of the business to identify opportunities for innovation and exploitation of intellectual property Businesses are then directed to specialist support or expert advice from the private sector or universities or colleges Funding is also available for research and development into new products, processes and technologies.

Phil Allen is Senior Programme Manager, Technology, Science and Innovation for Business at the Welsh Assembly Government and has responsibility for innovation support to businesses throughout Wales He is a qualified electrical and electronic engineer, who worked for Siliconix for 12 years primarily in semiconductor design In

1991 Phill joined Shanning Laser Systems (SLS) as Manufacturing Manager and was part of an MBO where he became Manufacturing Director responsible for the design and manufacture of medical and industrial laser systems During his time at SLS Phill worked on major development contracts with United Distillers, M & S and Vauxhall and was project leader for the Eureka 113 carbon monoxide laser programme in Cambridge Phill joined the Welsh Development Agency in 1996 as one of the first Innovation and Technology Counsellors (ITCs) for Wales and was promoted to ITC Programme Manager four years later In 2001 Phill worked on a project with the then Welsh Office to evaluate the support for lone innovators in Wales and as a result created the Wales Innovators Network (WIN) In 2002 Phill completed a Master of Science degree.

To find out more contact Flexible Support for Business (tel: +44 (0)1443 845500; website: www.business-support-wales.gov.uk/innovation).