In 1960 the world was a simple place. A few large companies dominated each major industry and they were skeptical of new ideas, especially ones that were not theirs. This was called NIH (Not Invented Here). Great technology, and great new ideas were concentrated in a few labs, and they did not transfer from one company to the next or one geography to the next.
Today, that landscape has dramatically shifted. Large companies are creating a lot less research as % of all research, and small companies are creating much more. Today 80% of the Fortune 500 have technology scouting programs to find this technology. Companies are moving from NIH to PFE (Proudly Found Elsewhere) . As an illustration of this, the volume of patents that have been licensed in just the past few years has gone way up. Technology is starting to transfer – it is flowing from one company to the next and from one geography to the next.
Technology is fragmented and it is transferring. These are the first 2 trends.
This drives a lot of economic growth, as thousand of small companies create and trade, create and trade – companies with technology needs are more aggressive at finding solutions and companies with solutions are more aggressive at finding licensees who need it. Companies are no longer bound to commercialize just what they have created. Technology and intellectual property are more liquid and their value thus increases – the beneficiaries are the companies that are good at creating technology and trading it.
I hypothesize that a 3rd trend is occurring, that we are moving toward a partnership economy. Where small companies will more aggressively partner with larger route-to-market partners. Small companies will benefit by getting their great new technology into a wider range of markets, solving more customers needs in more geographies. Large companies will benefit from these partnerships by having access to a wider selection of new technology. To use a baseball analogy, they will have a larger number of ‘farm teams’ to pick from.
These partnerships can work in both directions. Not only will large companies look to their ‘farm team’ for new technology, they will also spin out technology that does not make an internal threshold. The farm team is a great place to prove out a new technology, that could be reacquired if successful. Here are a few examples; www.earcheck.com was spun out of Becton Dickinson and www.sutetogrow.com was spun out of DuPont.
What does all of this mean?
1) The fundamentals of the economy are stronger than most realize, as thousands of small companies create the economic growth instead of a few large ones, and breakthrough technology is applied more rapidly in more places.
2) Companies that grow, will be doing more creating and trading of technology. The trading is the the harder of the two, and this will determine who grows and who doesn’t.
3) Large company to small company partnerships will be especially productive, and will be a new trend – as large companies strive to have a strong ‘farm team’ and small companies strive to have access to a wider range of markets and customers.
Here is an example of a large to small friendship…..can you guess who is larger?
Additional Resources:
1) Open innovation by Henry Chesbrough
2) Wikinomics: How mass collaboration changes everything by Don Tapscott
3) yet2.com’s annual conference in Boston September 29th through October 1st
Absolutely agree with this, Ben. Inter-company collaborations as you describe should be the proverbial “no brainer,” especially since so many companies have downsized in the past couple of years and no longer maintain the internal resources necessary to create the innovations customers desire.
However, I would note that attorneys who represent both large and small companies typically perceive such inter-company collaborations to comprise significant risk, particularly in the form of IP ownership issues. When any company is inexperienced in inter-company collaborations, the attorneys involved will typically end up serving as gatekeepers, which can set up roadblocks and cause considerable additional expense in the negotiation and IP protection phases.
We can’t put all the blame on lawyers because most do not have experience dealing with the new world of Open Innovation, either. Put simply, for most lawyers, uncertainty breeds the perception of risk, which is then typically passed on to their clients in the form of conservative advice. To help foster better collaborations among “newbie” Open Innovators, I would love to see lawyers who have worked at successful Open Innovation companies, as well as their business team partners, speak more openly about dealing with the legal issues involved in fostering inter-company collaborations. This would be in addition to the business-focused anecdotes put forth to show the benefits of Open Innovation.
Jackie…..that is a great idea……perhaps we should develope a list of OI friendly Lawyers….great idea……Ben
Jackie…..BTW….I love you blog…..Ben
interesting article .. I like this article, because it related to my research
Yeah, As i was passing by here and i read your post.It’s quite interesting.I will look around for more such post.Thanks for sharing
Ben,
I love the “farm-team” analogy, too. In today’s economic climate, leveraging good ideas from any credible source just makes good sense!
Keep these posts coming!
Joel Edelson