Open sesame

Six ways Bayer embraces 'open innovation'.

A minor revolution is underway in R&D and we are smart to take heed. Taking their cue from open source software movement, large organisations are out-sourcing their innovation projects on the assumption that the best ideas are outside the company walls.

In truth, the idea is not new – it’s probably been happening since we started drawing on cave walls. In 2005 it got a proper name with a book by Harvard professor Henry Chesbrough. He was curious why Xerox’s famous research house, PARC, was so good at the R and so bad at the D. His conclusion: Xerox failed to collaborate with other organisations, who, via former PARC employees, simply took the ideas and ran, mostly to Steve Jobs.

factors that drive innovation

But R&D is hard enough to do alone. Now you want us to collaborate, too?

Well, yes, and the good news is that some are doing it well. I was invited by German science company Bayer to attend a series of events and tour some of its facilities to see the open innovation up close. I’ve blogged about some of my experiences. By way of context, Bayer is the lead sponsor of the New Zealand Innovator Awards and will spend 15 billion euros internationally on R&D in the next three years.

First, you need to understand the motivation behind open innovation. Dr Wolfgang Plischke, Bayer’s head of innovation, points out that although the company spends 2.75 billion euros on life sciences R&D every year, that’s only one per cent of the world’s life sciences research spend.

“It’s important to consider the other 99 percent,” he says. To tap into that ‘other 99 percent’ Bayer outsources its innovation programme, engaging with a staggering 800 partners across the globe. Dr Plischke outlined the six main ways it outsources innovation.

1. Crowd-sourcing

Probably the most radical for this 150-year-old firm is its crowd-sourcing programme, grants4targets, where Bayer invites companies and scientists to apply for money, tools and expertise in exchange for access to their promising pharmaceutical products. Since its launch in 2009 it has received 825 proposals, of which 114 have been accepted for further development.

2. Incubators

Targeting promising biotechs and pharmaceuticals, Bayer set up a San Francisco incubator called CoLaborator. The facility offers start-ups expertise and equipment to develop drugs that align with its strategy. Launched in September, it already has two tenants with more expected.

3. Strategy partnerships

A more common but highly successful approach is strategic partnerships, in which Bayer forms joint venture or deep level partnerships with like-minded organisations. These may be research institutes or universities but typically involve Bayer funding research in exchange for owning the outcome. The partnership with technical university RWTH Aachen, is a good example. So are its many programmes for plant improvements, such as a cotton breeding programme with Australia’s CSIRO.

4. Consortia

Bayer is active in industry-wide collaborations, such as the European Union’s Innovative Medicines Initiative. The IMI consists of pharmaceuticals, governments, policy makers, hospitals, research institutes and universities and aims to break down the barriers that slow the speed of drug development. By exposing itself to industry-wide discussions, Bayer contributes to the growth of the sector but also exposes itself to new ideas.

5. Fund

Behind all these programmes sits Bayer’s considerable wealth. To pay for all of the life sciences innovation described above its sets aside 30 million euros in a Life Sciences Fund.

6. Internal collaborations

Ironically, sometimes Bayer’s external partnerships are easier to achieve than internal ones, possibly because it runs three reasonably separate business units in Human, Crop and Materials Sciences. Plishscke is determined to break down the walls in his desire to create multi-disciplinary innovation teams: “We cannot expect to cooperate externally if can’t do it internally,” he says.

Just how is any of this relevant to New Zealand? Well, for one thing, Kiwi companies should approach Bayer for funding and partnerships. And not just Bayer. Most tech giants are seeking such partnerships. And don’t forget the government, which has close to $92 million to burn in R&D funding.

It also reinforces the oft-repeated mantra of innovators and creatives: no-one has a monopoly on ideas. Bill Joy, the founder of Sun Microsystems, put it another way: “Not all the smartest people in the world work here.” Perhaps the smartest thing to do is reach out.

If Bayer, with its almost 3 billion euros in R&D spend, believes it’s missing 99 percent of the new ideas, then what are you missing out on? And how will you open your innovation?