CEO Letter

Open Your Doors to Innovation

Is R&D a core competency you have to own? Not if it costs too much and bogs you down.

September 11, 2007 — CIO — At the CIO 100 Symposium this year, delegates were treated to a plethora of ideas, innovation and knowledge sharing that bordered on the extreme. Of all of the issues discussed, I was most intrigued by the concept of open innovation. Both Don Tapscott, author of Wikinomics, and Dwayne Spradlin, president and CEO of InnoCentive, discussed in detail how the traditional practice of R&D is not only flawed but essentially dead.

The central idea of open innovation, as defined on Wikipedia, is that “in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (i.e. patents) from other companies. In addition, internal inventions not being used in a firm’s business should be taken outside the company.” Henry Chesbrough, a professor and executive director at the Center for Open Innovation at Berkeley, is credited with coining the phrase.

Now you might say this sounds ridiculous, futuristic or plain scary. However, when Alan Lafley, CEO of P&G and one of the most admired CEOs in the world, proclaims, as he did in 2003, that “50 percent of all P&G discovery and invention could come from outside the company,” CIOs and other executives should take notice. This is even more remarkable when you think that only one-fifth of P&G’s R&D came from the outside in 2002.

Couple the concept of open innovation with the idea, expressed at the CIO 100 Symposium by Randall Stephenson, CEO of AT&T, that in an IP-based world, the RPMs of commerce will increase exponentially over time, and you need to be thinking about how you can accelerate your own product development cycles. Open innovation not only allows for massive collaboration but it also enables solutions and innovation to occur at a faster pace.

This practice is only going to grow in acceptance. It is something that your organization should not only be discussing but aggressively adopting. Be assured that your competitors are.

To learn more about this remarkable topic, I recommend the following websites: Venture2 CEO Mike Doherty's blog, innovation.net, as well as InnoCentive, open-innovation.com by Frank Piller at MIT's Smart Customization Group, and Tapscott's Wikinomics.com.