Open Innovation and Open Business Models: A new approach to industrial innovation

Transcription

1 Open Innovation and Open Business Models: A new approach to industrial innovation Presentation to Joint OECD/ Dutch Ministry of Economic Affairs Conference on Globalization and Open Innovation Dec. 6, 2006 Henry Chesbrough Haas School of Business UC Berkeley 2006 Henry Chesbrough 1

2 Agenda Open Innovation Open Business Models Implications for Managing IP Policy Implications 2006 Henry Chesbrough 2

3 The Current Paradigm: A Closed Innovation System Science & Technology Base The Market Research Investigations R Development New Products /Services 2006 Henry Chesbrough 3 D

4 The Open Innovation Paradigm Licensing Other Firm s Market Internal Technology Base External Technology Base R Technology Spin-offs Technology Insourcing Current Market 2006 Henry Chesbrough 4 D New Market

5 Open innovation in practise License in Spin in Acquire Spin out Divest Robert Kirscbaum, DSM: Research & Technology management, July August C 2002 Henry Chesbrough EIRMA SIG III, License out The creation of new businesses is a highly dynamic process, best represented as a horizontal funnel (passed in iterative steps)

6 Closed Open innovation Other firm s market Licence, spin out, divest Our new market Internal technology base Internal/external venture handling Our current market External technology base External technology insourcing Stolen with pride from Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27, C 2002 Henry Chesbrough EIRMA SIG III,

7 IBM & Open Innovation Internal Technology Base External Technology Base Java, Linux R $1.9 B licensing, OEM for semi co s ODM for others Global Svcs Sun, and others eqmt Technology Insourcing Current Market 2006 Henry Chesbrough 7 D Other Firm s Market New Market

8 Is this just for High Tech? Internal Technology Base Procter &Gamble Use it or Lose it Other Firm s Market New Market External Technology Base Technology Scouts Venture Acquisitions Spinbrush Large Acquisitions Gillette Current Market R 2006 Henry Chesbrough 8 D

9 The Logic of Open Innovation Good ideas are widely distributed today. No one has a monopoly on useful knowledge anymore. Innovation is now done within networks of firms, rather than within a single firm Not all of the smart people in the world work for us Henry Chesbrough 9

10 Agenda Open Innovation Open Business Models Implications for Managing IP Policy Implications 2006 Henry Chesbrough 10

11 Which Would You Rather Have? A Better Technology Or, A Better Business Model 2006 Henry Chesbrough 11

12 Go with the Business Model Business Model > Technology Ability to profit from technology Ability to scale technology Ability to continue innovating technology Ability to acquire technology 2006 Henry Chesbrough 12

13 IBM: Its Closed Value Chain Value-Added Activities Solutions All IBM pre 1993 Applications Productivity SW Operating Systems Computers Chips, devices Atoms Materials Value Chain 2006 Henry Chesbrough 13

14 IBM s Open Business Model Solutions Integration Other Integrators Value-Added Activities Applications Productivity SW Operating Systems Computers Chips, devices Applications Productivity SW Operating Systems Computers Chips, devices Atoms Materials IBM Chain Materials OEM Market 2006 Henry Chesbrough 14

15 IBM s Open Source Business Model Spends about $100M each year on Linux 50% for general improvement 50% for specific improvements for IBM gear Others spend another $800M a year IBM creates value through Linux Also donates development tools, patents IBM captures value through value-added services and software up the stack 2006 Henry Chesbrough 15

16 Agenda Open Innovation Open Business Models Implications for Managing IP Policy Implications 2006 Henry Chesbrough 16

17 The Role of IP in the Business Model A business model has two functions: 1. Value creation 2. Value capture IP is critical for value capture in many business models IP can also be valuable in creating value Setting standards Intellectual commons Defining the space for the innovations of others 2006 Henry Chesbrough 17

18 Fig. 4.1 Evaluating Technology Alignment with Patent Coverage Patent Coverage Technology Coverage Unused Protection Region Protected Region Unprotected Use Region Party Henry Chesbrough 18

19 Fig. 4.2 Complex Technology Alignment with Patent Coverage, when Two Parties Have Conflicting Claims Patent Coverage Party 1 Technology Coverage Patent Coverage Technology Coverage Assertion Region Party 2 Impaired Region Infringement Region 2006 Henry Chesbrough 19

20 Fig. 4.3 Complex Technology Alignment with Patent Coverage, when Second Party does not Practice Technology Patent Coverage Party 1 Technology Coverage Patent Coverage Now Irrelevant Assertion Region Party 2 New Infringement Region Infringement Region 2006 Henry Chesbrough 20

21 Fig. 4.5 IP Mapping Value Chain Analysis: Printers Enabling Technology Equipment Installation Consumables Operation Repair and Service Controllers Manufacturing Site Prep Ink Programming Diagnostics Print Heads Integration Assembly Paper Monitoring Testing Lasers Testing Quality Control Procedures Sensors Connectivity Scheduling Parts = Moderate IP risk = Strong IP position (possible assertion opportunity) = High IP risk = Low IP risk 2006 Henry Chesbrough 21

22 The IP Management Life Cycle Figure 4.6 Stages in the Technology Life Cycle Maturity Performance Growth Decline Emerging Time Become the standard Grow the standard Compete within the standard Harvest the standard 2006 Henry Chesbrough 22

23 Managing IP for MS Windows Mature market in US Windows has won the war to be the standard So strongly enforce copyright to prevent piracy Every illegal copy of Windows is money lost Growing market in China Windows and Linux still battling So do NOT enforce copyright (not yet) Every illegal copy of Windows is one less for Linux IP Management Must be Driven by the Business Model 2006 Henry Chesbrough 23

24 The IP Management Life Cycle Figure 4.6 Stages in the Technology Life Cycle Maturity US Performance China Growth Decline Emerging Time Become the standard Grow the standard Compete within the standard Harvest the standard 2006 Henry Chesbrough 24

25 Example of recorded reassignment: Intellectual Ventures LLC, a technology development and licensing start-up formed by Microsoft veterans Nathan Myhrvold and Edward Jung, has won the bidding for General Magic Inc's portfolio of patents and other intellectual property, paying $300,000. (Wall Street Journal, May 29, 2003) REASSIGNMENT INFORMATION Date Recorded: July, Assignor: General Magic Inc. (Date signed 04/23/2003) Assignee: Intellectual Ventures Patent Holding Reassignment Kind: Assignment of Assignor Interest C Number 2002 Henry of Patents Chesbrough reassigned: 20 25

26 USPTO Patent Reassignment Data Patent Reassignments RY=1980 RY=1981 RY=1982 RY=1983 RY=1984 RY=1985 RY=1986 RY=1987 RY=1988 RY=1989 RY=1990 RY=1991 RY=1992 RY=1993 RY=1994 RY=1995 RY=1996 RY=1997 RY=1998 RY=1999 RY=2000 RY=2001 RY=2002 RY=2003 Rising faster than base of patents itself, from 0.1% to 4.0% 2006 Henry Chesbrough 26

27 Main Reassignment Kinds Assignment (of assignors interest) Security agreement/termination Government interest assignment Executive order 9424, confirmatory license Merger Change of Name Other Offered as an option in the PTO 1595 form From the examination of semiconductor class: Change of Address License Confirmatory license Conveyance of patent & trademarks Correction to an error in the patent number Release by secured party Release of security interest in patents and tradem Release of security interests Security interest Termination and release of assignment of security Transfer by operation of law Amended and restated patent and security C 2002 agreement Henry Chesbrough and mortgage 27

28 Reassignments in Semiconductors (H01L): 2003 License 1% Merging 2% Other 6% Pure & Autonomous 3% Impure & Autonomous 3% Ind. Inventors 1% Securitization 23% Affiliated Co 61% C 2002 Henry Chesbrough 28

29 Security: US Two reassignments for this patent: Date Assignor Assignee Reassignment Kind 06/21/2002 Xerox Bank One Security Interest 06/25/2003 Xerox JPMorgan Chase Bank Security Interest Patent: Fabrication methods for micromechanical elements, originally assigned to Xerox corporation. Application date: Date issued:

30 What s Going On? Your findings are consistent with what I have seen. That is, I have seen more security interests being taken in a company's patent rights (typically to collateralize debt). The beginnings of a secondary market for IP Henry Chesbrough 30

31 IP Secondary Markets in the Future Orphan recovery programs Failed Startup IP auctions Use It or Lose It corporate policies Bounties and Finders Fees Sale-Leaseback programs Patent roll-up strategies Patent commons areas 2006 Henry Chesbrough 31

32 Agenda Open Innovation Open Business Models Implications for Managing IP Policy Implications 2006 Henry Chesbrough 32

33 Policy Implications Case Study: US economic malaise in the 1980s Auto s Steel Consumer electronics Shipbuilding semiconductors 2006 Henry Chesbrough 33

34 US Resurgence in the 1990s New companies, new industries PCs, networking, software Internet Biotechnology New kinds of semiconductors Note that the troubled firms in the troubled industries did not improve much 2006 Henry Chesbrough 34

35 Closed v. Open Policies Focus on expanding domestic market Protect local champions from foreign competition Subsidize largest domestic firms Limit foreign students and foreign direct investment Focus on SMEs Focus on universities Focus on IP policies Stimulate greater competition among largest firms Stimulate greater information exchange and coordination 2006 Henry Chesbrough 35

36 Getting the Institutions Right Public research funding The foundation of the innovation system Focus on excellence, meritocratic award criteria IP Clear, effective, but limited protection Universities Meritocracy in research funding Allow professors to engage with industry Compete for best and brightest students Enable research to move into industry 2006 Henry Chesbrough 36

37 The Challenge of Indirect Policies No clear constituency Time delay from policy change to results Interaction among institutional factors, not a single factor solution We underestimated strength of US innovation system in 1980s We may be underestimating its weaknesses today Note that Japan has regained ground, with a very different institutional structure than US Note that OECD estimates China s R&D > Japan 2006 Henry Chesbrough 37

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