Getting the most out of ideas

Open innovation -- the concept that ideas and technology have to flow both into and out of companies in order to maximise the development and commercialisation of innovative new products and services -- needs to be embraced by Australian companies both in the biotech sector and other industries, according to visiting academic Prof Hank Chesbrough.

"I think Australia has really no alternative than to embrace open innovation," Chesbrough, the executive director of the Centre for Open Innovation at the University of California, Berkeley's Haas Business School, told Australian Biotechnology News. "If the alternative is to do it on its own, it could never get enough critical mass to compete globally."

Chesbrough has been brought to Australia by IBM to participate in the 2004 Innovation Roadshow organised by the InnovationXchange Network, where he is talking about the paradigm shift facing industries as they move to an era of growth and innovation.

His research is based on a detailed look at the function of R&D within companies, and the recognition that many innovative opportunities are lost because they don't fit with the company's strategy or direction. These opportunities, if out-licensed to other players, can create value for both parties.

"Research and invention are not in themselves innovation," Chesbrough said. "Innovation only occurs if [the idea] can get to the market." Chesbrough said open innovation is already working within the biopharmaceutical industry -- the blockbuster business model used by big pharma companies necessitates the companies looking outside their own R&D efforts for potential products which can be in-licensed at a point where risk is balanced with reward.

"Good ideas are widely distributed around the globe -- even the best companies have to leverage both internal and external ideas," he said.

According to Chesbrough, in the life sciences sector, IP has actual helped rather than hurt innovation, with ideas moving from initial conception and proof of concept in an academic environment, through to early development in a small biotechnology company, and finally through late stage development and commercialisation in a larger biotechnology or pharmaceutical company.

And the current expansion of knowledge about biology is fuelling the business model, providing feedstock for the process of innovation, he said.

But while open innovation allows ideas to flow in many directions, companies need to develop pathways for orphans -- the research and inventions that don't fit with the direction of the company, Chesbrough said.

He's impressed by the use of the open innovation concept in the InnovationXchange Network's Business Intermediaries service, also known as BRIDGE.

"The BRIDGE program facilitates exchange across companies without compromising their IP," Chesbrough said. "There is a deeper sharing of knowledge to see if an opportunity is there."

With the success so far of the BRIDGE pilot program, Chesbrough said he could see no reason why the concept wouldn't work outside Australia as well.

BRIDGE program early success

The InnovationXchange's BRIDGE program, which uses trusted intermediaries to help identify connections and business opportunities between companies without exposing confidential information, has notched up several successes in its first six months of operation.

According to Prof John Wolpert, former lab director of IBM Extreme Blue, and now the head of the BRIDGE program at InnovationXchange, the service has exceeded his expectations.

Acrux, one of the member companies of the pilot program, is likely to gain a patent opportunity as a result of the program identifying a strategic new invention. Another two members, previously unaware of each other, are working to jointly develop a AUD$1.5 billion market opportunity. A number of other potential deals are also in the pipeline.