There are a number of highly innovative US companies, many of them in the information technology (IT), electronics, and software
industries. What is interesting is that these companies were at one time fully-integrated entities—companies that made mainframe
computers, wrote the software, and sold you the paper on which to print. Essentially, they did everything from soup to nuts.
That model in the IT and electronics area has changed dramatically over the last 30 years. Many of the biggest names in those
fields claim that their adoption of an open innovation model led to this result and saved their businesses. So, what is open
Open innovation can be categorized three ways:
Type I is pure outsourcing, often touted as open innovation, or R&D activity pursued by external entities, such as contract research
organizations (CROs) and universities. Type II consists of licensing and its variations—collaborations, joint ventures, even in some cases technology transfer, and perhaps
what is called "crowd sourcing;" where a number of innovators come together to address a problem and solve it. Type III is R&D in the space beyond IP—an interesting concept, but which doesn't really help us much with what this means as applied
to pharmaceutical innovation.
Rather than digging further into the jargon, we need to ask what caused certain companies to adopt what is called an open
innovation model. Did it just dawn on those companies to decide "Oh, we need to create common platforms and technologies to
arrive at new products, and thus must collaborate with others?" Or did companies deliberately embrace it as a behavior they
should adopt, a culture they should push forward? Or was it vice versa—did the external environment intervene to force their
hand? The answer appears to be that because the high tech environment changed over the past 30 years, companies had no choice
but to adapt.
What happened in the electronics industry is instructive. By the early 1990s, IBM was on the verge of bankruptcy. The Taiwanese
and the Japanese manufacturers in the 1970s and 1980s began making chips that were competing with IBM's products. IBM had
to do something with the last few million dollars in its bank account to bring the company back to viability. Its solution
was to open up its patent portfolio to outsiders in a systematic way, as a means of generating income.
Today we are enjoying the fruits of a dizzying number of collaborative endeavors started decades ago that have resulted in
the launch of many new products in the last few years. The products combine the strengths of a number of different independent
companies coming together to create an innovative array of handsets, tablets, GPS devices, and computing devices. A fact worth
noting is that the intellectual property environment for these business sectors remains very vibrant. Successful open collaborative
frameworks were not the death of IP. Patents were and continue to be actively sought, licensed, sold, and litigated by these
industries—probably more so than ever.
Are there similar dynamics at play in the pharmaceutical sector that will push our industry toward an open innovation framework?
If so, what can we expect these frameworks to look like?
A key influencing issue is the volume of R&D assets that are not being pursued simply because of the enormous risks and costs
of developing new drugs. Are too many companies all chasing the same target drugs or the same cures? Should the industry collaborate
more to get to a more efficient outcome? Would this be considered a cultural change? Or is it a question of at what point
does the competitive balance lower the cost for new entrants and we are forced to collaborate? It is worth noting that the
pharmaceutical sector remains more fully integrated than many of the other industry sectors.