Professor Wim Vanhaverbeke, University of Hasselt, Belgium, presented this InterTradeIreland Innovation master class entitled "Crafting Innovation Deals between Large and Small Companies" at the Whitaker Institute on 9th May 2014

1. 1
Managing open innovation in SMEs
Prof. dr. Wim Vanhaverbeke
Hasselt University
ESADE Business School
National University of Singapore
May 7, 2014
How did we define open
innovation for large companies?
“Open innovation is the use of purposive
inflows and outflows of knowledge to
accelerate internal innovation, and expand
the markets for external use of innovation,
respectively.”
Chesbrough, Vanhaverbeke, West
Open Innovation: Researching a New Paradigm
(OUP, 2006)

2. 2
Current
Market
Internal
Technology
Base
R D
Outside in OI: Filling the gaps with external
technology
Technology Insourcing
New
Market
External
Technology
Base
External research projects
Venture investing
Technology in-licensing
Technology
acquisition
Source: H. Chesbrough, Sloan Management Review, Spring 2003
Current
Market
Internal
Technology
Base
R D
Inside out OI: Profiting from others’ use of your
technology
Technology Insourcing
New
Market
Technology Spin-offs
External
Technology
Base
Other Firm’s
Market
Licensing
Source: H. Chesbrough, Sloan Management Review, Spring 2003

3. 3
Some observations
n Main focus on:
• High-tech industries
• Large manufacturing (and now also services) companies
n What do we know about open innovation in SMEs?
• Few articles published so far (e.g. Van de Vrande et al. 2009,
Technovation)
• A few case studies or some survey based evidence
• No systematic analysis yet of OI in low-tech SMEs
n OI in high high SMEs by CVC
n “OI in SME”- project: conclusions of an in depth study of OI
successes in 10 European SMEs in different industries
12
OI: the Dutch situation
Share of innovating companies cooperating for innovation
Based on quantitative analysis of Dutch CIS data Source: Batterink, 2009
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1994-1996 1996-1998 1998-2000 2000-2002 2002-2004
Shareofinnovatingfirmsadoptingopeninnovation
Small (10-49 empl.)
Medium (50-249 empl.)
Large (>250 empl.)
Total
But number of collaborations
per employee is many times
higher for SMEs than for
large companies

4. 4
Open innovation in
“low tech” SMEs
Main take-aways: don’t copy OI
lessons for large companies
1. Start with the growth strategy or broader
strategic objectives of small firms
t BMI (VC2)
2. The entrepreneur is crucial in driving the
realization of that growth / change
3. OI : key resources to be sourced from external
partners to relaize the growth
4. OI-network management = key process

5. 5
34
Curana
JAGA
35

6. 6
DEVAN
CHEMICALS
DNA INTERACTIVE FASHION
Quilts of Denmark: quilts & duvets
with active temperature and humidity control

7. 7
++ Patient Room of the Future ++
++ Personalized Residence of the Future ++
++ Private-care Room of the Future ++
A consortium of architects, manufacturers, user groups,
professional organizations, and educational knowledge institutes
Agentschap Ondernemen - - - Alho
(pending) - - - Anamorf - - - Avantgarden - - - Artesis Hogeschool Antwerpen | Intgrale Productontwikkeling - - -
Boeckx Architecture & Engineering - - - Boone International | Boone Projects - - - BSC | Aquaware - - - Buro II & Archi+I - - -
BVZD Belgische Vereniging van Ziekenhuisdirecteurs - - - Cubist Creations - - - Devan - - - Elasta - - - Extremis - - - Fedustria - -
- Frames & Fields - - - Francovera - - - Haelvoet - - - Hogeschool Gent TO2C - - - IBBT - - - In-Ham Gits - - - InoxLine - - - ISS -
- - Modular Lighting Instruments - - - Mondoor - - - Philips (lighting, healthcare, consumer) - - - Groep Sanakor - - -
Tele-Signal Electronics - - - Televic Healthcare - - - Van Maele - - - VDB Productions - - - Vink - - -
VitraPoint Gent - ARTerior bvba - - - Vlaamse Verpleegunie | Urobel - - -
VTDV Vereniging voor technische diensthoofden in de verzorgingsinstellingen - - - Westelec
Dingens
Innovacelli Barometers

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42
Curana
MagIQ
02/11/12 16:05Curana magIQ - Fidlock GmbH
Fastener: SNAP
Application: Bike luggage system
Manufacturer: Curana
Product name: magIQ
With the magIQ system, Curana has
developed a solution for attaching items of
luggage and accessories to bicycles at the
place they are actually needed. The
innovative bike luggage system thereby offers
cyclists completely new possibilities for easy
attachment and detachment of panniers,
lights, air pumps, locks and flasks.
Secure attachment with a simple "snap"
The magIQ system from Curana allows you to secure
luggage and biking accessories to the bicycle with a quick
"snap" – and to detach them again with ease. The clever
"luggage concept" is based on the Fidlock SNAP male fix
Application areas
Fitting
Material/colour
Other features
Innovation based on Fidlock technology
With product characteristics such as fast, secure attachment
and detachment in addition to simple one-hand operation,
the Fidlock SNAP fastener forms the core of the magIQ
system. It has allowed Curana to develop a completely new
and highly flexible "luggage concept" for bicycles that makes
for an improved biking experience – in keeping with Fidlock's
"Fun + Function" Principle.
Find more information at: www.curana.com
Stadthelm / ABUS
Curana magIQ
Sammies by Samsonite
Salomon SAS
Porsche Design Sport /
Bag
Porsche Design Sport /
Boot
HOME NEWS PRODUCTS APPLICATIONS COMPANY CONTACT
Deutsch

9. 9
Application: bags
Some JAGA products
56

10. 10
Jaga
n Differentiation vs. competition through:
u Eco-radiators
u Design-radiators
n The company is not selling products but
experiences, ideas, values, etc….
n Differences:
u radiators as heating machines
u radiators to reduce carbon-footprint
u radiator as a creative part of the house, heating
the "soul"
Jaga Oxygen :
controlling temperature,
moisture and oxygen in the
house
Wearable heating?
Some JAGA products

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Jaga Experience Lab : JEL
- Product: test-facility
- Experience: test and develop
your own products
- Jaga invites professors &
engineers worldwide
- Low cost form of publicity: new
projects as Federation Tower /
Telefonica
Open innovation # 1
JAGA products days
61
• Total number of projects: 119
• Total number of products
created by non professionals:
49
• Number of Jaga Product days
ideas taken into production
within 6 months: 6
Open innovation # 2

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Example: Play radiator
25/05/14 Wim Vanhaverbeke 62
Example: The play radiator

13. 13
• Burning man festival in the Black Rock Desert in Nevada
• 40.000 people
• a cross-pollination of art, music, theatre, sensation
• wonderful creations: go up in flames at the end of the 3
weeks
Open innovation #3
Uchronians and the Burning Man

14. 14
www.uchronians.org
Start of the creative (internet) community
QOD:Vamdrup - Denmark
Founded 2000
Founders
• Søren Løgstrup (Sales and marketing)
• Hans Erik Schmidt (Business development)

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THE STRATEGIC DIMENSION
A framework for OI in SMEs:
Strategy/Business model as
starting point
BM as starting point for SMEs
analysis
n Studying open innovation in SMEs makes only
sense within the broader framework of a
business model (innovation)
n How to analyze a BMs?
• Renewed attention among management
scholars for BMs and BM-innovation
• Critical remark: BM(I) models do not pay
enough attention to network partners/ OI
…
85

16. 16
BM as starting point
for your analysis (after Johnson. 2010)
87
88
The start: vision of the
entrepreneur
THE ENTREPRENEURIAL DIMENSION

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How value creation starts?
n Vision / basic insight of the entrepreneur:
• Diverse: From the obvious to hard to articulate:
• Curana: developing bike accessories with sleek modern design
• QOD: A provider of a healthy sleep
• I styling : virtual shopping for fashion goods
• BM conception: from days to years
• QOD:
• Who can define “what is a healthy sleep?”
• How to translate these insights into technical specs for a functional
quilt?
• Istyling : piecewise development of the BM (body scanner)
• Articulating a BM may take time: A process view on
BM formation
• There is no grand design – discovery driven growth
strategy + experimentation (Rita McGrath)
89
90
Creating and sharing value with partners:
How open innovation fits into the picture?
THE RELATIONAL DIMENSION

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Curana: open innovation essentials
n Combination of internal and external knowledge (external
design company and polymer extrusion manufacturer) KEY
RESOURCES/ COMPETENCIES
n Collaboration with lead-customers (bicycle manufacturers) in
exchange of an exclusive deal limited in time
n Protecting your invention : IPR
n Progressively increasing the ecosystem of partners:
u Locus of innovation is in the network
u External network management at Curana
u Growth economic strength ≠ growth firm size
n Innovation as a tool to shape your company’s destiny and that
of the industry (more control points and higher profitability)
92
Managing your external
network (partners) as a
key process

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Managing your innovation
network (key process)
n Connecting partners (SMEs and other knowledge partners) is
based on strong personal ties between the main partners
n Trust + transparency about the objectives of the partners
n Time and money have to be invested
• Does everybody want to take risk?
• Important that the different firms are prepared to grow
together
n Cooperation is easier between companies of the same size
• But cooperation with large ones is possible too (different
logic)
n Over time assimilate the knowledge of different partners.
Become smarter by knowing more partners (knowing who) and
knowing more than your partners
• … 93
Managing your innovation
network (key process)
n Project management (central partner) with partners is quite
different from internal project management
u Each one is busy with a part of the project : costs easily raise
excessively
n Diplomacy and mutual respect
n Same corporate culture
n Tensions will pop up after a while
u Good relationship may become under pressure
u Open innovation? Open communication!
u Organize (mutual) evaluation session with partner(s)
u Open bookkeeping with main partners (their problems will be
yours)
u Set out rules for disloyal behavior
94

20. 20
Managing your innovation
network (key process)
n IP?
• Make proper arrangements with your partners
• Who is the owner?
• How partners can make use of the technology?
• Who is going to court (and who pays) in case of patent
infringement?
n Make sure that all partners are better off than
when they would not join / stay in the network
n Open innovation: benefits should be a multiple
of when companies work on their own.
95
Some conclusions
1. Open innovation only makes sense when integrated in broader
strategic objectives of small firms
2. Therefore, start with the business models and business model
innovation (CVP, profit formula, key resources (external and
internal) and key processes (external network management))
3. BM: Customer Value Proposition is crucial and comes first
4. Value is created in different ways : no one fits all “open
innovation strategy”
5. Value capturing by creating a unique strategic position through
OI (unique differentiation ; blue ocean strategy; offering
valuable / authentic experiences; unique positioning)
6. OI can be a valuable strategy for many SMEs: it is not the
result of a long term grand vision – discovery driven strategy
96

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Some conclusions
6. Open innovation enters into the picture through “key resources” that a
firm needs to create value.
7. OI requires network management by a central firm – the network
itself is source of competitive advantage (relational view)
8. Network management in SMEs is still embryonic. Most SME
managers fail in managing their partners – required skills are different
from internal management
9. OI in SMEs is about:
• Increasing VC through cooperation
• Capturing part of that share (building control points)
• Managing partners: Fair share of the pie for each partner (his problem
is your problem)
• Network management as a critical^process to create sustainable
competative advantage
10. OI management is different for low-tech SMEs (don’t copy solutions
for large fims)
11. Need to integrate SME strategy – entrepreneurship - OI 97
Speeding up the learning of good
OI-practices in low-tech SMEs?

22. 22
How do SMEs learn?
What does not work?
n Explanations of academia and consultants
n Most government led initiatives to stimulate entrepreneurship
u FP7 programs (Horizon 2020; Cosme?) are too slow and too
bureaucratic for most SMEs
What does work?
n Stories of entrepreneurs that have been successful
n Talking to other entrepreneurs with similar ambitions
u Share experiences and learn from them
n Low profile innovation networks with managers in the lead
Some local innovation networks do nice work 103
Problems and finding a way out
• Local innovation network initiatives
• 60 km action radius
• Non- or semi professional coaches
• Few good local cases, few managers as speakers (time consuming)
• Reinventing the wheel problem!
• High set up costs!
• How to drastically improve the situation?
• There are many excellent cases in Europe / world
• Make a YouTube like movies (10-15 min) about these companies with
subtitles in English
• Put these movies on the web together with a syllabus and some (open)
innovation management tools – feedback Web 2.0!
Strong impact on the number of companies that learn OI
practices and strong improvement in the quality of
learning
104

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Open
innovation:
New frontiers
and
applications
OUP
2003
2006
2006 2011
20142011
Exnovate as a network of excellence
for OI-practitioners and scholars?
n www.exnovate.org
u An international network for excellence in managing Open and
Collaborative Innovation
n Projects
u CE and OI Masterclass (10 times Philips / ESADE) – May 2014,
Barcelona
u PhD course open innovation at ESADE (5th time in January 2014)
u Open innovation metrics
u Using best practices to improve OI in SMEs
n Open Innovation Community on Facebook and
Linkedin
n MOOI-project

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http://www.innovationmanagement.se/welcome-to-the-the-
mooi-project/
wim.vanhaverbeke@uhasselt.be