Open innovation in the marine industry

Dr Jouko Huju of GMBA Finland talks about open innovation in the marine industry.

Henry Chesbrough is considered to be the father of the notion “Open Innovation”. Chesbrough (2003) describes it as the new way to manage innovation and the R&D by saying that: “a company cannot survive alone anymore and even the innovation process should go beyond the boundaries of the firm”.

A big part of the companies in the global marine industry are SMEs and therefore have limited resources for research work. Because of this the companies generally face more uncertainties and barriers to innovation. Therefore the assumption is that these weaknesses could partly be overcome by integration into networks and other new forms of collaboration. The interactions of SMEs, and actually all manufacturing companies in the marine industry, are often informal and trust based. That is why open innovation, when properly exploited, can be an important addition and support for their innovation activities. For some companies this would be their first contact to planned R&D.

As the regular relations of the marine industry to science and technology transfer is rare and not always properly guided, there is a growing possibility that their development work falls behind and through this they will start losing market shares and their growth potential in exports diminishes. In an even worse case, due to the lack of R&D, the unit price of their boats goes beyond the reach of an average customer. Additionally one must not forget the EU rules (Recreational Craft Directive) or rules imposed by the environmental laws. All these points increase the importance of joining forces in innovation.

Small companies can utilize the possibilities of open innovation much more but someone needs to open up the real scope and dress the concept in an understandable way. There are some examples of joint innovation already like the application of new materials (composites and carbon fibre) and 3D-design systems. A challenge will be to identify and share the intellectual property rights.

Before discussing the nature of open innovation, it is important to understand the flow of the innovation process. Horizontally the process can be divided into four “gates” where gate 1 charters the project, gate 2 defines the business plan, gate 3 proposes the launch and gate 4 makes the sanity check. The innovation process will face various challenges depending on the company size. Larger companies can use their explicit knowledge which is thoroughly mapped but smaller companies will have a challenge in transferring their tacit knowledge into an explicit form.

As far as the innovation process when connected to open innovation is concerned, the logic is completely reversed. The process is chancing because the companies do not have enough internal sources to provide new innovations to competitive prices. Clever outsourcing in innovations will provide the companies early access to findings of external vendors. If a company uses the services of universities or young start-up companies or even graduate students, they do not have to re-invent the wheel time after time and spent a lot of money in turning the innovations into products. Good research practice today includes accessing external knowledge.

“Companies are increasingly rethinking the fundamental ways in which they generate ideas and bring them to market, harnessing external ideas while leveraging their in-house R&D outside their current operations” (Chesbrough) The world is full of ideas and people and knowledge to be used and that companies should be using this potential. The case for open innovation is clear: in today’s rapidly moving world, companies can ill afford to retain outmoded closed models of innovation management.

The basic assumption is that in open innovation knowledge comes from several external sources. These sources can include other companies, universities or even private companies. Open innovation means also that valuable ideas can come from inside or outside the company and can go to the market from inside or outside the company as well.

The change towards open innovation has taken place because of basically four erosion factors:

1)    “The movement of workforce is quicker, meaning that also knowledge moves around.” 

2)    “There are a lot of new types of funding, like venture capital.”

3)    “Innovations tend to be used up more rapidly.”

4)    “The increasing supply of all types of external suppliers.”

Open innovation thinking changes the role of research and expands the role of internal researchers to include not just knowledge generation but also knowledge brokering. Deploying open innovation needs an innovative business model as well. The innovation strategy must change towards identifying external sources for knowledge. Buying and selling of intellectual property will hugely contribute to the success of companies.

The regional character of tacit knowledge (knowledge that resides within an individual) makes presence in and access to an innovation cluster important for leading companies since only ideas, knowledge and technology that are not widely available via the Internet and modern information technologies can provide sustainable competitive advantage.

Knowledge provides a sustaining competitive advantage and many companies now realize that. Putting their knowledge base in full use and combining that with a planned knowledge sharing process in clusters can not only save money and time but will increase productivity and profits considerably. The environments of clusters provide a strategic opportunityThere is also a potential a potential threat of clusters. Because of people changing jobs, tacit knowledge moves around and this needs to be controlled by a planned innovation management which would allow exploiting the possibilities and at the same time minimizing the risks.  A thorough plan when creating clusters for innovation is essential. Companies in the marine business are at various stages of development and therefore dividing them in groups of innovation can produce better results.

 Because the management of knowledge flow is essential the industry needs “listening posts”. These listening posts can all be considered as clusters of innovation but they perform a well defined task. Firstly there are “trend scouts” with focus on technological mega trends. Secondly there are  “technology outposts” in academic institutions or high-tech players in the industry and thirdly there are “matchmakers” with diplomatic tasks. Matchmakers’ most important value is in the big network they have. There will some challenges in combining the gathered knowledge and in the management of such clusters but specified function levels will produce more accurate results.

A specific extension of innovation clusters is the use Internet and social media platforms for gathering knowledge and information for innovation purposes. Being quick is essential in today’s rapidly changing world. The lifetime value of knowledge shrinks rapidly because it becomes obsolete quicker. Allowing others to gain access to your knowledge will soon start multiplying. A well planned user network can create at its best a huge network of thousands of suppliers, vendors and customers and the knowledge that they can bring together is not only superb in terms of value but also in terms of speed of access. The idea is to build and operate platforms where communities of customers and users create, develop, and discuss new products and services with the objective to capture the joint creativity and knowledge of both the company and its customers.

Before taking any actions on starting open innovation processes in the marine industry it is essential to understand what problems can arise with Intellectual Property Right (IPR). To start with it is important to specify what IPR is. Intellectual property refers to the subset of ideas that are novel, are useful, have been reduced to practice in a tangible form and have been managed according to the lawIn practice this all refers to patents, copyrights, trademarks and trade secrets.

Joint development agreements, non-disclosure agreements, patents, and other mechanisms to protect IP are highly recommended even in the early phases of co-development and even with trusted partners. Ownership rights usually reside with the creator, but joint ownership applies in some situations.

The innovation process itself changes radically when connected to open innovation. Open innovation has a number of independent stakeholders and suppliers of knowledge. Considering the importance given by the theories for a planned innovation process it is surprising to learn that in the marine industry there seems to very little if any experience in a process of systematic innovation. Some companies are aware of the need but none report any action taken so far. There is a clear willingness to develop this side of the business but it will need help from outside. This roots back to the average size of the companies and limited resources. Companies need to take a wider look outside their own companies. Not even the big companies can afford excluding outside sources for their innovation work. The changes are taking place so rapidly that only by connecting forces companies that keep up with the competition.

The role of internal experts in a company keeps changing from knowledge creation towards knowledge selling, buying and exchanging and when small, specialized companies keep emerging, knowledge can be more easily acquired from outside.

Again in the marine industry the notion of open innovation is clearly unknown. There seems to be very little basic knowledge about open innovation. Therefore much communication is needed to build trust and increase the amount of knowledge.

“The marine industry would need someone to take the enablers role”

I believe there is alot of willingness to try open innovation. I would propose the creation of something what I would call an Innovation Mill. This would concentrate on jointly specified problems and starting with a certain sector of the industry. The group could, with an external facilitator and with some outsourced technical expertise, start a process for all kinds of open innovation initiatives. Someone just has to take the lead.

 The solution suggested might seem simple. The reality is much more complex though. There is willingness to open innovation and at least some companies are eager to start right away. The problems that we will encounter are connected to all sides of the innovation process. Innovation grows out of enthusiasm. It grows out of the need to seek something new. People involved in a process of open innovation cannot be prejudiced or jealous of the knowledge they posses. The real challenge begins when the different working cultures, values and attitudes of the participating people (and their management) need to be put to co-operation.

The question is, can we afford not to take action in this.

Disclaimer: Global Marine Business Advisors and its associated website are not registered legal entities. GMBA is a network of independent marine industry advisors. In all articles the opinions expressed are those of the author and does not necessarily reflect those of GMBA