Helping SMEs adopt open innovation

SMU Office of Research & Tech Transfer – Small and medium enterprises (SMEs), as defined by the Organisation for Economic Co-operation and Development (OECD), are “non-subsidiary, independent firms which employ fewer than a given number of employees”, usually between 200 to 250.

Enterprises that hire between 10 and 49 employees are considered small if revenues do not exceed 10 million euros (approximately US$11.5 million or S$16 million). It is therefore not surprising that the average SME lacks the necessary resources to create product and business process innovations.

For Singapore Management University (SMU) Associate Professor of Operations Management Pascale Crama, it serves as the inspiration of her research project titled “Open Innovation Systems for SMEs in Singapore”. This project is funded by the Academic Research Fund (AcRF) Tier 2 grant from the Ministry of Education (MOE).

Coined by Henry Chesbrough of UC Berkeley, open innovation brings external parties and their solutions into an organisation. But “the cost of searching, selecting and implementing novel technologies remains high for SMEs due to their tight resource constraints”, writes Professor Crama.

For her research, Professor Crama seeks to “identify, develop and test interventions which influence SMEs to increase the adoption and the performance of open innovation from research laboratories in Singapore”.

The research consists of two phases. Phase 1 analyses 2008 to 2017 licensing data from A*ccelerate, the commercialisation arm of the Agency for Science, Technology and Research (A*STAR), a Singapore government-funded research institute. The goal is to identify mechanisms through which SMEs have been able to overcome the lack of resources and successfully commercialise inventions.

Phase 2 is about developing interventions, such as training programs, that will increase the licensing of external solutions. SMEs will be taught how to create an open innovation culture and framework, which Professor Crama hopes will lead to an increased propensity to license technology from Institutes of Higher Learning (IHLs).

While the adoption of technology is key to innovation within organisations, Professor Crama points out a more fundamental issue that must be addressed before any licensing or open innovation can be done: adopting the right mindset.

“When SMEs are family-run, they change when the family generation changes,” she points out. “When the new generation comes in, they want to make their mark and they look around for some improvements that they can create.

“When companies have had the same leadership for 10, 15, 20 years, they’re doing okay but at the same time they may not be doing well, and may be frantically pedalling under the water like a swan [to keep up].

“Innovation is just one more thing that you’re asking them to pursue, and open innovation means they have to engage with people outside of their organisation. They go, ‘We don’t have the time and resources for this.'”

While licensing of technology is a big part of open innovation, Professor Crama explains it is more than that.

“Open innovation encompasses licensing of existing intellectual property (IP), but it can also encompass joint researching for solutions with external partners that creates new IP,” she tells the Office of Research and Tech Transfer.

“It could also be the secondment of a researcher. So, a researcher from A*STAR [could work at] that company on a project for a period of time. These are some different ways that open innovation happens.”

The design of the study is still to be finalised, but Professor Crama has made some interesting observations in the first 16 companies that have been identified as successful adopters of open innovation.

“The projects that are most likely to create value are, not surprisingly, projects that have a clear client and in many cases, the client could be internal,” she notes. “So, it’s when you’re looking at your own processes and you ask, ‘How do I reduce costs in my own process?’ Or you can follow lead user innovation because that also gives you a clear client.”

So how can the result of the research project be used once it is completed?

“[The point is to] take this openness that is practiced with IHLs and apply it to supply chain partners, whether upstream or downstream because you then have more aligned incentives, more aligned expectations and you create additional commercial value,” she offers.

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