The Future of Open Innovation. Paul Isherwood 21 st October 2010

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1 The Future of Open Innovation Paul Isherwood 21 st October 2010

3 Agenda OI what is it, why do it, who is doing it? Adding rigour to the fuzzy front end of the process Bringing R&D and commercial teams closer together Balancing technology push with market pull Key trends, developments & challenges in OI Conclusions & questions

4 Agenda OI what is it, why do it, who is doing it? Adding rigour to the fuzzy front end of the process Bringing R&D and commercial teams closer together Balancing technology push with market pull Key trends, developments & challenges in OI Conclusions & questions

centres Knowledge concentration Getting unusual suspects to solve R&D puzzles Source: Harvard Business Review, May 2007

5 The growth of open innovation Use the best available Research networks Knowledge diffusion OPEN INNOVATION What happens in R&D, stays in R&D Source: Harvard Business Review, December 2006 CLOSED INNOVATION Do it yourself Corporate research centres Knowledge concentration Getting unusual suspects to solve R&D puzzles Source: Harvard Business Review, May 2007 Source: Chesbrough, H. (2003). Open innovation: the new imperative for creating and profiting from technology. HBS Press, Boston, MA

6 Different industries & adoption of Nuclear reactors CLOSED INNOVATION open innovation Biotechnology Consumer electronics Semiconductors Aircraft engines Oil & Gas Communications Investment banking Mainframe computers Food & drink Clothing Pharmaceuticals OPEN INNOVATION Automotive Personal computers Motion pictures

7 External innovation focus is essential Innovation occurs outside large companies Recognition of IP in small organisations Reduced time for taking an idea to product Increasing competitive pressure

8 Open innovation in practice We believe the next big advance, which may reshape the food industry, has already been invented by someone outside the company, and our goal is to be the first to find it Source: Peter Erickson, Senior VP of Innovation, General Mills, February 2007 Collaboration is key to innovation and we love working with the outside. Such an approach has seen the centre s scientists evolve from inventors into translators Source: Peter van Bladeren, Director of Science & Research, Nestlé, April 2007 It s not that we re not innovative. We are very innovative, but the fact of the matter is that so are a lot of other people Source: Steven Goers, VP of Open Innovation & Investments, Kraft Foods, March 2008 Compete like hell externally, collaborate like family internally Source: AG Lafley (CEO Procter & Gamble) & Ram Charan, The Game-Changer, April 2008

9 Agenda OI what is it, why do it, who is doing it? Adding rigour to the fuzzy front end of the process Bringing R&D and commercial teams closer together Balancing technology push with market pull Key trends, developments & challenges in OI Conclusions & questions

10 Ideation vs. Implementation Activity management process well defined Lack of similar rigour in pre-pipeline ideation stage Ideation Stage Activity Management Process Short-term led? Commercially led? Brand/product led? Platform led? Pillar led? How to measure?

11 Respondent industry Source: NineSigma Open Innovation Benchmark Survey, February 2009

12 Current focus of OI efforts Source: NineSigma Open Innovation Benchmark Survey, February 2009

13 Type of open innovation practiced Source: NineSigma Open Innovation Benchmark Survey, February 2009

14 Academia Innovation sourced from anywhere.. GSK Network & Suppliers Organizations

15 Innovation pathway at GSK Early stage assessment and feedback Link external innovative technology to our brands Process can result in a win for GSK and a win for innovators Timings represent general guidelines rather than guarantees

16 An ideal open innovation target Scientific proof of principle Solid business case Unique Competitive advantage

17 Agenda OI what is it, why do it, who is doing it? Adding rigour to the fuzzy front end of the process Bringing R&D and commercial teams closer together Balancing technology push with market pull Key trends, developments & challenges in OI Conclusions & questions

18 Open innovation team in GSK OI team are responsible from concept to delivery Co-located with scientists & marketing experts in Innovation Hubs Timely assessment and development of idea or technology by key decision makers

19 Innovation hubs

20 What s the Hub really like? Open workplace leads to greater sharing of ideas Greater sense of community in the group More of a team mentality Creative eavesdropping is phenomenal More innovative ideas and more relevant ideas

22 Day 2 in the NHFG Hub July 2010

23 Agenda OI what is it, why do it, who is doing it? Adding rigour to the fuzzy front end of the process Bringing R&D and commercial teams closer together Balancing technology push with market pull Key trends, developments & challenges in OI Conclusions & questions

24 Industry/market perspective Industry convergence Blurring of boundaries between industries creating new sectors eg nutraceuticals & functional foods Industry differences Pharma & chemical - science driven technology intense R&D projects Food & drink - consumer focused and often purely market driven Growth opportunities Working in tune with the marketplace not just the technology Innovation will be happening at the intersection of the two

need that customers may have Pull driven by user needs and

25 Technology push vs market pull Push driven by ideas or capabilities created by R&D in the absence of any specific need that customers may have Pull driven by user needs and requirements (demand), rather than by ideas or capabilities created by R&D

26 Structured and Sustainable Pipeline Process Consumer Insight High Launch Rate Consumer Insight Superior Science Validated Product & Claim Global Launch Superior Science Speed to Market

27 Energy science Collaborations with 13 academic centers of excellence in psychology, cognition and physical energy; 25 publications Strong linkage with GSK Pharma Neurology group Brain and Body Energy claims launched in 2003 with strong science which have withstood regulatory scrutiny

28 Types of consumer claims we have used based on the science Brain and Body Energy Physical Edge Refuel yourself Mental Edge Advertising Standards Authority Approved (UK) Committee of Advertising Practice Approved (UK)

29 Berry science Global collaborations with 23 academic centres of excellence 2009: 6 oral communications, 2 publications, 7 submissions for peer review World leaders in blackcurrant breeding research Vitamin C heritage and credibility One of five a day Exploring other berry bio-actives

30 Types of consumer claims we have used based on the science Rich in Vitamin C: A Powerful Antioxidant Friendly to teeth Naturally rich in antioxidants 1 of your 5 a day Wildlife Trust and sustainable agronomic technology 100% recycled PET, 1st major brand to market

31 Sport science Over 35 years research on sports nutrition with over 100 peer reviewed publications Supported by Lucozade Sports Science Academy working with elite athletes and over 60 external agencies/partners Pioneered contaminant testing regime for ATP assuring product quality for elite athletes

Types of consumer claims we have used based on the science Proven to give you an Edge Proven to increase mental and physical performance 33% longer

32 Types of consumer claims we have used based on the science Proven to give you an Edge Proven to increase mental and physical performance 33% longer Gets energy to the muscles fast Recover quicker / train harder in subsequent sessions Proven to help build muscle in combination with resistance exercise

33 Agenda OI what is it, why do it, who is doing it? Adding rigour to the fuzzy front end of the process Bringing R&D and commercial teams closer together Balancing technology push with market pull Key trends, developments & challenges in OI Conclusions & questions

34 How far will OI go, how long will it last? Trends identified from recent research evidence & current practices: Industry penetration from pioneers to mainstream R&D intensity from high to low tech Size from large firms to SMEs Processes from stage gate to probe-and-learn Structure from standalone to alliances Universities from ivory towers to knowledge brokers Processes from amateurs to professionals Content from products to services IP from protection to a tradable good The era of OI has just begun & has a long life left ahead of it! Source: The future of open innovation, Gassmann, Enkel & Chesbrough, R&D Management, 40, 3, 2010

35 Sustainability trends Designing with the end in mind Carbon is king Trash into cash

36 Breadth of external networks

37 Breadth of external networks

38 Collaboration with neighbours

39 FMCG open innovation forum Machinery Manufacturer Core Forum Membership Packaging Raw Materials Processed Materials FMCG Producer Retailer Consumer Distribution, Logistics & Waste Management Support Networks SMEs Science Base Intermediaries Share best practice & explore hot topics in OI along the FMCG value chain From source to consumer with flexibility to include related or parallel activities Participate in bi-lateral or multi-lateral OI collaboration projects Accelerate OI progress, resolve challenges, create & capture value Source: IfM s Centre for Technology Management, University of Cambridge, July 2010

system Technology applicable to non-drink products inc household cleaners Pouchlink can reduce the vending carbon

40 Pushing several innovation buttons (1) Unpreserved healthy drinks blended aseptically & vended on demand Convenient resealable flexible pouches, fully recyclable World s first chemical free, self cleaning post mix system Technology applicable to non-drink products inc household cleaners Pouchlink can reduce the vending carbon footprint by up to 75% Sources: packaging news.co.uk, July 2010, timesonline.co.uk, July 2010 & thegreendrinkscompany.com, July 2010

Pushing several innovation buttons (2) One of the new biodegradable SunChips bags,

compostable crisp bag Made from more than 90% renewable, plant-based materials

instead of fossil fuel is used to make some products Healthier you: 18g

41 Pushing several innovation buttons (2) One of the new biodegradable SunChips bags, after spending 12 weeks in a compost heap Healthier planet: world s first 100% compostable crisp bag Made from more than 90% renewable, plant-based materials Breaks down completely when placed in a hot, active compost bin Solar energy instead of fossil fuel is used to make some products Healthier you: 18g wholegrain/oz, 2g fibre/oz, 30% less fat, less salt Source: July 2010

42 Takeout from today OI what is it, why do it, who is doing it? Adding rigour to the fuzzy front end of the process Bringing R&D and commercial teams closer together Balancing technology push with market pull Key trends, developments & challenges in OI Conclusions & questions

43 Embrace the unexpected If at first the idea is not absurd, then there is no hope for it Source: Albert Einstein ( ) Good relationships make absurdity easier to explain

44 GSK is changing Visit our Annual Review, the world of GSK:

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