Open Innovation Newsletter
Edition 27 - August 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.

ONE QUESTION, THREE ANSWERS

Is there anything called “failure” when it comes to innovation?

After 26 editions covering a wide array of innovation-related subjects at the One Question, Three Answers section, we decided to ask managers about cases of failure.

We always had major contributions from experts, national and international authorities in innovation about countless themes.

This time, we ask:

What innovation venture from your organization was the most successful? Which was the most unsuccessful? What do you believe are the causes of failure and success?

Not one of the replies we received mentioned a case of failure. We know those institutions had a lot of success, a consequence of learning from previous initiatives that failed. The practice of innovation requires tolerance to failure and we believe that being willing to share it, and then learn from it, is extremely important to strengthen an innovative culture.

Instead of publishing each answer about their successful cases (and then hide our failed objective), we decided to share with our readers our own failure of not being able to wrap up the section about failed cases. And to launch the same challenge for our next edition.

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INTERVIEW

About Inventive Culture

 

Aly Khalifa, Gamil Design

Wenovate: How do you define Inventive Culture?

Aly Khalifa: Inventive Culture is dedicated to establishing that environment that creative people thrive in – and enables them to create new works. It typically features experimentation, collaboration, inclusive thinking and community mindedness.

Wenovate: How and when it came to you?

Aly Khalifa: As creative consultants we have gone in cycles of various improvements: how to set the stage for staff, how to conduct meetings, how to communicate with clients, how to organize our internal environment and even how to contribute to our community. What we realized was that there was no single magic solution. What we were reacting to was ever-changing needs of maintaining a culture where creativity, collaboration and cross-pollination thrive.

Wenovate: In your opinion, what is a creative environment?

Aly Khalifa: Creative environments have to ride a fine balance. Too much control kills creativity just as much as too much choice can. One of our go-to creative methods is to start a design based on someone else's scribble. It's so much easier for people to begin to work with a few random stray lines than to be given a blank piece of paper and told to do something original. We have found that creative environments need to have this same type of approach.

Wenovate: We know you have many companies based on this new culture. How they were coming?

Aly Khalifa: Our consulting firm, Gamil Design, is responsible for providing creative ideas to a variety of international clients. It's our job to see things differently and that's what's informed the beginning of our pursuit of inventive culture. We formed Designbox to provide workspaces, meeting rooms and a monthly gallery schedule to open up the possibility for collaboration and expression with other creative professionals. We quickly realized that staff contact with other creative individuals outside of the reporting structure was also beneficial to establishing a feeling of common purpose…which eventually led to establishing a culture. 

We took the lessons from Designbox and decided to apply to our whole city in Raleigh with a festival called SPARKcon. This time we used an open-source methodology to open up the participation to beyond the professions with which we were most familiar. With a mission and no budget we were thrilled to have 250 leading thinkers set the tone for SPARKcon in year one. Eight years later, SPARKcon is seen as an anchor event for the city and displays the talents of more than 1700 local talented individuals across fashion, music, geeks, graffiti, speakers and circus performers. It now brings in more than 35,000 people. This experience has given us the courage to be increasingly open with new business models and has led to many new insights and opportunities, like crowdfunding and bigger collaborations.

Wenovate: How creativity, innovation and inventive culture are related in your work?

Aly Khalifa: We see inventive culture as the "connective tissue" that joins together people, skills, creativity and energy that leads to innovative ideas. It's hard to immediately identify, but is one of those things that "you know it when you feel it." To build this culture, you need to exercise "transformational leadership" which is very different than typical top-down corporate leadership. In fact, transformational leadership is a common trait of most entrepreneurs. So if you want to become an entrepreneur, build your skills with volunteer work.

With SPARKcon's open source and volunteer methodology, we have been learning this slowly and continuously. However in the process, we are connecting a powerful network of creative folks who support each other's efforts and this has exploded into more and more exciting possibilities. As an example, our latest effort with Lyf Shoes is to have our creative community not only help design the uppers, but to also participate in the on-site manufacturing. 
We tend to focus most of our intention on new products and business models, but at the end of the day, these things only exist to help us build culture. So let's build an inspiring one.

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SUITE

Open Innovation, Social Innovation and Desafio Brasil

Marco Túlio Pires, advisor of innovation and technology at the Social Development Department of Sao Paulo State Government

Marco Túlio Pires, advisor of innovation and technology at the Social Development Department of Sao Paulo State Government.

Innovation – including open innovation – was always present in the Department’s agenda, which, for some time, has been looking for tools and related solutions. Participation at Desafio Brasil (Brazil Challenge) fit perfectly, since we already wanted to involve our own employees and other sectors of society in an environment for creation and solving problems.

We did wanted to hire a collaborative innovation platform, but those processes take some time because of all the phases it needs to go through, like public bidding, analyses, auction, etc. The opportunity to be a part of the Challenge was the shortcut we needed. We wanted to understand how this innovation culture could be disseminated, something that was completely new for a public agency.

Cases like Natura’s, Intel’s and FGV’s, institutions highly praised for their innovation knowledge, served as examples for us when it started to adapt this to the public administration (since you can't just copy the model from the private sector).

Despite having started at the end of the first phase of the Challenge, we were able to involve all of our 26 subdivision. In the Department's 10 priorities, we selected the productive inclusion - about how to enable people who are in condition of extreme poverty and put them in the job market

We try to make an effective social inclusion, creating cooperatives, work centers and opportunities to help people make their living. We arrived at the Department with this mission, but we wanted to hear the input from society and also from our employees about those ideas of inclusive production.

We have received more than 70 proposals in two weeks after the release of the challenge. The ideas will be reunited and worked on with experts, so that we can understand if they belong to our scope. If they do, they will go through a validation phase with the participation of the project creators. After that, we’ll start the projects and award the participants.

This is social innovation – to give people means to create ideas that will affect society as a whole, not only ideas that look good on the paper, but that could find fertile ground to promote social development.

We agree with the concept that innovation happens when you unite mass production with utility, when you see a purpose for an idea. Innovation is how to make an idea get out of the research lab and find a market.

Social innovation follows this path, with ideas that can actually change people’s lives in difficult situations. That is what we want with this challenge: to create a culture so that other challenges could be launched.

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FUNDING

Exploring new models of innovation funding

Rafael Levy, Director at Allagi

The funding programs and incentives to innovation normally sought by companies in Brazil are the ones that bring direct benefits to activities already developed by them, like: grants (subvenção econômica) and tax incentives (Lei do Bem). I understand that the main reason for this fact is because this types of program are initially more simple to apply and understand the benefits, because they are applied to the company’s existing expenses (its own team and projects) and are related to non-refundable benefits.

However, the Brazilian innovation system has many other interesting programs, often with less “competition”, which are not explored by the companies and are usually overlooked by P&D managers. They are:

A) Low interest loans

First, we have loans to activities of Research, Development and Innovation with subsidized interest. Many companies disregard those programs because they are debt and don't represent a direct increase in their R&D budget.

However, when you consider that their interest rates are down to 3.5% per year, i.e., below inflation and therefore representing a negative real interest rate, those loans can represent a great financial gain for companies. Even if the company has enough cash flow to keep investing in their innovation activities, it could take the loan and use their own budget on something else, or even leave it invested, because any kind of investment fund, even a savings account or a fixed income fund, has better rates than the loan.

Example: if a company gets a R$ 100 million loan with interest rate of 3.5% p.a. and invest its own resources in Brazilian CDBs (considering a net yield of 5.5% p.a.), that means that it is earning R$ 2 million each year with the interest difference. This is already an indirect subsidy to the company.

In practice, however, companies do not get loans to reinvest in the financial market, but start to make investments for which they had no cash or exchange more expensive debt for cheaper debt like these.

In this case, if a company is working with an credit line with a rate of 15% p.a. and replaces the portion related to the R,D&I with a credit line dedicated to innovation, by the same reasoning it would save R$ 11.5 million per year with the savings in interest payments. This "indirect subsidy" few companies realize.

Those interested in such programs should look for BNDES Inovação Tecnológica program, FINEP Inova Brasil (now also unified in the public bids of Inova Empresa), as well as state financing programs like Pró-Inovação, from BDMG with FAPEMIG in Minas Gerais state.

Sometimes such funds are ignored because the main interested in resources for R&D is the department itself, while the financial department is the one that makes financial requests. Without some sort of interaction between those two sectors, the request becomes impracticable. However, for the R&D manager, one the main advantages of this kind of funding is the commitment of the company with its R&D budget and activities during the loan period.

B) Partnerships with universities

Generally, the companies search for financial resources for their immediate projects or for development with their own internal teams. For that reason, many times they ignore or just don’t know about funding programs dedicated to company-university partnerships.

Those lines are targeted at the execution of R&D projects in universities or private non-profit research institutes, but supported and co-financed by private companies who are interested in the use or commercialization of the results achieved. The resources for the universities are non-refundable and, although they require some sort of budget matching from the company, it could be only 10% of the total of the project (like in the case of FUNTEC).

When a company has long-term projects, with a need of highly scientific content and that involve competences not totally dominated by the internal team, this kind of partnership could be interesting because it allows the company to access new knowledge and other resources besides their own, enabling larger technological leaps in their products or services.

One of the major difficulties in this kind of partnership is the need of negotiations and discussions with the university regarding intellectual property, confidentiality, publication of scientific results, schedule and the different motivations between the university and the company. The agreements with universities usually take a long time to be signed, mainly due to the discussion about sharing intellectual property and the payment of royalties. The subject is complex and deserves a separate article on this topic.

The main programs of this kind are FUNTEC, from BNDES, which is continuously open for application, and the public bids of FINEP’s sectorial funds, which depend on the release of specific bids. Besides those, there are similar programs in some state research foundations.

C) State Funds

The Research Foundations of some Brazilian states (FAPs) have programs aimed especially at research in companies (or in partnership with companies).

Some examples are the PIPE and PITE programs of FAPESP (São Paulo state), which offer non-refundable resources for research projects associated with companies. PIPE is aimed at small companies that wish to develop internal research programs. PITE is aimed at research projects in universities carried out in partnership with medium or large companies.

It is recommended to consult programs from the Foundation of your own state. Most companies only seek federal funds for their projects through FINEP or BNDES, but often the resources might be closer than you think.

Besides the State Research Foundations, there are funds from the decentralization of FINEP funds. The TECNOVA program includes non-refundable grants for small and medium businesses operated by financial agents in each state. For example, FAPESC, from Santa Catarina, has just launched the first call for this program. Each state has its own intermediate agent of this program.

Also, the program Inovacred is a line of loans decentralized from FINEP and is also operated by accredited institutions in each state (see the list at:  http://download.finep.gov.br/programas/inovacred/ParceirosInovacred.pdf)

D) Scholarships

Frequently the big necessity of a R&D project is the acquisition of new knowledge by the research team. This kind of activity could be paid by programs that grant scholarships for research or technological development projects, which could also be used by the companies to educate their team or to develop possible future contributors.

Some programs grant scholarships that are specifically aimed at projects involving companies, like the RHAE scholarships from CNPq, aimed at small and medium businesses.

Besides, there are many opportunities with the program Ciência sem Fronteiras, which grants scholarships for education and research overseas.

E) Regulatory programs

Besides the traditional programs, which distribute their resources through centralized agencies from the federal (FINEP, BNDES, CNPq) or state government (FAPs), there are resources for R,D&I (Research, Development and Innovation) distributed through regulatory requirements or tax incentives for some specific sectors, which could be used by companies that wish to develop projects in the area.

It’s important to mention the R&D program of ANEEL, which requires utility companies of generation, transmission and distribution of electric energy to invest part of its revenues in R&D projects in partnership with third parties (which could be either universities or other companies). Those companies (like CEMIG, Copel, Light, CPFL, AES, etc) have a specific R&D budget and are always searching for interesting projects to invest. Since those payments are equivalent to non-refundable resources, the program is a great opportunity for those who have applicable technologies in the energy sector and wish to carry out R&D projects in partnership with public utility companies.

There are also programs like INOVAR AUTO at the automobile industry, ANP R&D for the oil and gas sector, and the IT law, which requires manufacturers of electronic equipment to invest part of its revenues in R&D.

However, differently from ANEEL R&D, which requires hiring of third parties (not making distinction between universities or companies), the other program demand that the R&D spending occur either with universities or research institutes, or with the internal R&D team. Although other companies interested in developing R&D projects for these referred companies are competing for the same budget as their internal teams, it’s important to know that they have a relevant budget dedicated to R&D and that those are potentially accessible resources.

Conclusion is that although companies are initially interested in just grants and tax incentives, there are many other opportunities in Brazil that could offer equal or even larger benefits. You only need to know where to look for and be ready to explore new partnership models.

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ARTICLE

Open innovation and the concept of distributed networks

Bruno Rondani

About three years ago, Anderson Rossi, professor at the Dom Cabral Foundation, asked me during an open innovation panel what is the relation of this subject with the so-called “innovation networks”.

Two months ago - after having the last two editions of the Open Innovation Seminar focused on “Sustainable Growth supported by Innovation Networks” -, an entrepreneur very involved with the subject asked: does any “innovation network” actually exist? And, if it does, does it work?

I wouldn’t hesitate to answer both questions, even with examples, if it wasn’t for a conversation I had with Salvatore Iaconese and Augusto de Franco. When I explained to them what we were doing in the recent programs of Wenovate (open innovation, challenge-drive innovation, triple helix), both replied me very emphatically: “this is not network”.

They explained to me the concept of distributed networks, where the free-interaction peer-to-peer is the main attribute, and how moderation and centralization of initiatives called open innovation only reinforce the old paradigm of the vertical and linear innovation. When talking about the concept of networks applied to companies, Augusto de Franco emphasizes that companies created closed and hierarchic structures that block the free flux of ideas and interaction, which make them lose their capacity to innovate.

I replied by arguing that the opening of the companies' innovation processes was a condition to create distributed networks of innovation. They insisted that co-creation from the free interaction is what stimulates creativity and allows an spontaneous generation of ideas and that wasn't what was happening to the companies when they were adopting practices of open innovation.

The description they made, although very interesting, was echoing on my mind: “but this isn’t innovation”. Ideation and creativity are part of the process, but innovation requires complementary actives like resource allocation, which an environment of co-creation and distributed network alone probably can’t achieve.

In a capitalist economy, whoever has the resources and the market positions (usually investment funds and big corporations) are the decision-makers and to decide the allocation of those resources they need viable projects for innovation, not only ideas. While crowd funding is taking its first steps and represents a small part of the investments in innovation, there is no way to count with the distributed networks as its new locus.

To leave the theoretical debate and to test the ideas in practice, we decided to make a few experiments. I was never friendly to the practice explored by companies that publish challenges of the so-called seekers for a pre-registered community of solvers. Even less I liked the competitions of business plans as stimulus to entrepreneurship.

The first one brings a problem of business strategy. If the innovative solution is available on the market and it’s possible to access it through public bids, it ceases from being an strategic resource, because it’s also available for your competitor. I wasn't surprised when I was told from the first practioneers of this model that they only produced incremental innovations.

In the second case, as a good student of Saras Saravathy, I can’t accept that by simulating the real investment process of venture capital in competitions that exclude participants in the same proportion of the real cases are actually teaching about entrepreneurship. By doing that, we’re actually conditioning entrepreneurs to the language and structure expected by fund managers, awarding those who present themselves better to this model.

With those questions in mind, I took the coordination of the 8th edition of Brazil Challenge, a high impact competition of entrepreneurship promoted by Getúlio Vargas Foundation. By using a specific clause of my contract with FGV, which obliged me to propose “meaningful innovations” to the program, I decided to incorporate to the Challenge the concept of “innovation network”.

For that, we planned two new pillars to the program: (1) the creation of an environment of free interaction between participants – a co-creation environment and (2) the possibility of other partners to launch innovation challenges to the entrepreneurs as a way to guide the participants – open innovation. Besides, we define as our own objective to increase the impact of the competition by attracting more entrepreneurs and make them have the opportunity to benefit from the process, giving them more learning opportunities before they are eliminated from the competition.

The first adopted measure was to find a software platform that would allow interaction between participants and would manage the many proposed fluxes (co-creation, competition and innovation challenges) paralelly and sinergically. With the platform defined, we called entrepreneurs to populate the environment of co-creation with their ideas or to submit their proposals in the competition.

We didn’t offer any specific award and we didn’t create any rule for those who opted for publishing their ideas in the co-creation. We simply opened the platform for people interested in co-creating ideas with others. For our surprise, by the end of the first deadline, we had an identical number of startup ideas for co-creation and proposals for the competition. There were about 380 startups signed up for the competition and 370 in the co-creation. In that moment the system had 1500 entrepreneurs.

By the end of the first phase, we asked the participants to help the other 370 ideas published at the co-creation with commentary. We gave 28 days for this free interaction and for the new startups to be registered in the competition. We stimulated whoever was in the competition to read others’ ideas and make comments and whoever was in the co-creation environment to develop their own idea before submitting them to competition.

By the end, we had 1219 startups: 917 startups registered in the competition and 550 published in the co-creation (302 opted to stay only in the co-creation environment). In terms of interaction, there were 1400 commentaries in a total of 344 ideas. In this step 3400 people participated.

At the same time,  we presented those results to the companies. Other institutions launched challenges of innovation in our network. This movement attracted five challenges of innovation published by interested partners in the community of entrepreneurs of Brazil Challenge. Partners had 25 days to attract entrepreneurs to propose solutions to their challenges. In the first week, partners received a total of 150 proposals, demonstrating that there is a big interest from the entrepreneurs to interact with these organizations. With the open challenges, the number of participants continued to increase, reaching 4000.

It’s hard to draw any definitive conclusion about this still incomplete experience, but the numbers we reached (and we’re not evaluating the quality yet, but the commitment), show that by changing the process of a competition and opening flux of ideas alternatives, we were able to assemble a much larger number of participants and generate collaboration among them. By comparison, the 7th edition of Brazil Challenge had 364 qualified startups involving a total of 1543 entrepreneurs.

I believe that the locus of innovation is the company. And, back to companies, I agree that innovation could actually be potentialized by free interaction between collaborators and external community, but I also believe in the importance of robust innovation processes, capable of integrating free generation of ideas with evaluation, implementation and dissemination of innovation.

Free interaction has a crucial role in the establishment of a creative culture, essential for innovation, while innovation processes are crucial to allow ideas to become viable projects, so that the resource-owners could take the investment decision.

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WENOVATE & PARTNERS NEWS

One of the most read articles at Você RH is from one of our own

An article about knowledge management from André Saito, one of the partners of Allagi Open Innovation Services, published at the website of Você RH in 24/02/2012, is one of the magazine’s most read according to their own website (http://revistavocerh.abril.com.br/).
If you haven’t read it yet, If you haven’t read it yet.

 

First National Seminar of Incentives to Innovation

Sao Paulo hosted the 1st National Seminar of Incentives to Innovation, Research and Development, held on July 18th. “Public Mechanisms for Innovation Funding" was one of the topics discussed.
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Wenovate participates at the Amcham Committee for Innovation

Collaboration in the definition of challenges as the first step to open innovation was one of the themes presented during the Innovation Committee of Amcham, held in Sao Paulo, in July.
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Sustainable Growth supported by innovationnNetworks was a topic at Smart Sustainable Cities ITU

On July 30th, Sao Paulo received the ITU Workshop on Smart Sustainable Cities in Latin America. The panel “Sustainable growth supported by innovation networks” was one of the highlights.
More

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