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Open Innovation

Collective Creativity

Brazilian companies share risks and costs with multiple partners in research and development projects

Faced with a challenge to convert forest product residues into new chemical compounds like ethanol and polymers, research institutions in Brazil and Sweden and companies in the paper and cellulose industries realized that the chances of success would be greatly increased if they could share experiences and technologies on a broad research platform. And so in June 2013, companies like AkzoNobel, Fibria, Novozymes and Sekab, working with universities such as the University of Campinas (Unicamp), the Federal University of Rio de Janeiro (UFRJ), and Chalmers University in Sweden, launched a program aimed at integrating the cellulose industry with biorefineries, facilities that can convert biomass into a variety of chemical products.

Dubbed Polynol, the project is coordinated by the Swedish institute Innventia, known for its leadership of projects that bring together industry, universities, and research centers in Europe. “There are a lot of partners from industry and research centers that are working together as a value chain, openly sharing research results in order to reduce the time required to implement their projects,” explains Niklas Berglin, assistant director of the business division of Innventia’s biorefinery.

Similar initiatives have been attracting enthusiastic support in Brazil and all over the world during the past ten years, owing to dissemination of the concept of open innovation. The term first appeared in 2003, in the book Open Innovation by an American, Henry Chesbrough, a professor at the University of California, Berkeley, who used it to describe a practice that had emerged in the mid-1990s with the establishment of partnerships among company research departments. Compared to the traditional model in which corporate secrecy prevailed, open innovation distributes the innovation process over an external network of partners; there is room for universities, nearby partners or partners from other countries, suppliers, and even competitors and customers—each contributing their special expertise. In his books, Chesbrough shows how, until the mid-1990s, companies tried to do everything themselves, as if self-sufficiency was the key to innovation (see infographic). Gradually, companies came to realize that they could do better if they took advantage of ideas from outside, contributed by universities and by other companies. “They saw that this would cut costs and give them more time to focus on their specialties, as well as enabling them to share risks,” says Bruno Rondani, founder of Wenovate, an association established to encourage and promote innovation projects. This does not mean that everything will be shared. Companies will open up their innovation efforts in order to capture and offer new knowledge, but close them when they want to appropriate something. Some companies, for example, license technologies only after their products have been on the market for awhile.

In the past 20 years, several multinationals like IBM, Xerox, P&G, and Philips have started to involve customers, suppliers, researchers, and other companies in their innovation efforts, signaling to other companies that they too could seize the opportunity to opt for open innovation. According to a study published in 2012 by the U.S. institute Forrester Research, 77% of the world’s largest companies are adopting the model as their principal innovation strategy. The study, which consulted top executives from more than 200 companies in the United States, Germany, and the United Kingdom, shows that most (81%) of the open innovation initiatives occur in the form of collaborative research networks].

In the case of the Polynol project, the laboratory run in Curitiba by the multinational Novozymes was chosen to evaluate the possibility of extracting sugars from different types of biomass, such as brushwood and leaves in a process known as enzymatic hydrolysis. Meanwhile, the technology center operated by the Brazilian firm Fibria, in Jacareí (SP), is focusing on the logistics and production costs of the new raw materials. “This way, we can see the whole picture and make more complete analyses of the problems,” says Paulo César Pavan, president of the project committee in Brazil and process and product manager of Fibria’s Technology Center.

038_043_Inovacao aberta_226-02According to Rondani, one trend that is slowly taking hold is the interaction between big companies and technology-based startups. A study done in 2012 by Flanders DC, a foundation associated with the Belgian government that supports innovation, suggests that big companies should interact more frequently with small and medium-sized companies. However, according to that research, which examined cases in Europe, big companies still prefer to work with universities and other, larger companies, rather than with smaller ones that depend on that sort of initiative in order to survive in the market. Rondani admits that pursuing interaction with smaller companies and startups as a facet of open innovation is still a very new concept, especially in Brazil. “But a lot of startups have the capabilities needed to help large firms solve a problem,” he says.

In Brazil, programs organized by big companies in their effort to absorb technologies and knowledge generated by other companies are beginning to gain strength. One of these is Wayra, a startup acceleration program run by Telefônica. The initiative began in 2012 and has already selected more than 30 companies to be its partners for a ten-month period, sharing the same space in a building in the city of São Paulo. There, the owners of startups have direct contact with executives of the company, who provide consulting services in the areas of business and marketing. Many of the startups chosen by Telefônica are working on developing applications and software that are in increasing demand on the world market.

According to Carlos Pessoa, director of Wayra, Telefônica benefits in two ways. “Over the long term, by investing in startups that have innovative technological potential the company can reap a significant economic return,” he says. In the short term, Telefônica plans to reach out to find new business deals and diversify its activities in the market with technologies and services that have never been part of its portfolio. “In addition, startups can offer Telefônica preferential access to certain products and services for its internal use, before the startup begins serving other customers,” Pessoa says.

One of the companies that has set up at Wayra is Proradis, established in 2013 by researchers from the University of São Paulo (USP) in Ribeirão Preto. Specializing in the development of medical diagnostic software, the company used the program to refine a tool, based on cloud computing, that organizes and stores clinical exam data on the Internet so that it can be accessed from different locations simultaneously. “Here at Wayra, we have had contact with the day-to-day life of a big company, which has kept us informed about new administrative tools and exposed us to a larger network of clients and investors,” says Haissan Molaib, one of the partners in Proradis. Another startup selected by Wayra is BovControl, which develops software to help cattle ranchers manage data about their herds. “Telefônica facilitates our relations with potential partners or customers by promoting a favorable environment so we can grow,” says Danilo Tertuliano Leão, founding partner of BovControl.

Another company that decided to reach out to attract technological startups is Bradesco. In 2014, the bank launched InovaBra, a program featuring interaction between closed and open innovation intended to support startups that submit solutions applicable to financial services. The program will begin in 2015. The difference between the Bradesco and the Telefônica initiatives is that the bank is turning to open innovation as a means of complementing its own internal innovation process, such as developing of new technologies to improve interaction between the bank and its customers, while Telefônica is investing in startups that are not necessarily working in telecommunications. “We are thinking about our strategic horizon for the next ten years,” says Fernando Moraes de Freitas, executive manager of the economic department of Bradesco and coordinator of the InovaBra initiative.

New initiatives of this kind are also being launched by Brazilian companies that are already familiar with open innovation. One of these, Braskem, has adopted the concept as part of its innovation strategies ever since its founding in 2002. In June 2014, the company inaugurated a new biotechnology laboratory in Campinas (SP) for use in research with new raw materials. It also maintains technology centers in Triunfo (Rio Grande do Sul State) and in the United States, in Pittsburgh. Although Braskem is investing in internal laboratories, a great number of the 270 innovation projects now under way at the company are being developed openly with universities and other companies. “Investing in our own team enables us to set more specific targets and strategies with our collaborators,” explains Patrick Teyssoneyre, director of Braskem’s technological center in Triunfo.

Some partnerships recently forged by Braskem with foreign startups demonstrate that one of the merits of open innovation is that it facilitates international collaboration. One of these partnerships was established in September 2014 with the U.S. firm Amyris and the French company Michelin to develop technology for producing isoprene, a chemical compound used in the tire industry, from a renewable source. The three companies will work together to accelerate the biochemical studies that use sugars obtained from sugarcane and cellulose inputs. Amyris will share with Braskem the rights to market the renewable isoprene technology that is to be developed, while Michelin will be given a nonexclusive preferential right to access the green isoprene technology.

Wayra, affiliated with Telefônica, offers startups space in the same building in São Paulo in order to accelerate development of new products and services.

EDUARDO CESARWayra, affiliated with Telefônica, offers startups space in the same building in São Paulo in order to accelerate development of new products and services. EDUARDO CESAR

Gathering collaborators around a project is not just some crazy idea. Without it, many ambitious projects would hardly get off the drawing board. A prime example of this in today’s world is the Watson platform, a cognitive computation system introduced by IBM in 2011. The computer, still in development, interacts with the language of the user, has a voice, and can process large quantities of data and acquire knowledge, according to how it is used. But for that to occur, dozens of universities and startups had to be involved to help create the software able to make the computer learn specific languages and vocabularies.

In the near future, Watson could serve as an electronic manager of a bank by recommending the best investments based on a client’s personal profile. In hospitals, where it is already being used in the United States, it assists with the diagnosis and treatment of cancer. “We must not underestimate the capabilities of other companies. Our partners and customers are as good as we are,” says Jean Paul Jacob, a Brazilian who is a researcher emeritus of IBM and professor at the University of California, Berkeley, where he has been living for more than 40 years. “By identifying a supplier’s talent we can solve a problem faster without having to hire that professional,” Jacob says.

Looking to suppliers for ways to differentiate themselves in the market is one of the motivations that led Brazilian aircraft manufacturer Embraer to announce, in May 2014, an initiative for consolidating the open innovation culture in the Brazilian aerospace industry. Working with the Brazilian Development Bank (BNDES), the Brazilian Innovation Agency (FINEP), and the São Paulo Development Agency (Desenvolve-SP), the company launched an investment fund with initial assets of R$131.3 million to be used in supporting collaborative projects involving companies and startups in the industry with Embraer.

“If an innovation appears to be promising, the fund will contribute resources to support the company and Embraer could become a customer by incorporating those innovations in its products, services, and business operations,” says Peter Seiffert, head of the strategic planning unit at Embraer. In his opinion, knowledge generated at universities needs to be incorporated into new products and services. “Ideas must leave the academic world and enter the market so that Embraer, as a customer, can incorporate those innovations in its business,” Seiffert explains.

An historic example of how Embraer woke up to the idea of open innovation took place with its development of the ERJ-145 regional jet, achieved in a collaborative effort with four other companies. In the 1990s, work on design of the aircraft had stalled for economic reasons and could not be completed without outside help. Thanks to cooperation, the jet was introduced in 1995 and became a commercial success. Since then, other models have been developed cooperatively, but in each case the concept was developed by Embraer alone.

But it was not always so. Some years ago, Embraer creations received preferential protection under industrial secrecy rules—an approach that satisfied the need for protection during the development of a specific product. As the industry became more competitive, research became more complex, frequently requiring competencies that Embraer had not yet mastered. The company then began to build networks of knowledge within the context of pre-competitive research, i.e., research limited to basic science. In that stage, companies in the aerospace industry conducted research jointly with a specific objective—to study new materials, for example. As a project moved closer to finding an industrial application, each company internally developed its own product or technology for which it would later obtain patent protection.

This networking helped Embraer register more and more patents for product and process solutions for manufacturing in Brazil and abroad. By licensing its patents, the company expanded its sales possibilities. “The open innovation model makes intellectual property a saleable product,” explains Henry Suzuki, an intellectual property consultant. He cites as example the Fraunhofer Institute, in Germany, founded to handle the technological needs of companies in Europe. The knowledge generated from a partnership with one company is licensed to other companies to resolve common problems.

In Brazil, one of the examples that illustrates this practice is the partnership between Petrobras and Pipeway, a Brazilian company that makes and operates tools for inspection of oil and gas pipelines in order to identify dents, corrosion, and leaks. In 1998, researchers from the Pontifical Catholic University of Rio de Janeiro (PUC-Rio) and the Petrobras Research Center (Cenpes) developed a new pipeline management tool. Until then, the service had been contracted out to foreign companies that charged high fees for it.

Although it had developed the technology, Petrobras was not in a position to execute the service internally. The company then decided to license the technology developed with the university to the researchers themselves, who then founded Pipeway. “The company became a Petrobras supplier and, besides providing the service, perfected new solutions based on the original design,” recalls engineer Ivan Janvrot, vice president of Pipeway and a retired Cenpes researcher.

Today, open innovation is present in various research projects being carried out by Pipeway. One of them was recently completed in partnership with the Federal Technological University of Paraná (UTFPR), with support from FINEP, to develop equipment that maps the trajectory of an underground pipeline and integrates the information with Google Earth.

Until the 1970s, Petrobras did research in conjunction with other companies, especially in developing refining technologies. With the discovery of sizeable petroleum reserves in deep waters of the Campos Basin in the 1980s, Petrobras began to intensify that cooperation. The reason was the need to develop technologies for operating in deep water, since the basin is more than 1,000 meters deep and, at the time, no proven technologies were available for extracting petroleum under those conditions. “We made a strategic decision not to develop everything ourselves but to establish networks of domestic and foreign partnerships,” says José Paulo Silveira, associate director of Macroplan, a consultant to companies in the field of open innovation. He had been superintendent of Cenpes for Petrobras in the 1980s. In the case of the deep water program for the Campos basin, 109 projects were carried out with 61 Brazilian and 42 foreign partners over the course of six years. A total of $70 million was invested in projects. “The scale of the effort made it a pioneer in open innovation here in Brazil,” says Silveira.