R&D vs. Licensing

The benefits of Open Innovation/Licensing are summarized in the “R&D vs. Licensing” figure. Not everything is as rosy as the figure portrays however. The key barriers to Open Innovation were found in a 2019 IRI survey to be (1) the technology was not as mature as expected resulting in project delays or killed partnerships, (2) that Open Innovation was not driven by strategic intent, but rather as an objective in and of itself, (3) internal misalignment between functions (engineering, marketing, quality, etc.), and (4) the time to contract was too long (leaving internal teams and potential partners discouraged).

When assessing whether technology needs can be met through open innovation, it is important to first examine which types of innovation can create and sustain business growth. Corporations can conduct strategic planning based on a combination of three growth horizons: current generation growth; next generation growth; and long-term business growth. The first horizon is focused on slowly growing revenues coming from current generation market share growth and geographic expansion. Supporting current generation growth is typically based on incremental innovation. In this environment, most IP is commercially available to all industry participants. The company’s price/performance position is well known and understood by others, and because the technology is mature, intellectual property protection is often obtained from trademark and copyright protection. External technology is often supplied by individual customers or inventors.

To satisfy expectations of shareholders, growth from next generation offerings is also required. The technology for next generation products is not available today but will come from significant innovations; the objective is to create a competitive advantage that others cannot readily follow. The goal is to block competitors using all forms of intellectual property, in particular patents. The innovations that support this type of growth often come from internal R&D initiatives or company-to-company open innovation initiatives.

Long-term growth requires new business growth. This often involves the development of new business models. Because this work is often developmental, intellectual property protection is based on nondisclosure agreements and trade secrets. Open innovation activities in this timeframe are often joint development agreements between companies or collaborative research with universities or research labs.