Open Innovation is not a difficult concept to grasp – it’s simply about collaborating outside your company’s boundaries to create new business value – but, in practice, organisations have more difficulty, or perhaps, reluctance embedding it in to their business model.
At the Oil & Gas Technology Centre, Open Innovation lies at the core of how we source ideas and convert them to fully-funded technology projects. And, if we’re going to continue at the pace we’ve already established, we need lots of them.
Our industry’s recent history has raised a whole host of challenges: How to balance areas of mature production that are already borderline economic when your selling price drops by over 80%; how to find a more sustainable reduction in costs rather than simply cutting jobs; and how to embrace disruptive technologies that are having a greater impact in almost every other industry around the World? The industry has been led towards collaboration through targeted regulation, but a lot of change is happening around creating better awareness of the impact that specific technology projects can have if they’re shared even more openly.
Likewise, sharing how other industries have improved through open collaboration is important. The car industry, for example, has restructured its supply chain to collaboratively standardise on many aspects of their design across brands and is currently embracing the disruption that electric and self-driving cars will have.
The drive for disruptive technologies is creating a shift in organisational spending.
Conventional wisdom in business is that 10% of the innovation portfolio spend should be aimed at transformational or disruptive innovation. Recent studies have shown, typically, more than double that is actually being applied by organisations striving to achieve a step change to differentiate themselves and gain a competitive advantage.
Every chance should be taken to manage spending without compromising quantity and quality of transformative ideas. This is where Open Innovation can really make a difference, but Open Innovation is the least used tactic across all innovation programmes.
Looking in a bit closer detail, a cross section of the same study data shows that in 49% of more mature organisations, Open Innovation is a stronger part of their portfolios.
So, why, as a relatively young organisation, have we taken the Open Innovation route?
For us, there are three main reason: resources, reach and revolution.
One of our biggest challenges is feeding our ideas hopper with ideas and potential projects.
We could have taken the more traditional closed innovation approach favoured by highly competitive insular organisations and channelled our available resources into building a team of highly skilled technical experts dedicated to solving industry challenges. To us, and thankfully a growing number of our industry’s organisations, that runs counter to the emerging ethos of collaboration within the industry.
Justifiably even more so than a commercial organisation, our key resource – public money – needs to be leveraged to best effect. Using it to establish Open Innovation processes, has given us greater reach where crowdsourcing our ideas is much more cost effective and is the only way we can achieve the throughput that we need to sustain our ideas pipeline.
This open sourcing of ideas is matched in importance by open evaluation. Finding disruptive technologies from the vast pool of available technologies whilst not wanting to reinvent the wheel helps mitigate the wasted resources.
We also want to tap into revolutionary or disruptive thinking that comes from accessing minds in academia, emerging technologies and across industries. By using Open Innovation, we bring in new and different thinking from across other industries.
Specifically, our own ‘Call for Ideas’ process, where we ask for project ideas to help solve specific industry challenges, throws our net far and wide to harvest and assess ideas from across other industries.
Whilst we may have addressed some of the sceptics’ arguments around what we see as the value of Open Innovation for the OGTC and the wider industry, what about the pessimists view of overcoming its implementation barriers?
The number one question we get is around Open Innovation is Intellectual Property ownership and protection.
Innovators are effectively sharing their IP with you, potentially at their own risk. The reason they would be motivated to do this is not usually altruism.
As an organisation, it depends on what you want to gain, that determines your relationship with potential innovators. If an innovator sees enough benefit from giving you their idea in the hope that you will develop it when they can’t, you will have a win/win situation. Both parties realise the greater value in the contract even when the risks are quite high.
In our case, we offer a financial incentive to innovators. Each ‘Call for Ideas’ is backed by a prize fund where winning entries can share a million pounds worth of project funding. About 20% of our projects have come from this process so far. As an organisation, the OGTC doesn’t take any equity or retain any IP in any of the technology projects that we fund. That all remains with the technology providers themselves.
Open Innovation doesn’t necessarily mean that you share the ideas publicly once you’ve received them either. We address this in our processes by switching from an open call to start with to generate the initial ideas, but then close the collaboration process so it’s just between us and the innovators. This is still Open Innovation, just not quite so open. Before any IP is exchanged, we insist that all parties are protected by a simple non-disclosure agreement (NDA).
Balancing culture and process is also required for success. Open Innovation carries with it connotations of an easy-going, unorthodox working environment, and, whilst that may be beneficial to creative thinking, it doesn’t guarantee anything actually gets delivered. Ours, like other successful Open Innovation programmes, encourages that aspect but within a clear structure. Our Calls are clearly defined and articulated and require a standard format for responses within the stated timeframe. Their evaluation is completed within consistent assessment guidelines and everyone knows these rules at the outset.
In terms of success, the OGTC Open innovation programme has delivered for us.
In its first 18 months, the eight calls have created a network of over 1000 innovators who have submitted over 330 ideas. The process is on target to deliver around 25 projects with funding exceeding £8m. We believe this is compelling evidence of the value that Open Innovation can bring.
If you want to learn more about our Open Innovation process, take a look at a recent webinar that we co-hosted with our Open Innovation platform partner, Imaginatik.
Also, our current ‘Call for Ideas - Restoring Shut-in Wells’ is open for submissions until 28th February, 2019. Click here to find out more and submit your ideas.