Open Innovation, Blue Ocean and IPR

"Understanding the concepts of innovation in the realm of COVID-19"

Nothing has been louder than the voice of the novel corona virus and the unanticipated pace at which companies, laboratories, institutes and governments are searching for a vaccine or a treatment. Working from home and self isolating like two thirds of the planet's population it seems a good idea to explain some innovational concepts through reflecting them on a topic that has taken the headlines in our daily news for the past couple of months.

1) What is innovation? (Radical VS Incremental)

As per the government of New Zealand "Innovation is the creation, development and implementation of a new product, process or service, with the aim of improving efficiency, effectiveness or competitive advantage.”  In the science of management, innovation is either radical or incremental innovation. By definition, incremental innovations are small improvements on existing products or offerings to help create value and tap markets. On the other hand, radical innovation is the introduction of a revolutionary new technology that disrupts the existing markets and make the existing products out of competition. In reflection to COVID, I would consider the repurposing of an older drug to symptoms of COVID as an incremental innovation while the effort to produce a vaccine that prevents the virus would be a radical innovation.

2)Blue Ocean VS Red Ocean strategy

In innovation, company offerings are often attributed to either a blue ocean strategy or a red ocean strategy. The difference between the two strategies may be spotted in the opposite figure obtained from www.lloydmelnick.com

Companies that adopt a blue ocean strategies are those companies who look beyond competition and existing products. A company that adopts a blue ocean strategy creates its own uncontested market space rather than competing in the existing market. These companies do not look at price competition as they make competition irrelevant. Consider a medical company is deciding on its activities during the current pandemic, a red ocean strategy would be to produce products in demand now such as face masks, testing kits or sanitizers. From this stance, price would be a determinant to compete with the vast number of competitors in the market. On the other hand, a company going for a blue ocean strategy would allocate resources to work on a vaccine for the disease. Working on producing such product would make competition irrelevant and would break the value-cost trade off, as demand would be inelastic to the price in the absence of substitutes or competitors.

3) Open Innovation VS Closed Innovation

If you have skimmed through the different concepts of innovation you might have came through any of the terms "closed innovation" or "open innovation". The above figure is the simplest explanation of both concepts. In closed innovation companies rely only on their internal capabilities and ideas to come up with innovative offerings, while in open innovation companies blend into their external eco system and make use of external collaborations or knowledge already existing in the market. In terms cost, internal innovation would usually be costly due to the need of hefty investments in R&D, while the cost of open innovation would usually be related in intellectual property rights and the cost of using science or knowledge previously developed by other entities or individuals. For example, some companies, in times like these, will rely on their internal capabilities and spend billion on R&D so they would arrive at offerings that would tap the demands in the current markets. Other companies, relying on open innovation would collaborate with external parties to use technologies already developed to help them make their offerings ready. The cost of such collaborations would be the cost to use such knowledge or technology, since they are not for free. In practice, companies that have developed unique and useful knowledge would protect it with intellectual property rights "IPR".

4) Intellectual Property Rights

Their are 5 main types of IPR that in the figure to the left, of which patents are the most relevant to this aeticle. A patent is a right granted to an inventor by the federal government that permits the inventor to exclude others from making, selling or using the invention for a period of time. For example, a company that has invented a unique way to quickly and effectively isolate antibodies that fight the virus may patent its method, and another company would have to pay in order to use this method in a process to producing a treatment or a vaccine.

It is worth noting that the primary intention of this article is not a scientific one, in relation to health and the pandemic, but rather a quick run in the science of innovation in an effort to simplify some of the terms that determine how innovation is managed and how it is looked upon from a theoretical point of view.