How SMEs can benefit from Open Innovation.
Open Innovation (OI) is not just for large multinational corporations; small and medium enterprises also have a lot to gain.
Promising to deliver crispy, tasty food cooked with 80 percent less oil, the AirFryer has found its way onto many a kitchen countertop. Since it was launched by Dutch consumer appliance giant Philips in 2010, air fryers have taken the world by storm, spawning numerous copycats and creating an entirely new class of kitchen gadget.
While the AirFryer may now be known the world over, few people are aware that the technology that made the AirFryer possible was not developed in-house, but was instead licensed to Philips from a small two-man company called KCS.
The example of the AirFryer highlights the changing nature of innovation, underscoring the fact that no company—no matter how large or well-resourced—has the monopoly on good ideas.
Open Innovation at any size
At the heart of most successful companies is a constant drive to innovate. Patenting technology helps businesses profit from their research and development (R&D) efforts by raising the barrier to entry for competitors.
While the strategy of developing innovations in-house may have worked spectacularly well in the past, businesses are increasingly realising the need to look beyond the confines of their company walls for disruptive technologies. This attitude has a name: Open Innovation, or OI.
Large multinational companies, such as P&G and Accenture have come to embrace OI and make it part of their long-term strategy, even employing dedicated OI managers or directors. Small and medium enterprises (SMEs), however, with their limited manpower and R&D resources, may sometimes struggle to implement OI in their day-to-day business practices.
But as the example of KCS and the AirFryer shows, SMEs nonetheless have plenty to bring to the table and much to gain from engaging in OI partnerships.
Keeping it simple
The AirFryer was invented by Fred van der Weij, who was frustrated by a fat-free fryer he had bought based on a television ad. With the help of Chinese partners introduced to him by KCS shareholder Hans Brocker, van de Weij had the first working prototype ready by 2009. At this point, the two men faced a decision: should they try to market the device themselves or sell the idea to another company?
At the same time, Philips had been fruitlessly working on developing a healthier fryer for four years, coming up with machines that were too complicated and expensive for the average consumer. So when van de Weij and Brocker came to them with their prototype, Philips immediately recognised its potential, signing a licensing agreement for the next five years with an option to buy over the technology thereafter.
According to an analysis by Professor Wim Vanhaverbeke of Hasselt University, KCS succeeded where Philips had failed because the smaller company’s limited resources forced them to work within narrower constraints, resulting in a simpler and easier-to-use product.
Lessons in licensing
By licensing the AirFryer technology, Philips quickly gained market dominance without having to spend undue amounts of time and money on in-house R&D. KCS, on the other hand, gained access to Philips world-wide manufacturing resources and marketing networks, invaluable assets that helped to propel the AirFryer into mainstream consciousness.
For SMEs hoping to engage in OI, licensing is just one of the many different win-win scenarios. Instead of outbound OI, businesses can also benefit by borrowing technology from competitors or even firms in completely different sectors. Other examples of OI include joint research, joint ventures and strategic alliances.
If you are an SME owner and have been inspired by the AirFryer story to think about how your firm could likewise profit from OI partnerships, do reach out to us to find out more about both the existing technologies on offer and what companies are looking for.