Tuesday, April 04, 2006

Out in the open

I had the opportunity to participate at Innoventure, a conference bringing together industry, government agencies and academia to foster increased innovation in the Southeast US. One of the key sponsors of the event was Michelin.

Michelin has a new focus to speed innovation, and discussed its focus and new viewpoints with the attendees and with the local Greenville, SC paper. In the newspaper article, the director of external research is quoted as saying that Michelin used to have a "secretive" culture and did not share research, but that it is increasingly emphasizing openness and collaboration with universities, research labs and even entrepreneurs. Such collaboration helps Michelin innovate faster. "We discovered there's lots of ways to do innovation. One of Michelin's weaknesses is we focuse very, very heavily on the product, and we have an excellent product. But business model innovation and new ways to sell tires, new ways to bring products and services to our customers, we've been more behind there."

This is the beginning of a significant change - not only for Michelin, but for leading consumer packaged goods manufacturers like 3M and P&G, as well as a number of other firms. Even large firms with extensive R&D facilities can't keep up with the demands of consumers and all the new research and technology coming on the scene. If the large guys can't do it effectively, how can small and mid-sized firms, with smaller R&D budgets, compete?

I think they will have no option but to work in an open source innovation model, or choose to innovate around the things they think they can control or differentiate. For example, Michelin will probably not outsource its innovation around tire technology, but may seek new ideas for sales channels and methods to interact with customers. Who understands customers really well and what can Michelin learn, borrow or steal (legally) from those firms?

There's a significant amount of discussion around "open innovation" and open source business models. I think we'll see more of these larger, well respected R&D driven firms open up to outside ideas and push some of their technology out to smaller firms which may be able to bring the technology to fruition more quickly. Working with partners, large and small, will increase the speed of innovation and bringing new products to market.

I think the focus in the short and medium term will be on this aspect. Once we've had a great idea and can protect it, what is the best means to bring it to market? Should we try to do this ourselves, or should we work with partners? However, in the short and medium term, R&D labs are not going to fully open the kimono - since we are talking about the crown jewels. Other than software, I'm not sure a completely "open source" business model works yet - but give it a few years and some trials in the market and we may begin to see more openness even around the ideas and intellectual property.
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posted by Jeffrey Phillips at 8:50 AM


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