Harnessing the power of open innovation

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Innovation is vital to the competiveness of the Northern Ireland economy. Owen McQuade met with PA Consulting’s

Charlie Henderson to discuss how local organisations can harness ‘open innovation’ in these difficult times.

Charlie Henderson believes that the current high degree of uncertainty around the economy – “are we in recovery or are we in a double-dip?” – is delaying important investment decisions and that this is hurting Northern Ireland’s competitiveness.

“We must avoid competing in commodity marketplaces where product and service are produced more cheaply elsewhere. Northern Irish companies need to move up the value-chain and build on our reputation as the producer of high quality products and services. The key to this is innovation and this needs investment,” he adds.

Henderson observes that although innovation has always been part of business, “the increasingly diverse demands of customers make it progressively more difficult for any single company to meet a customer needs.”

Open innovation

In response to this, companies are increasingly working across the supply chain and with academia to produce innovative, customer-focused solutions. Companies are adopting a more collaborative approach to innovation, bringing together a broader range of ideas, talent and intellectual property from outside their organisation. Ideas thus no longer reside within one company. This approach is called “open innovation”.

Open innovation allows companies to focus in areas where they have a particular specialist competence and work with others “to fill the gaps”.

Not only does this help in terms of meeting complex customer needs, it makes financial sense and suits economies such as Northern Ireland. “Open innovation can be cheaper with development costs shared across a number of organisations. By working together, it allows SMEs to focus on their areas of expertise and punch well above their weight. This suits a region such as Northern Ireland with a high proportion of SMEs.”

Open innovation does, however, create challenges. “Historically, businesses have fortified their corporate walls and innovated behind closed doors. Now they need to work with others as part of an ‘innovation eco-system’.”

In his experience, businesses often struggle to integrate this pool of external knowledge and talent with their own innovation systems. “Organisations must be able to identify market opportunities and find the most appropriate innovation resources to address these. These resources may not all be within their own organisation. Organisations must be sufficiently agile to work with other innovators to respond to client needs within increasingly demanding timescales.”

Henderson sees a role for government “in supporting and encouraging open innovation through collaboration”. He believes that “innovation must be driven by the companies themselves” but government can facilitate innovation, “connecting, developing relationships, facilitating and establishing communities of interest which help create opportunities for collaboration”. Government can also work with academia “to help build the business knowledge and skills base in collaboration with business.”

More clustering

One of the ways to support open innovation is to provide a focus around specific customer problems or clusters. This helps with sharing of ideas and development of a skills base with a common interest. However, Henderson notes: “Northern Ireland has too many clusters at present. We shouldn’t try to be all things to all people. We need just a few areas where we can focus and promote our efforts.”

As to potential clusters, he responds “Northern Ireland has a number of candidate areas: agri-foods, telecoms, ICT, connected health, digital content, advanced materials and advanced engineering.”

Given his transport background, it is unsurprising that Henderson highlights green transport as offering huge potential: “Green transport brings together a number of areas – energy, advanced materials and engineering, all of which we do well in Northern Ireland and have a history of innovation.”

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PA Consulting has a long association with supporting innovation. In Northern Ireland, PA has been working with the Northern Ireland Science Industry panel (Matrix). PA has also been delivering a number of programmes on behalf of Enterprise Ireland to build innovation capability. And in the UK, PA has recently been appointed by UK Trade and Investment to manage three of its major programmes (Sector Champions, R&D and Fiscal Stimulus Initiative). This work involves about 60 PA staff helping businesses with investment in the UK.

One area where PA’s work is expanding is in helping organisations with open innovation. As part of this, PA is exploiting its technology centre in Cambridge. The centre has over 200 scientists, engineers and consultants, all working full-time on innovation or helping our clients become better innovators. “Local clients who have visited the centre have been very impressed with the depth of knowledge,” commented Henderson. “More importantly, they see open innovation working for real and understand the benefits.”

“Open innovation is not a passing trend. The name might change but the idea is here to stay and will become another part of modern working culture,” observes Henderson.

When asked what is the ‘crunch issue’ with innovation, he replies: “Always focus on what the customer wants, not on the technology. You have to ask: ‘What is my customer trying to achieve here?’ Normally this is about doing something more efficiently or differently than before. Innovation is more than new technology; it typically includes changes to processes and culture.”

Open innovation survey

PA Consulting recently conducted a survey to investigate the current status of open innovation. Business development and R&D directors from 33 leading global companies were interviewed. Overall, most leaders agreed that open innovation is key to the future success of the business, and as such, deserves management attention and resources. The survey also revealed several specific issues that need to be addressed before open innovation achieves the central status that most respondents believe it should have.

There are concerns about sharing know-how. Another common impediment to advancement in open innovation is uncertainty over the sharing of IP. Companies are unsure about when to adopt open policies and when to be more protective of ideas. Their degree of openness appears to be influenced by the company’s level of dominance in its marketplace, the rate of technological change, and the perceived potential of the specific IP under consideration.

Other challenges include the lack of overall company-wide strategies for open innovation and lack of the specific skills, tools and techniques in place to support the different way of working that open innovation requires.

For more information on the survey, visit: http://tiny.cc/lsxb7

A cluster that promotes open innovation

The Swedish Parliament set out an ambitious vision that no one would be killed or seriously injured in road traffic. This was not just a road safety vision, but one around which businesses could develop. From this Sweden has developed a large and successful cluster based around road safety. This includes companies such as Saab, Volvo and Scania as well as numerous SMEs in their supply chains. As well as traditional automotive safety, this cluster has evolved over time to include high-end telematics and hybrid technology. This cluster also includes a number of academic institutes who not only train future employees, but provide input into the innovation process.

Profile:

Charlie Henderson

Charlie Henderson is a Managing Consultant with PA Consulting Group. Scottish-born, he has been based in Belfast for the last 14 years. In his current role has successfully supported organisations in exploiting new technologies and processes that deliver real business benefit.

Charlie’s work has been critically acclaimed. He led the assignment that won the 2006 Management Consultancy Association award (the industry ‘Oscars’) for best operational performance project in the public sector and was heavily involved on the assignment that won the 2007 best public sector project.

Charlie now heads PA’s UK and Irish work in the transport sector. As well as traditional management consultancy, this is increasingly working with organisations in the transport sector benefit from open innovation.

Outside work, he loves to spend time with his wife (Anne), kids (Angus, Sarah and Ella) and dogs. He tries to combine this with his other passion – going up and down mountains, either running or cycling – but is increasingly failing.

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