Open Innovation Newsletter
Edition 24 - May 2013

Open Innovation Newsletter is produced by Wenovate – Open Innovation Center. It brings interviews with professionals involved in the practice of OI in Brazil with the aim of registering cases, debating concepts and creating opportunities. It also brings articles and information about courses and events.


What has changed in Brazil's innovation scene in the last ten years and what to expect from the next decade?


Paulo Coutinho
Innovation Manager, Braskem

“With the government, there has been a significant evolution regarding legislation and funding, including the notion that the natural risk innovation brings must be shared with the companies. Awareness about the importance of engineers has also increased. The national education program Science Without Borders also strengthens the quality of those professionals. Another thing is the understanding that resources must be assigned to areas with expressive or inherent advantage, like what happened to chemists with the renewables. From the next decade, I expect the evolution of innovation management in mid and small-sized companies, as well as improvement of relationships between universities and companies.”

Fabio Klein
Technologic Development Director, Embraco

“The Brazilian market is now more open to global products and companies started to identify more effectively the market's needs and accelerate the development of new products. It took a decade of transformations for the companies to learn the importance of involving research centers and universities in its R&D departments. That was the start of the concept of open innovation in Brazil. For the next decade, even companies with structured R&D departments will need to improve and it'll be crucial to create an ecosystem around the development of intelligent solutions. The combination of innovation and brand reputation is what will guarantee businesses sustainability.”

Frederico Ramazzini Braga
R,D&I Manager, BRF

“The last decade in Brazil was marked by a significant increase, both quantitatively and qualitatively, of government incentive mechanisms to R,D and I. Institutions have become stronger, which contributed to increase, diversify and internationalize partnerships between research institutes, universities and companies. In general, companies have now more confidence in the system and started to use it more frequently. Changes happen really fast, and that forces companies to engage in co-creation. In that context, we could wait more partnerships and collaborative experiences that should be increasingly multidisciplinary and multifunctional.”

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Innovation at the core of economic policy

Carlos Americo Pacheco's vision is not limited to his vast CV, that ranges from titles to leadership positions. For the current dean of ITA (Technological Institute of Aeronautics), there's no question to whether innovation should make it to Brazil's economic policy agenda.  Check below some of what he had to say to Open Innovation Newsletter.

Challenges ten years ago

There was an important public discussion about innovation in the past decade, but the public instruments related to grant-in-aid and applied research were weak. The Innovation Law brought an implicit cooperation proposal, but there was some difficulty in obtaining resources since we were still structuring the revenue of sectorial funds that had not yet proved their potential. We had just left, in 1997, an era of reduction of government incentives, in the middle of the budget crisis. We had some recovering in 2002, but still timid. There was some excitement around the theme of innovation because the Innovation Law was being debated between 2001 and 2002 in the Congress. In 2004, it was considered vital. One way or another, there was an enormous amount of effort for using the legal framework to open new paths.

The instruments only improved with the Good Law (from 2005, with tax incentives to companies who invest in R,D&I). We know this law has a lot of flaws - it only benefits companies with real profits and excludes smaller ones, for example. But it still has a lot of impact, comparatively. It reaches the big companies, which produces an important effect on the productive chain.

It's interesting to realize that this history represented an effort of institutional learning. The Innovation Law has also some difficulties and is more generous in its discourse than in practice, but it generated an attitude change that has lead to understanding of how collaboration benefits all sides.

Regarding the resources, ten years ago the budget fund was of R$300 million ($ 150 billion), expected to reach R$1 bi. Today, revenues reach about R$ 4 billion. Even if it didn't work as a strategy - it envisaged alignment between public and private sector, the creation of a managing committee, etc. -, it indisputably worked as a source of funding.

Challenges today

Today, there's a clear consensus - public and private - that innovation is a business agenda. We need an industrial and economic policy for innovation. Until now, we have been creating instruments to foment science, but what drives innovation forward are taxes, credit, market opening, international bargaining and commercial promotion. We need a deeper involvement from the Ministry of Development, the Ministry of Finances and a firmer treatment when it comes to venture capital. Innovation has to go beyond Finep and CNPq (government agencies for research and innovation) and penetrate at the core of economic policy. If we achieve that, the solution for the rest of the problems will come easy.

University-company cooperation

This cooperation has never been absolutely bad. In general, there's a progressive tendency to collaboration. An university's purpose, above all, is to educate people. If it were a company, their main product would be the student. Not even 15% of universities' revenue comes from collaboration. For schools, the more people learn, the better. But for a competent and developed company, for whom technology has a decisive role, it's the opposite: the less people have access to that knowledge, the better, because that's what aggregates value. But, despite of that, cooperation between them has been proving positive to both. For the university, it brings new challenges, new problems and opportunities for the students. And the companies benefit from accessing a different and new kind of knowledge, vaster than what exists internally.

Inova Empresa and Embrapii

Recently announced Embrabii (Brazilian Enterprise for Research and Industrial Innovation) and Inova Empresa (government program for innovation in enterprises) bring some important news. It's the structuring of a model that encourages many institutions to work together with financial sustainability.  Like what happened to the innovations agencies at universities and with the Innovation Law, we're going through a learning phase, and that's what will tell its impact and success.

It's an important initiative, though a hard one. The scenario is different from Embrapa's (Brazilian Company for Agriculture Research). Farmers don't fully compete with each other - they have a very strong collaboration aspect, which makes it easier to spread some technologies among them. With the industrial sector is the other way around: people are not so eager to share information with their neighbor. It's hard to work with them and come with global solutions - like what happens with soybean varieties, for example.

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Only one change

A quick Google search for the name of University of California at Berkeley resident researcher Jean Paul Jacob shows more than 500 thousand results. Most of them are features and interviews about his predictions for the future of technology. More than a good fortuneteller, Jacob is an attentive observer of changes. For the past decades, he has seen those transformations from a technology giant: IBM. We asked him a couple of predictions as well - this time, focused on innovation practices. For him, the whole debate about innovation comes from one single expression: service economy.

Open Innovation (O.I.): Which were the main changes related to innovation practices in the world that happened in the last ten years?

There was just one change: we're increasingly becoming workers of a service economy in which the competitive key is innovation. Service is always a coproduction. Always. At the restaurant or the health clinic, the more you share information with the service provider, the better the results. Besides, it's an intangible commodity, which means there's no metric. How could you prove that you are a better journalist than others? By the number of words you write? That's nonsense. The only way to stand out is to innovate.

O.I.: If we compare the innovation practices from ten years ago with what happens today, were there any significant changes?

The practice itself is very similar. The difference is that ten years ago people talked more about "pastel de queijo" than innovation. Innovation is a fashionable word right now, like cloud computing or big data.

O.I.: And what did open innovation bring?

Innovation has four fundamental pillars: it's collaborative, multidisciplinary, open and global. Henry Chesbrough has concluded in his business that openness was the most important, and that's why we came to this nomenclature, "open innovation". But innovation always needs its four pillars.

O.I.: How did the introduction of open innovation have changed companies?

There was a change in the culture. Companies are beginning to understand that they don't need to do and invent everything. The more they hear their clients, the better. When they receive the demands from clients and co-produce with them, they are naturally receiving the concept of innovation.

O.I.: Did this change produce any impact in big companies, like IBM?

Change is slower in big companies than in small ones, just as it's easier to yaw a sailboat than a transatlantic. IBM has done that when it has ceased from being a company that produced computers to become a company of services. This redefinition has saved IBM. It happened in 1993 and it continues to happen now, including with the so-called open innovation.  IBM, that has always been proud of its patent portfolio, today buys companies and uses their technology and solutions in an unimaginable speed.

O.I.: Is this a model that will continue to be proved right for the years to come?

Yes. But the question is: in what speed? Companies that arrive first have greater chances of success, but innovation has its own timing. Sometimes, it happens too fast or in the wrong direction. The first smartphone, called Simon, was created by IBM [in 1992]. A notable achievement, but released way before its time. Nobody knew what that was, telephones were things that just dialed and rang. At this very moment, I'm evaluating ten innovations, some in the areas of medicine and health, for example, and trying to understand if they will be successful. It's not enough to be brilliant.

O.I.: Could we expect some other important changes?

Innovation has always been a consequence from the passage of the industrial economy to a service economy. What awaits us now is a reversion/evolution from the service economy. Industrial economy is masses-driven, while the service economy brings personalization. We will have, in the next few years, massification with personalization.  For example, it will be possible to introduce 3D impressions in dentist clinics to hasten the production of prosthesis, but each of them will be made in an individualized way for each patient. In the same way, this could happen with the production of human organs for transplants.

When I speak about innovation in my lectures, I show that it'll be moved by challenges in areas that we wouldn't have thought before from the point of view of the technology. People are migrating from the countryside to the cities in the whole world. How will food be produced? And that's not counting difficulties with transportation, epidemics, energy and many other social challenges that will guide innovation: health, transport, crime, potable water.

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The promises of open innovation: what we've learned and what to expect

Bruno Rondani, diretor-presidente do Wenovate

Since the term was forged, in 2003, the concept of open innovation was largely adopted by innovation managers in the main companies of the world. The model brought some important promises. While some of them were fulfilled, others are still facing difficulties.

Among the fulfilled promises, there's the general understanding that the open innovation model motivated a change of management paradigm - external collaboration started to be treated with more attention, discipline and, most of all, method. Only a few of the leader companies in innovation haven't invested for the past 10 years in management models to deal with external collaboration. The effort has also allowed the strengthening of the collaborative innovation culture internally in the organizations.

Software platforms that facilitate internal collaboration became ordinary, as well as the use of mediators to help connecting with the external environment. Internal collaborative platforms, which encouraged collaboration through employees horizontally, regardless of their position or department, became popular. The same happened with the mediators, who promised to reduce the distance between challenges and solutions.

However, the main promises that open innovation practices brought were more pragmatic. Among the benefits mentioned by its believers, there were (1) the access to knowledge and external technologies that allow or reduce the time and risk for innovation development, (2) the sharing of knowledge and complementary resources between projects, mitigating the demands for new investments, (3) the monetization of inoperable technological actives through licensing or sale of patents, spin-off of new businesses or de-investment and (4) the creation of open business models capable of evolving to platforms in their most advanced stage.

Among the most diverse models companies have adopted to reach those promised objectives, there is the popularization of launching challenges through internal or external platforms. Today, they're a part of the innovation system and respond well to incremental problems, but not to the development of new innovation strategies. The popularization of open innovation challenges, according to its practitioners, was very useful to raise awareness of external networks, though the most relevant collaborative projects come from closer relationships with strategic partnerships.

We saw partnerships between government, universities and companies more frequently, and saw the creation of environments, laboratories and management organizations dedicated to the cooperation between its maintainers and external communities. Universities re-organized many of its research groups around centers tackling society and industry's challenges. Companies from different sectors joined each other to create organizations dedicated to management and execution of collaborative projects. Research labs built structures of technology demonstration in order to sell the results of their researches. Science parks created collaborative environments to integrate different actors and even countries united to create bilateral organizations to innovate.

Those initiatives produced great impact in collaboration for innovation development, but the public-private investment models and the negotiation of the shared intellectual property are still important aspects to discuss.

We also saw the multiplication of venture capital funds and corporative startups. Cooperative funds distinguish themselves from traditional venture capitalists (which only want to mitigate their investments) since they insert other objectives in the equation. Among them: the monetization of technological actives not used internally, the acquisition of relevant startups to the core business and the fomenting of external ecosystems. In general, those initiatives still don't have results that in fact impact the strategy of the mother company, and there are already some cases of funds abandoning their strategic objectives for the purely financial model.

We also saw some companies radically redefining their structure and strategy to become platforms for innovation communities. As an example, we have Apple, P&G and Eli Lilly.

The legacy of open innovation

Today, open innovation still faces many challenges - but they're aligned with the initial proposal rather than risking is, since they only exist because of the radical change the market has been through. Companies today compete for the innovation networks.

Ecosystems are complex and it's increasingly clear that the connection between people is essential. For open innovation to happen, we need relationships based on trust. We've been increasingly creating partnerships involving different interests. The challenge now it to find balance when working as a team.

What we've learned in the last years was the effort for innovation is not limited to R&D, or any other department or even the company itself. The effort of innovation is distributed in many communities. We've been living a transformation of how individuals and institutions organize themselves to innovate. The open innovation approach helps companies to walk in this new environment.

External relations strengthen the importance of business models in order to guarantee competitiveness, and not only the technological dominance or product supply. It's through open innovation that we advance in a new understanding about intellectual property, university-company partnership, sharing of resources and the application of knowledge generated dispersedly. Today, open innovation makes companies to reorganize its efforts around new global challenges, even in a competitive environment. It's the new era of capitalism.

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Open innovation arenas generate agreements

In the last edition of Open Innovation Seminar, in November 2012, ten open innovation arenas were held. Already recognized as an innovation model in other countries, they were the initial step to establish a new way of cooperation in Brazil. Some of them already showed some important developments.

With an ambitious proposal, the arena Science Without Borders aimed to find more effective models to involve the private initiative in the federal program. The Swedish-Brazilian Center of Innovation and Saab were the first partner organizations to create a collaborative platform between Brazilian and Swedish researchers to improve research projects submitted to the program selection. This year, Wenovate, together with CNPq, wants to expand this model in order to improve the reach of the scholarships.

"CNPq has enough resources to fund a sufficient number of scholarships, not counting the ones being offered by companies. Our challenge now is not to create more vacancies, but to fulfill the present ones", says CNPq national actions coordinator Emerson Willer. According to him, the number of candidates that manage to access the graduate scholarships is very disappointing.

Wenovate's support might render important for us to find the right professionals for those vacancies and to encourage companies to back the program - not financially, but with those collaborative platforms and with taking advantage of professionals after they come back from their time overseas".


Academic meeting

One of last year's news was the holding of the first Academic Meeting for Open Innovation. Researchers of Brazilian and foreign universities met to present their lines of work and to build networks capable of generating future partnerships. One of them is starting to materialize: Capes (Brazillian education agency) just approved a scientific cooperation project, involving researchers from University of Sao Paulo and University of Lindkoping. The project still awaits approval of Swedish organization STINT, which is also involved in the partnership.

Another partnership under way is between Federal University of Itajuba and the University of Berkeley. Unifei approved, together with CNPq, a project to research and understand which model of open innovation practices is used by Brazillian companies. Lead by industrial engineering researcher Carlos Mello, the project includes the participation of PhD students that might carry out their researches through PhD sandwich programs. Professor Henry Chesbrough will orient one of them.


Natura Campus

In the last OIS, one of the arenas was held by Natura, who used the environment of knowledge sharing and collaboration to promote a meeting with its partners' networks and to announce the Natura Campus award - a program to encourage innovation through collaborative networks. In the last month, Natura has revealed the results of the program's new edition. Seven open innovation projects were selected.

The contest was launched in 2012 through two public bids: the Amazon Bid, launched together with Natura Amazon Innovation Nucleus (the cosmetic company's headquarters in Manaus), and the Science, Technology and Innovation Bid. An investment of about R$6 million (US$ 3 million) is planned for all bids.

Twenty-nine institutions were visited - including universities and hospitals - with more than a thousand participants. After being evaluated by Natura's managers and innovation researchers, finalist proposals were selected for an immersion period in Natura, working directly with its professionals. The program received proposals from 94 organizations. From them, there were 24 finalists and 13 proposals were approved.

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25 - 27 November - WTC São Paulo

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