How to Create a Successful Open Innovation Strategy – A Client’s Journey

“Promotion of Open Innovation is not a choice between top-down or bottom-up approach –consistency and connection between the employees and the management is the key to success!”

In this case study we would like to share the story of our client in Japan, the Idemitsu Kosan Company, Ltd. Idemitsu is a Japanese petroleum company and the second largest petroleum refiner in Japan. After a few separate open innovation pilot projects, they have decided to take a more strategic and consistent approach to open innovation. We believe their experience and learnings can be helpful to many global corporations which are currently setting-up or reviewing their innovation strategy, having internal discussions on what role open innovation should play in R&D, whether it should be promoted top-down or bottom-up, what pilot projects to choose and what is the long-term outlook for open innovation initiatives. We have asked Idemitsu these questions and welcome you to download their full interview below.

Why this challenge?

With 80% of revenue depending on petroleum sales, Idemitsu saw the risks of decreasing domestic demand for petroleum due to the spread of EVs and decline in the population in Japan. Environmental issues were an ever-growing concern since the time of the Paris Agreement. Idemitsu sensed the urgent need to promote portfolio transformation and have invested in new businesses, such as highly functional materials and renewable energy. They have built a strong in-house R&D capability with multiple labs and researchers working on corporate and business segment levels. However, developing new technologies on their own, such as OLED or all-solid-state batteries took decades. Another challenge was that being in the materials business, it was difficult to connect with end users, and future considerations were often based on limited connections and customer feedback. So “to accelerate innovation Idemitsu needed to make more use of outside parties and external resources”.

Journey

In 2019, to support the connection with outside innovators Idemitsu decided to invest in venture capital. As a result, they have received information on startups, but it also became clear that “nothing, in particular, would happen if Idemitsu does not target changes within the company”. The key issue to address internally was a very strong vertically divided culture. A corporate structure, Open Innovation (OI) Promotion Group was set up for this task, aiming to accelerate R&D. It took some time, many workshops, and series of iterations to find the right format to overcome the skeptical attitude (see full interview for more details).

The aims of the initial phase were to (1) “make researchers to really understand and feel that open innovation can be used in their work” and (2) find actual projects. In the first year the corporate level has promised to carry all the cost of open innovation projects, “respond to all projects, no matter who or what they are”, and handle anything regarding implementation.

As the result, open innovation started to gradually spread within the company. Today each department incorporated open innovation tools into their work and some early adopters who realized the usefulness of the tools are emerging. As word of mouth spread, people began to understand that “using open innovation tools can do things like this”. Currently Open Innovation Promotion Group at Idemitsu receives more internal requests for open innovation projects that they can support. That is why they are working on creating a selection process, where the priority will be given to the projects that are linked to actions and represent new ways of using and applying open innovation.

Learnings

“Promotion of open innovation cannot be done top-down or bottom-up – it must be done from both sides. If it is top-down, the feeling of being forced to do something remains, and it is hard to ask people to engage in activities to create new businesses from the bottom up when there is nothing to do.”

To promote open innovation, it is very important to have a consistent connection between the workplace and management. If there is a corporate level structure for open innovation, it should find the fine line between supporting actual projects and being involved or supervising too much, as this can undermine local initiatives.

Having a partner with Open Innovation experience and actual tools is also critical to success. In this journey NineSigma and Idemitsu have been working in a partnership model, where Idemitsu especially valued NineSigma’s very accurate advice on the use open innovation tools, accommodating an understanding their intentions, suggesting sometimes a different way of approaching the challenges, as well as being keen to share open innovation know-how, accumulated in over 20 years of practical work.

Future Outlook

In the future Idemitsu would like to keep on using open innovation for “accelerating the growth of existing business,” which has been the focus so far. They expect the importance of ideation to increase in terms of “how to discover new business ideas” and “how to create seeds of ideas”. To reflect this the Open Innovation Promotion Group name will be changed to the “New Business Promotion Group”.

Ideally, Idemitsu “would like to see open innovation tools in the minds of each researcher to the point where it is commonplace for them to utilize them on their own”. In this area, the use of NineSigma’s OI Council was significant, as a very easy-to-understand tool to gathers ideas and knowledge from global experts in a short time. Idemitsu researchers have often used it to explore applications for existing technologies and had the opportunity to experience the usefulness of the tool for themselves and how they can use it in the future.

Among practical actions to spread open innovation even more it is planned to (1) repeat steady activities and spread by word of mouth as before, (2) incorporate it into new employee training and (3) have job rotation in open innovation promotion structure.

Download full interview with Idemitsu to learn more.