Dominic Oughton of the Institute for Manufacturing at the University of Cambridge describes the crucial role played by Open Innovation in delivering value to both large corporations and innovative start-ups in the food and drink sector.
What is Open Innovation?
Open Innovation (OI) is an approach whereby organisations seek to collaborate with others to deliver innovation. Innovation is often a collaborative activity but the practice really came to the attention of industrialists and academics alike when Henry Chesbrough coined the phrase ‘Open Innovation’ in 2003, defining it as ‘the purposiveinflows and outflows of knowledge toaccelerate internal innovation, andexpand the markets for external useof innovation, respectively [1].
OI is typically depicted as adding a‘permeable boundary’ between the organisation and the external environment, with flows of information and knowledge into and out of the ‘innovation funnel’, as ideas are developed into products and services that are taken to market (Figure 1]. This embraces many different types of interaction, from adoption of blue-skies research through licensing of mature Intellectual Property (IP) to co-branding of mature products and spin-out of underutilised technologies. Underlying this philosophy is a core belief that‘we don’t have a monopoly on good ideas or the best brains in this organisation.’
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OI in food and drink
OI has been widely adopted across many industrial sectors, with fast-moving consumer goods (FMCG), pharma and computing in the vanguard, and ‘faster’, ‘better’ and‘cheaper’ all being cited as benefits. Larger companies need access to new ideas and technologies to feed their innovation processes. They need to source them from wherever they are generated. This is particularly true for firms competing in the food sector where tens of thousands of new food and household products are introduced each year to serve niche markets across the globe. The variety of products is likely to grow further as firms increasingly aim to serve the individual consumer’s needs.
Bringing together small and large companies in mutually beneficial partnerships seems the obvious way forward; harnessing the speed, entrepreneurship and innovative capacity of small firms to feed the channels, brands and resources of the large company should create the new value for consumers that neither firm could deliver alone.
Specifically in the food and, more generically, FMCG sectors, major corporations have embraced OI models consciously and, with encouragement from top managers, they are implementing and coordinating OI through dedicated teams. As Mortara et al. [2] found in one of their case studies, this sector recognises the potential power of OI: ‘the ‘outperformers’in the food industry use external sources of innovation.’ OI seems a successful approach to achieving sustained high growth and containing innovation costs. Furthermore, FMGC’s innovation is strongly dominated by brands and the adoption of OI contributes to the reinforcement of branding messages.
Today a number of drivers are encouraging an environment where entrepreneurial start-ups can deliver vital innovation. These include:
the rise of the demand for organic and sustainable products, the need to respond to issues like obesity, diabetes and allergies in the population,
the discovery and demand for ethnic foods by the mainstream.
Amongst the highest profile adopters of OI is Procter & Gamble (P&G), with former CEO, AG Lafley, inspiring a culture change from ‘not invented here’ to ‘proudly invented elsewhere.’ P&G’s Connect & Develop (C&D) programme has been highly successful, producing more than 35% of the company’s innovations, including Pringle Prints, and billions of dollars of revenue [3].
Another example of the application of OI in the food sector is International Flavors and Fragrances. IFF taps into the creative potential of its customers when conceptualising and designing products. Using an internet toolkit with a large database of flavours, the company involves the customer when creating a new flavour. Co-creation allows it to increase its ability to meet individual customer expectations and to reduce time-to-market [4].
Larger companies need access to new ideas and technologies to feed their innovation processes."
Challenges for large corporations
The challenges faced by organisations in adopting Open Innovation vary depending on which end of the‘collaboration telescope’they are looking though; global corporations and nimble start-ups see things very differently!
Large corporations face both ‘hard’ and ‘soft’ challenges in moving to a more open approach, needing to re-think many of their business processes to adopt, for example, the ‘Want-Find-Get- Manage’ framework developed by Gene Slowinski – perhaps the most widely used framework for OI. They may also need to rebalance their innovation resources and infrastructure. However, research suggests that simply rewiring the ‘innovation hardware’ without consideration of soft factors around motivation, skills, culture and metrics is unlikely to yield results [5]. Chief amongst the factors behind successful OI programmes is clear leadership from the top of the organisation; it is essential to overcome the ‘notinvented here’ syndrome, which is the natural legacy of a traditionally self-contained or closed approach. However, slogans and rhetoric are not enough to change behaviour. Rewards systems need to be revisited, perhaps giving equal recognition to the colleague who scouts a new partner as the one who publishes a patent. Incentives and culture change need to be backed up with additional skills in collaboration, negotiation and intellectual property (IP) to complement existing technical skills. Importantly, those who will be in the front-line in developing and cementing these new external relationships need an empathetic and outward-looking mindset.
Food start-ups, on the other hand, face very different challenges in the OI context. Two of the primary obstacles they need to overcome are the entrenched nature of food distribution channels and systems and a lack of seasoned entrepreneurs in this segment of the industry. Clearly, leveraging the resources of large, established players can help them address both of these issues.
The complexity and scale of large company operations mean that even their own staff are sometimes unable to help a start-up contact the right people."
Challenges for innovators
For the innovation provider, often a small or early-stage company or perhaps a university department or spin-out, the challenges of embracing OI are different but no less great. Many of these derive from the fundamental asymmetry of the ‘elephant and mouse’ nature of a partnership. Some of the most pressing issues are described below.
How and with whom to engage
The complexity and scale of large company operations mean that even their own staff are sometimes unable to help a start-up contact the right people - finding the right entry-point is the first of many challenges faced by the early-stage firm. This is compounded by understanding the different roles of people in a large company. Who is the decision maker? Who influences them? Who will be working on implementing the partnership? Who will be affected by its outcome? Moreover, as soon as a contact point is established and developed there is every likelihood of them being moved along by the ‘big company merry-go-round’.
Different ‘clock speeds’ and power imbalance between partners
Small start-ups are usually able to make decisions very quickly. Large firms, due to their complexity and multiple layers of management, often find it very hard to make decisions at ‘start-up speed’. This can be very frustrating for the start-up – undermining the very trait of agility that the large company was hoping to achieve through partnering: getting to innovation ‘faster’. Such relationships may have a very different context in the two organisations. For the large company, this may be just one of many technology positions within a portfolio. For the start-up, the partnership with a large company is likely to be a survival issue. This can push the cash-strapped start-up towards accepting less lucrative deals or simply serves to undermine confidence in the partnership.
So many of the strategic issues and opportunities in the food, drink and FMCG sectors need a joined-up approach to make real progress; sustainability, provenance and obesity cannot be tackled through bi-party relationships alone. One great example of such cross-industry collaboration is INCPEN, whose members are an influential group of international and British companies with a common interest in packaging and sustainability. They include raw material suppliers, packaging manufacturers and manufacturers and retailers of packaged products. Working within this system-oriented approach, INCPEN aims to achieve a vision of the future where production, distribution, and consumption are sustainable, minimising the environmental impact of packaging and packaged products.
Collaboration, and specifically an Open Innovation approach, plays a crucial role in delivering value to the food and drink industry."
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Alexander Hill, CCO of Senseye receiving the Highly Commended award from the IfM
Experiences from the IfM’s Open Innovation Forum
The IfM’s Open Innovation Forum also takes a cross-sector approach, bringing together some of the key players to share best practice in OI and to explore ‘hot topics’ along the food and FMCG value streams. The recent OI Forum ‘Pitching Event’ gives an interesting insight into the challenges and opportunities that companies in the food and beverage sector are looking to address through OI. The IfM worked with the twenty member companies to establish their highest-priority innovation needs and then took the consolidated ‘Top 50’ to innovators from universities, start-ups and SMEs, looking for solutions. Eighteen finalists were shortlisted to pitch their innovations to the OI Forum ‘dragons’; the winners highlighted both the breadth of the challenge and the types of organisation that are able to respond to this approach.
The overall winner was Nuritas Ltd, an Irish bioinformatics technology company specialising in the discovery of peptides (chains of amino acids) with disease beating properties. The company’s disruptive computational approach to discovery uses artificial intelligence and DNA analysis, which provide unique solutions for the maintenance of health and wellness in industries, such as functional and medical foods, pharma and cosmetics. This is a great example of transferring non-traditional technologies (big data and AI) into the sector to deliver a critical innovation need (improved health and wellness).
Amongst the ‘Highly Commended’ companies was WeFarm Ltd, a peer-to-peer service that enables farmers in the developing world to share information via SMS, without the internet and without having to leave their farms. Small-scale farmers are highly vulnerable to the effects of climate change and face many other challenges, including lack of access to traditional markets, agricultural inputs and finance. Every day, individual farmers develop a diverse range of innovative, low-cost solutions in response to these challenges. WeFarm’s service enables these solutions to be shared and leveraged by other farmers demonstrating a truly dispersed OI model, addressing the challenge of sustainable food for a growing population.
Another Highly Commended entrant was Senseye Ltd, a start-up offering automated diagnostics, prognostics and condition monitoring to help eliminate machine reliability problems by revealing what is happening now and predicting what will happen in the future [6]. This is another good example of a novel technology solution to a ubiquitous challenge for all sectors, including food and drink: how to derive higher Overall Equipment Efficiency (OEE) from existing investments.
The ‘Pitching Event’ is an interesting adaption of the first two stages of the Want-Find-Get- Manage model:
identifying what resources are Wanted,
Finding potential external sources,
Getting access to these resources,
Managing the relationship.
It will be up to the ‘dragons’ and‘pitchers’ to navigate the last two stages, striking a deal and delivering value from it for all concerned.
Conclusions
Collaboration, and specifically an Open Innovation approach, plays a crucial role in delivering value to the food and drink industry and addressing some of the broader societal challenges, such as sustainability, food security, provenance and health. External sources of innovation, from start-ups and universities or from outside the sector, can be harnessed to great effect in delivering value, whether measured in commercial or societal terms. Navigating all the challenges and potential pitfalls identified above requires that this value is shared equitably and success is most likely to be underpinned by people with an ‘open’ mindset.
Senseye, the ‘Uptime as a Service’ product, is an intelligent and easy-to-use automatic prognostics and condition monitoring tool, which has been specifically designed for manufacturing companies implementing predictive maintenance, allowing them to forecast machine failure without complexity. It is based in the cloud allowing automatic monitoring of key equipment on phones, tablets or PCs.
The product helps to eliminate machine reliability problems that remain unsolved by traditional data-collection, monitoring and diagnostic tools. It helps production managers and operators understand when a fault is likely to occur, weeks or months in advance, as well as for how long the machine will be able to keep operating – the ‘Remaining Useful Life’ (RUL). Results are delivered from day one and improve with time as the product learns more about machines and operations.
Dominic Oughton is Principal Industrial Fellow at the Institute for Manufacturing, University of Cambridge, Charles Babbage Road, Cambridge, CB3 0FS, UK
5. Mortara, L., Napp, J., Slacik and Minshall, T. (2009) How to Implement Open Innovation: lessons from studying large multinational companies. A study conducted by the Institute for Manufacturing with sponsorship from Unilever and the Cambridge Integrated Knowledge Centre. http://www-cikc.eng.cam.ac.uk/wp-content/docs/COIN.pdf
