Opinion: Open v networked innovation

10 November 2014

by David Hughes, Group General Manager Commercial

The past two decades have seen the development of several important trends in the management of industrially oriented R&D. Many companies are moving beyond the reliance on in-house R&D teams for innovation generation to strategies that encompass global outreach for external outsourcing and resourcing.

Open Innovation (OI), a term coined by Henry Chesbrough in 2003, describes this growing trend of large, multinational companies searching for technologies and IP beyond their own, internal R&D functions. The essence of the idea is that companies need to accept ideas and technologies from the outside to drive new product innovation, rather than depending solely on their own research teams, and to spin out or out-license technologies that don’t fit with the company’s own remit.

The classic diagrammatic representation of OI is the “leaky funnel”. An industrial product development process is often represented by a funnel – with many concepts entering at one end and a few new products coming out the other end. The novel feature of OI is that external innovations enter the product development process, and off-target innovations can exit, at many points along the funnel – from concepts to developed technologies and even products.

OI is mostly associated with large multinational packaged goods companies, primarily based in the US and Europe, such as Unilever and Procter & Gamble. These companies have teams of technology scouts across the world tasked with identifying technologies and IP that fit into their companies’ research pipelines. By combining in-house expertise with external technology access, these companies can efficiently expand their product pipelines.

Whilst Australasia is a potential source of technologies for companies using the OI model, the relatively small number of large companies based in Australasia limits the extent to which OI can flourish in the region. Rather, the large number of SMEs (small-medium enterprises) across Australasia has driven a different approach – widespread, networked innovation where organisations pool resources to develop new technologies to meet their collective needs. When properly constructed, this model brings together players from across the innovation cycle and increases the flow of innovations. It works best particularly for sectors and industries with a strong sense of identity.

This Australasian model is becoming increasingly global with local companies fronting international initiatives to coordinate innovation and prevent duplication of research in areas that are non-competitive. One example of this is the Global Dairy Platform, established by New Zealand company Fonterra, where member companies share information and support the viability of the sector by facilitating open innovation and collaboratively addressing the opportunities and threats facing the global dairy industry.

Because of its size, New Zealand is an ideal candidate for this type of model, so it’s not surprising that the horticulture industry has a strong model of networked innovation. The levy mechanism applied by many sectors provides a method where individual grower contributions accumulate to provide a substantial fund for R&D that benefits the industry as a whole. This contribution can also be used to gain access to additional industry-matched funding from the New Zealand government.

Similarly to the Open Innovation model, Plant & Food Research, the primary research provider to the New Zealand horticulture industry, has scouts in key markets looking for potential innovation links. However, contrary to the OI model, these scouts are identifying potential partners to facilitate an expansion of the country’s R&D network, creating a larger scale for innovation. Establishing this wider network multiplies the sector’s cooperative R&D into a global consortium with greater feedback benefits to the New Zealand industry.


Emma Timewell
Communications Manager, Corporate Communications,
Plant & Food Research Mt Albert,
120 Mt Albert Road, Sandringham
Auckland, 1025, New Zealand
EMail: media@plantandfood.co.nz
Telephone: +64-9-925 8692
Mobile: +64-21-2429 365

Copyright © 2018 Plant & Food Research Australia