Open Innovation at Hydro-Québec

Conférence Forum Innovation Aérospatial5-6- décembre 2011Palais des Congrès, Montréal

Charles Gagnon, ing.Directeur Valorisation de la technologie

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2 Hydro-Québec

Innovation Management Context at HQ

2001: Implemented the industry’s best practices in innovation management

From more than 600 on-going innovation projects reduced to 65 innovation projects (focus on value creation) in 2001

Stage-Gate® project management process

Portfolio management process

2004: New policy approved at HQ for innovation management (dir-20)

2008: Intensification of open innovation

No established "cookbook" or best practices

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Definition of Open Innovation for Hydro-Québec

The strategy and process whereby the research institute identifies and capitalizes on technologies, innovations and ideas, originating both internally and externally, to serve the company’s interests.

Note: Open innovation operates in both directions

(inside-out or outbound innovation and outside-in or inbound innovation).

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Benefits for Hydro-Québec

1.1. Strong leveraging powerStrong leveraging power (external contributions by partners, complementary expertise, potentially shorter lead times and reduced risk)

2.2. New achievementsNew achievements for Hydro-Québec, impossible by working within the closed innovation paradigm

3.3. Optimal solutionsOptimal solutions for Hydro-Québec

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2008 Diagnostic of Open Innovation at HQ

N.B.: Data on innovation projects as of June 19, 2008

0%

10%

20%

30%

40%

50%

60%

70%

Étapes 1-2 Étape 3 Étape 4 Étape 5

N = 13/57

N = 19/44

N = 10/18

N = 8/13

% o

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en

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N = Total projects involving partnerships / Total projects at each stage as of June 19, 2008

Few projects (≈ 20%) at stages 1 or 2 were conducted with partners or external collaborators.

Total of 50 partnerships

for 132 innovation projects

(only 38%)

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Findings:

Few external ideasexternal ideas are found in the Hydro-Québec innovation process.

Little collaborative researchcollaborative research is conducted with external parties during stages 1 and 2 of innovation projects.

External partnersExternal partners are generally identified when stage 4 starts, typically 3 years after the innovation project has started, in order to ensure industrial production, support and possibly commercialization of the technology.

Intellectual propertyIntellectual property is often protected by Hydro-Québec before teaming up with an external partner.

Innovation projects are considered to have lengthy cycles.

Implementing innovations in the business divisions is always a challenge.

2008 Diagnostic of Open Innovation at HQ

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Main Challenges

1.1. Tool availability and processes establishmentTool availability and processes establishment

2.2. Internal information sharing Internal information sharing (technology watch, network of (technology watch, network of contacts, external benchmarking, market intelligence, travel and contacts, external benchmarking, market intelligence, travel and conference reports, etc.)conference reports, etc.)

3.3. Intellectual property protection: Intellectual property protection: fear by researchers that external fear by researchers that external partners might "steal" their ideaspartners might "steal" their ideas

4.4. Partnering vs Outsourcing : Partnering vs Outsourcing : fear by research managers and fear by research managers and researchers that R&D be outsourced (instead, external expertise researchers that R&D be outsourced (instead, external expertise sought to complement internal expertise)sought to complement internal expertise)

5.5. Length of negotiation: Length of negotiation: Too much time spent and too many parties Too much time spent and too many parties involved in negotiating and finalizing partnership agreementsinvolved in negotiating and finalizing partnership agreements

6.6. First and foremost, open innovation involves a First and foremost, open innovation involves a change in corporate culture !change in corporate culture !

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Orientations and Strategies: Open Innovation (Nov. 4, 2008)

Orientation 1

Ensure an open innovation system within Hydro-Québec

Orientation 2 Strengthen connections with

the outside world

Orientation 3 Plan and implement

collaborative research

Orientation 4 Adjust the innovation process and manage change

14 main operational strategies

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Main Adjustments to the Hydro-Québec Innovation Process

1. Better focus on state of the art at stage 1 (existing technologies and intellectual property (IP), leading players and strategic analysis).

2. Development of partnering strategies and IP strategies at stages 1 and 2 of innovation projects.

3. More frequent external calls for expressions of interest as of stage 2 for partners and collaborators selection.

4. Consideration of expectations and requirements across all markets (inside and outside Hydro-Québec).

5. Operational project management tools that include external players in internal innovation processes. External partners can be invited to gate meetings throughout the Stage-Gate process.

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Stage-Gate® Process Flowchart at HQ

1. Look at options and state of the art

1. Look at options and state of the art

2. Prove concept and make preliminary design of prototype

2. Prove concept and make preliminary design of prototype

1.

Options identified

2.

Concept proven and preliminary design of

proto-

type

3. Design and develop a prototype and perform demonstra-tion tests

3. Design and develop a prototype and perform demonstra-tion tests

3.

Prototype demonstrated

4. Design, develop and test the industrial product

4. Design, develop and test the industrial product

4.

Industrial product

5. Perform final testing and certification

5. Perform final testing and certification 5.

Certified Industrial product

6. In-house deployment

and implementation

7. Market to outside world

GATE FOLLOW-UP

Value of project Business division needs, operating

constraints and/or opportunities External market needs and

constraints, and commercialization Science and technology Considerations related to

manufacturing the final product Partnership Intellectual property and

confidentiality

Seven factors covered concurrently at each stage/gate

Project portfolio construction and refinement

Process input gate

0

STAGE

OPEN INNOVATION

1. Focus on state of art at stage 1, updated at each gate (existing technologies and intellectual property, key players, etc.)

2. Partnership and collaboration strategies

3. External calls for expressions of interest

4. Consider both internal and external needs for different markets

5. External partners participate as needed at gate meetings throughout the Stage-Gate process.

Project review 12 to 24 months after going through gate 5

Project review 12 to 24 months after going through gate 5

© Copyright Hydro-Québec

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Main Adjustments to the Portfolio Management Process due to Open Innovation

1. Introduced organized technology scouting activities

2. Mapping of pertinent local and global expertise and identification of missing internal capabilities

3. Strengthening of external financial levers

4. More frequent external benchmarking (roadmaps and innovation strategies)

5. Promotion of value-added research consortia

6. Promotion of out-of-house ideas and solutions

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Portfolio Management Process at HQ

1. Look at options1. Look at options

2. Prove concept and make preliminary design of prototype

2. Prove concept and make preliminary design of prototype

1.Options

identified

2.Concept

proven and preliminary design of prototype

3. Design, develop a prototype and perform demons-tration tests

3. Design, develop a prototype and perform demons-tration tests

3.Prototype demonstra

ted

4. Design, develop and test the industrial product

4. Design, develop and test the industrial product

4.Industrial product

5. Perform final testing and certifica-tion

5. Perform final testing and certifica-tion

5.Certified industrial product

6. In-house deployment

and implementa-

tion

7. Market to outside world

0. Process input gate

Project review 12 to 24

months after going through

gate 5: Implementation

andCommerciali-

zation

Project review 12 to 24

months after going through

gate 5: Implementation

andCommerciali-

zation

External ideas/opportunities/solutions

Internal ideas – Collaboration between business units and IREQ

Collaborative research and partnerships

Strategic innovation portfolio

Technical watch and trend tracking

Organized technology scouting activities

Open innovation

Strengthening of external financial levers

Portfolio ManagementPortfolio Management Innovation strategy, innovation themes

and promising pathways Technological development plans for

the Hydro-Québec power system Roadmaps and external benchmarking Identification of world leaders and

consortia Mapping of pertinent local and global

expertise Prioritization of innovation projects Allocation of resources Portfolio balancing Financial spinoffs and economic

evaluation Monitoring of management indicators

for all projects and for open innovation

© Copyright Hydro-Québec

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Management of IP with Open Innovation

Most frequent approach is co-ownership of IP.

Commercial benefits are then shared based on negotiated agreements, generally reflecting the contribution of each partner.

Open innovation requires a deeper knowledge of the external competitive environment in terms of IP held by dominant players in a given field. New software tools are appearing on the market to help track rapidly such knowledge.

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Collaborations and partnerships: More than doubled in 2 years

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Open Innovation at HQ: 2010 Results

136 partnerships for 139 internal projects

Sept. 2008

50 active partners

136 active partners

Sept. 2009

82 active partners

Sept. 2010

+ 172% since 2008

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Conclusion

Companies like Hydro-Québec may have much to gain from open innovation:

Reduction in innovation project costs

Reduction in project duration

New ideas as input to the innovation project pipeline

Significant value created by external partnerships and collaborative efforts: increased leverage impact

Products better suited to meet all market needs and thus having greater commercial impact

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Questions?