Open Innovation

R&D has evolved from a private company effort to a collaboration between private, public and academic partners.
December 2004
William Fulton
By William Fulton  |  Columnist
Director of the Kinder Institute for Urban Research at Rice University and former mayor of Ventura, Calif.

Seventy-five years ago, at the dawn of the Great Depression, the owners of the Columbian Rope Co. made a daring move. While other manufacturing companies were cutting back, Columbian pressed forward with plans to create a "New Products Research Laboratory" adjacent to the rope company's large factory in upstate New York.

The young scientist Columbian selected to run the lab was my grandfather, Edgar Johnson, then a chemistry professor at Cornell University. It was a classic example of private industry luring a significant talent out of academia. In 1930, Johnson left the cozy intellectual sophistication of Ithaca and moved his family--including my concert-pianist grandmother--forty miles north to the factory town of Auburn.

The gamble paid off. By the late 1930s, Columbian was producing innovative breakthroughs in rope strength that helped the company dominate the field. During World War II, the research lab tackled "rope rot," experimenting with the first chemical treatments designed to slow down the decay caused by fungi, mold and other organisms. Over the course of three decades, my grandfather's R&D operation helped make Columbian the second-largest rope company in the world, secured Auburn's reputation as "the cordage city" and helped provide the community with good factory jobs--even for people I went to high school with many years later. It was, in other words, one of Auburn's most effective economic development tools.

Columbian's research lab was, of course, a classic corporate R&D operation--a proprietary lab operating in secret, located across the street from the factory and far away from the academic world of chemistry. Today the story would be different. Edgar Johnson might be lured away from teaching, but he would probably not be lured far from the Cornell campus--perhaps to a research lab set up by Cornell and funded partly by Columbian. His discoveries would not be proprietary. They would probably be at least partly in the public domain and applied to specific products by a combination of academics, researchers and corporations. The discoveries would be brought to market through joint ventures, partnerships, licensing agreements and similar techniques.

This is the difference between the closed approach to research that was the norm in my grandfather's day and the so-called "open innovation" approach. As outlined in a book by the same name by Harvard professor Henry William Chesbrough, the "open innovation" idea calls for a more public and collaborative approach as a way of developing new products, especially in the technology sector. By placing research labs close to college campuses and sharing knowledge more openly, the idea goes, we are more likely to see successful spinoff companies, and the flow of profitable new products will accelerate.

In addition to turning the traditional corporate research model on its head, the open innovation approach suggests a much greater emphasis on public policy as well. Open innovation must be undertaken by an entire community--not by an individual company. And that means investments and commitment by the public and nonprofit sectors as well as private companies. San Diego became a leader in biotechnology because of a series of public investments in land and other startup efforts for a series of institutions: UC San Diego, Scripps Research Institute, the Salk Institute, which are located in close proximity to one another. More recently, Arizona's leaders have kicked in $90 million to start the Translational Genomics Research Institute (TGEN) and are now creating a medical school in Phoenix with a translational genomics emphasis. Another striking example is California's Proposition 71, which makes a $6 billion state commitment to stem-cell research, largely to reestablish the state's lead in biotechnology.

Decades ago, Auburn's industrial leaders set the table for economic growth in many ways. There were the rail connections, the power lines and many other pieces of underlying infrastructure that any manufacturing company required. Then there were the early versions of the Richard Florida "creative class" theory. Not the least of Auburn's economic development efforts, I'm sure, was providing opportunities for my grandmother to perform with symphony orchestras, which in turn made life in Auburn more attractive for my grandfather.

But Auburn working together with ivory-tower Ithaca to create research labs that connected academia to the world of manufacturing? Fostering networks among researchers whose employers were in competition for new products and market share? Using "open innovation" to create synergies between people who don't talk to each other? That was ahead of Edgar Johnson's time. It's interesting to wonder how much stronger rope would be today if open innovation had been in vogue decades ago.