Dr Alex Colman, senior patent attorney at HGF, discusses open innovation in the energy industry:
The interconnected nature of the challenges faced to move from fossil fuels to cleaner, more sustainable and low-carbon alternatives requires all stakeholders to collaborate. As a patent attorney, I am particularly interested in the collaboration that is needed to drive technological innovation in the development and deployment of clean energy technologies.
The traditional approach for a business investing in innovation is to rely on its own research and development capabilities, by investing in its own facilities and hiring the best specialised researchers and engineers.
Internally focused, this approach typically seeks limited collaboration with external partners, sometimes even with suppliers or customers, and often focuses on the use of intellectual property (IP) rights as a means to safeguard innovation and prevent the sharing of knowledge.
This ‘closed innovation’ approach will not accelerate the energy transition. By limiting access to external expertise, there is an inherent slowing down of innovation processes. This can restrict a business’s ability to adapt to rapidly changing market conditions, and if many businesses in the industry are similarly afflicted, the ability of the industry as a whole is restricted.
There is a growing sense that time is running out to achieve the change of pace required for net zero commitments. Innovators need to adopt ways of working that facilitate collaboration in order to develop the entire value chain, from the upstream producers to the downstream consumers, and to encourage and protect the necessary investment.
A more contemporary approach is ‘open innovation’, which involves distributing innovation activities, such as research and development, across individual businesses in the industry, with each having its own knowledge and competencies. The intended benefit of this is increased total innovation, by dividing the effort required to produce innovation between multiple parties.
Open innovation can be a powerful strategy for businesses seeking to stay competitive and innovative in any rapidly evolving market.
By leveraging a wider pool of external resources, expertise and ideas, businesses can expand their capabilities, reduce risks and create more value for their stakeholders.
Crucially, open innovation facilitates faster problem-solving by building a broader problem-solving network, including startups, research institutions and other businesses. This enables businesses, and the industry as a whole, to address challenges on the road to net zero more efficiently and effectively.
Often cited drawbacks of open innovation are the potential difficulty in capturing value from one’s own efforts and the risk that others may capture more than their fair share.
Some may perceive external collaboration as a risk to protecting proprietary knowledge.
A balance must be struck between the need to fairly obtain value from one’s own IP without discouraging others from innovating within the wider industry. Businesses can start by deciding what knowledge they can share, what knowledge they must share, and with whom they can share it.
This decision-making, and the inherent identification and compartmentalising of knowledge within a business, is important, as both individuals and the industry benefit from everyone not sharing everything.
Individual businesses clearly benefit by keeping to themselves the knowledge that gives them a competitive advantage. However, it is important to recognise that the wider industry also benefits, since if no competitive advantage can be gained from investing in innovation, e.g. investing in research and development, then resources may not be allocated to it. This risks actually driving down innovation.
Businesses that have a well-defined IP strategy will likely find open innovation less risky and more profitable than those that do not. This is because 1) such businesses will be better at managing knowledge within the business; and 2) IP enables businesses to obtain IP rights over new knowledge, including products and processes, software, data and know-how. Though this is not to prevent the sharing of knowledge, but by establishing clear ownership of IP it is easier for businesses to manage collaborations, facilitating the co-development of further innovation by allowing information to be exchanged and traded with others, including for a fee.
Ultimately, open innovation allows businesses to build on knowledge obtained from the wider industry.
Yet, to deliver maximum value for both individual businesses and the industry as a whole, businesses should manage knowledge critical to competitive advantage.