On the Cusp of a New Era of Open Innovation

IdeaConnection interview with Michael Docherty, founder, Venture 2
By Paul Arnold
Michael Docherty is an open innovation thought leader and entrepreneur. He is the founder of Venture 2 Inc., a consulting and new ventures firm that connects and commercializes new products and businesses.

Mike’s introduction to open innovation occurred during his time at Sunbeam Products, a US-based small appliance business. He was brought in as VP of New Products at a time of turmoil in the company’s history. With backs against the wall, Sunbeam had no option other than to find ways of partnering with entrepreneurs and source ideas externally, and Mike helped to spearhead its reversal in fortunes.

photo of Michael DochertySince that time he has been passionate about open innovation. He’s also managed venture-backed start-ups and was president of a venture capital firm active in the collaborative innovation market.

Here he talks about how he uses OI to help companies innovate and grow, and where he thinks the industry is heading.

How do you accelerate adoption of open innovation?

I think at least two things are necessary. One is senior management buy-in, the other is you need a crisis. I often tell people that if you’re not in a crisis, go create one. But I don’t mean wait until you’re in bankruptcy like we were at Sunbeam, to do it.

You really need to have that sense of urgency to accept the risk. It came pretty naturally to us being in a turnaround because our backs were against the wall. At the same time I can recall very personally that I was working with a staff of one hundred and we launched ten new products in the first year and trying to launch one hundred and fifty within a couple of years. We knew we couldn’t do it ourselves.

I remember how scary it was recognizing that I was giving up control. I was accountable, but I was giving up control to others in terms of both sourcing the ideas and in many cases we were implementing with partners as well. Having lived through it I’m very attune to it at a personal level.

What are some of your approaches with your clients?

We have a process called innovation matchmaking because we think this is about developing relationships and making matches. In fact we used to call it innovation speed-dating to emphasize the relationship building aspects. We also do innovation landscaping and opportunity assessments and on the open innovation side we help companies to build networks of innovators. We talk about that being proprietary relationship-based networks or ecosystems. The visual I would use to describe this is concentric circles. You have to collaborate internally, you have to learn to collaborate with your suppliers and many companies are working those means already, but then too often they’re jumping from that group to asking the world to solve their problems.

So it’s not always about broadcasting your problems or challenges to the world?

We think organizations are missing this very fertile middle ground of key suppliers and others you “need to know” to build relationship-based networks. Call it an exclusive club if you will of serial entrepreneurs, knowledgeable experts and friends of the corporation that are more likely to bring you fruitful technologies than others. It’s really about nurturing and developing these relationships. So we actually have a process for identifying those external players and building a functional network around that.

The other side of our business is commercialization support. The central service around that is what we call ‘new venture jumpstart’. Here, we bring teams together of our corporate clients and in some cases with entrepreneurs to help them take big ideas and very very quickly move them forward to address a complete business model, and go-to market strategy and identifying the skill sets and partners to pull it off. It’s an intensive 4-day process adapted from the lean start up movement, and part of helping our corporate clients innovate more like start-ups.

I love the fact that you originally called it speed dating, but can it appeal to companies where change is measured in geological timescales?

I really do believe that open innovation is potentially more about people than it is about technology. I think that point is lost on many. It’s very easy, especially from the R&D folks to focus on the technology. But in any business it’s about people, so we embrace that. That’s what drove the speed dating and matchmaking analogies. We believe that some of the best ideas might be missed if you’re not meeting the people.

Quite frankly, things may look great on paper, but until you sit face to face, you don’t know whether something’s good. Also, I can’t tell you how many times entrepreneurs have come to a meeting and once you have built up a tiny bit of trust you start to see their second and third ideas are so much stronger than the one they’re leading with.

What also drives the innovation matchmaking is the need to level the playing field. There’s so much of open innovation that’s focused on big companies saying bring your ideas to us and we’ll hear you out and let you know whether we give you a thumbs up or thumbs down. The smart companies are coming to the realization that they need these entrepreneurs as much as the entrepreneurs need them, and so the matchmaking format actually levels the playing field.

Can you draw our attention to a success story where your approach has helped your clients?

We did a matchmaking event across multiple companies including P&G, GlaxoSmithKline, Kimberly-Clark, and Jarden. We focused on consumer health monitoring solutions and we introduced these companies to seven technologies. One ended up being licensed and launched by Jarden, called ‘Myself’ a feminine incontinence device. Another example is that we helped a large consumer health company identify a go-to market strategy for a technology they had already identified. We helped them develop the business models and go-to market plans for what became about a $400 million opportunity.

Where do you see open innovation going?

I think open innovation is at this point where it’s moved from traditional closed approaches to today’s transactional approaches. I think we’re on the cusp of the next major thing in open innovation, which is this whole trend of building relationship-based networks, but it’s still hard for people to get their arms around this idea.

I believe really deeply that if you fast forward five to seven years from now, you’ll see this notion of new types of relationships - interdependency across these organizations and having very strong relationships that are actually a source of competitive advantage - is going to be much more widely accepted than it is today.

The problem today is that many companies doing open innovation have the view that they are at the center of the ecosystem. If you are a P&G you can probably do that and I wouldn’t argue against the need for that.

We’re certainly helping some of these larger companies build their own mini ecosystems, but I actually believe that by its nature that you need to plug into the larger ecosystem as well. It’s actually a web of relationships where you have your own network where you’re at the center, but you’re also plugged into larger networks where you are in there with others - peers and potential competitors - plugged into the flow of ideas and not necessarily owning all of those relationships.

Conceptually this sounds wonderful, but is it a hard sell as large companies will resist not being the principle focus of attention?

It is and I think what’s going to shift it, is not me or you or anyone trying to convince them to do it, but rather when they see it happening and if they don’t get on board they’re sort of feeling left out. That is what is going to drive it. My message to large companies is that you need to build networks with you at the center, and you also need to engage with larger ecosystems in the ways that benefit you as well as benefit the ecosystem.

Have you seen more companies engaging with open innovation in the last year or so?

Absolutely. No doubt. I’m starting to see it more in certain sectors. It’s very well developed in CPG and food, it’s very well developed in pharma and consumer health, but in other industries it has been a little slow on the take up. For example, in durable products. Quite frankly I think durable products is a difficult one to pull off until you have enough infrastructure in the world to support them. There isn’t much of a technology base to support them at the moment. On the digital technology side, and mobile in particular, it’s just starting to happen. For example, with Samsung’s recent announcement of its new open innovation centers.

It’s going back to the network concept I’ve been discussing. I think it’s one of Samsung’s attempts to say we want to make sure we don’t miss out on these big ideas; we want to attract them to our ecosystem or our network first.
So overall, yes I definitely think in the past year or so I’ve seen a lot more people adopting it and it really has moved from being a “nice to have” to a “must have”.

There’s no turning back?

There is no turning back, and I really do believe that this is the way all innovation is going to be done, although it may not all be labeled open innovation. If you take a longer term view, we’re really five to seven years into a twenty year revolution of the way innovation is done in the world. As the world becomes hyper connected we’re just learning how to leverage tools we’ve been using for social purposes. We’re so young in this curve.

And I think that’s another point that confuses the topic of what actually is open innovation. When you say the words ‘open innovation’ it generally takes people to the R&D definition - that broad definition of looking for technology externally. If you take a broader view of collaborative innovation and you start to fold in things like crowdsourcing and collective intelligence as well as open innovation and networks, I think it’s harder to get your arms around. But those are all movements that are taking place kind of in parallel and they are converging. It’s an exciting time to be an innovator.

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