In popular perception, open innovation as an approach has got associated with crowd-sourcing and open challenge contests. But open innovation is much more than that — in its essence, it is an approach that moves away from an inward innovation focus to a more collaborative approach to innovation. The most effective open innovators, like Procter & Gamble (P&G), believe that the best ideas can come from anywhere, and, therefore, make a conscious effort to open their innovation pipelines to a much wider set of sources. About a decade ago, the then P&G Chief Executive officer (CEO) A.G. Lafley set a target of more than half of P&G’s ideas coming from outside the company, and that was achieved a few years later.

Potential for Indian companies

Indian organisations can benefit from adopting an open innovation philosophy. At the strategic and system integration level, both Tata Motors and Mahindra have demonstrated its utility. Tata Motors’ entry into the small car market via the Indica, and Mahindra’s ambitious entry into the high-end SUV market through the Scorpio, were both facilitated by an ability to work with a range of technology suppliers and design consultants and integrate their inputs into successful products. This approach was cheaper than taking the vehicle design from a single source, and also allowed the companies to create their own distinctive product and brand identities.

Another company that uses open innovation successfully is Eureka Forbes. India is one of the biggest markets for retail water purification in the world. Eureka Forbes has been one of the pioneers in the water filtration/purification business in India, and its Aqua Guard has tremendous brand recall. With an 8,000-strong direct sales force across 550 cities and towns, about 15,000 dealers across 1,800 towns, and a strong service network of 1,100 service centres, it has a formidable retail presence.

Given the company’s strong competitive position in one of the world’s biggest markets for water purification, Eureka Forbes is an obvious target for research institutions and companies the world over who are trying to out-license new technologies. Eureka Forbes has taken special care to build a reputation as a good partner so as to encourage more such enquiries to come their way. They have an open invitation for technology partnerships on their website. To back up this open innovation philosophy, the company has focused on building the ability to translate knowledge into innovation and operational excellence — Eureka Forbes has been a winner of the “Most Admired Knowledge Enterprise” Award four times.

One of Eureka Forbes’ recent products, AquaSure, is based on an integrated multi-stage technology that the company sourced from the Argonide Corporation of the US. This disruptive technology based on a Nanoceram filter allows the transformation of contaminated water into water as clean as bottled water without the use of chemicals.

Eureka Forbes reminds me of the iconic American mini-steel pioneer, Nucor Steel. Nucor built a reputation for being able to take new steel technologies that had been demonstrated only at laboratory scale, and work with the technology suppliers/licensors to scale them up to an industrial scale. Some of the world’s leading technology suppliers, therefore, sought out Nucor as a partner, and Nucor often gets a first look at new technologies before others do.

Opportunities across sectors

Many mid-size companies in the chemical sector in India are now sensing similar opportunities. They have strong process capabilities, low-cost manufacturing processes, and most important in the present context, strong balance sheets. At the same time, there are small companies and research laboratories in the developed world sitting on potentially impactful technologies, which they are unable to commercialise in the West because of weak market conditions, and the hesitance of existing companies to make major investments. In some of my recent interviews, two leading experts — S. Sivaram, a former Director of the National Chemical Laboratory, and Pramod Chaudhury, Chairman of Praj Industries — both underlined the potential of partnering with such technology sources. However, as we saw in the case of Nucor, developing internal capabilities to scale up and commercialise such technologies is critical for Indian companies to capitalise on this opportunity.

In the pharmaceutical sector, Biocon provides a good example of a company that recognises the importance of using ideas from outside to complement ideas generated from within. Soon after Biocon started working on its own proprietary oral insulin product, it entered into an alliance with Nobex, a small American company that had developed an innovative delivery mechanism for oral insulin. Later, Biocon bought out Nobex’s intellectual property rights and used these assets to build a strong patent platform in the oral insulin domain.

Research consortia

Another important source of innovation ideas is research consortia. Some Indian companies like Mahindra & Mahindra (M&M) and Tube Products of India (TPI) have joined international consortia to keep track of the latest research trends. For example, TPI has joined a US-based steel processing consortium, ASPPRC, since the last decade. ASPPRC has close links with the Colorado School of Mines. Membership of this consortium has helped TPI learn about processing steel in a more comprehensive manner. Leading global steel makers and automobile companies are a part of this consortium, and this helps TPI get a clear product perspective.

While research consortia in India are in their infancy, pioneering programmes like the Government of India’s Collaborative Auto Research Programme (CAR) have brought companies like Tata Motors, M&M and TVS, and institutions like IIT Bombay and the Indian Institute of Science on the same platform. Membership of such consortia is not a substitute for internal R&D, but provides a listening post, helps assess emerging trends, and provides access to pre-competitive research inputs.

The importance of India as a market, and the competitiveness of Indian companies in global markets have made Indian companies valued targets of specialised global, independent technology suppliers. But Indian companies need to improve their capabilities in technology assessment, forecasting, valuation, scaling up and integration if they are to take advantage of the opportunities provided by the open innovation paradigm.

(Beyond Jugaad is a monthly feature. The writer is Professor of Corporate Strategy & Policy, Indian Institute of Management Bangalore. Send feedback to thenewmanager@thehindu.co.in. )

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