First Guest Posting – FIAT

It’s a great pleasure to welcome the first guest contribution to the OpenInnovation.net teaching section. It is by Alberto DiMinin, Assistant Professor in Management at the University of Pisa (Scuola Superiore Sant’Anna). It is based on an article on FIAT which he published in the California Management Review together with Federico Frattini and Andrea Piccaluga. It focuses in particular on the value of open innovation during an economic downturn – here is what Alberto has to say about it:

In the current economic downturn, one critical question to answer for innovative companies is how to maintain their technological capabilities and new product development projects in a context of continuously shrinking R&D budgets. As noted by Henry Chesbrough in a recent paper published on Harvard Business Review, Open Innovation can be very useful to this aim. In particular, what can be especially useful are Outbound Open Innovation processes, whereby a firm places some of its innovation assets or projects outside its own walls by, e.g., out-licensing or spinning out technologies that would not be internally developed for lack of resources. Outbound Open Innovation allows your company to save time and resources that would be invested in developing these technologies, generate additional cash flows that could be re-invested in internal, more strategic projects and, perhaps most importantly, create an extensive network of relationships and strategic partnerships which are an important asset when markets recover.

The FIAT case study provides a detailed account of how the Italian car maker applied Outbound Open Innovation to safely navigate a dramatic crisis of the European auto market in the early 90s and prevent some long-term, strategic innovation projects from being withdrawn due to the cut of the firm’s unavoidable rationalization plans and cut of R&D budgets. The case study focuses in particular on the strategic and organizational change envisioned and implemented in CRF – Centro Ricerche FIAT (in Italian, Fiat Research Center) by Gian Carlo Michellone, which was CEO of CRF since 1989 to 2004. The two pillars of the new strategic approach devised by Mr. Michellone were: (1) CRF would open up to external partners and clients in order to better exploit its technologies and obtain significant financing from external resources; (2) CRF would establish an extensive network of relationships with leading firms, Universities and research centers with the aim to streamline its participation to EU or government-funded research projects and to enter into a network of inter-organizational relationships. This represented a radical departure from the traditional, “Closed Innovation” model CRF had implemented since its foundation in 1976. Open Innovation scholars know very well that managing this kind of transition is very challenging and requires winning strong cultural barriers. The case study provides a detailed description of the actions which Mr. Michellone undertook to overcome these barriers and brings the reader behind the scene of Open Innovation.

These actions introduced profound changes to CRF organizational structures, criteria applied in the training, selection and evaluation of researchers and engineers, approaches for performance measurement and management, tools used to plan and select innovation projects as well as to interact with external organizations. The case study is exemplary of how one can bolster such deep changes in an organization DNA for innovation by only acting contemporarily on all the facets of a firm’s organization and management systems. The leadership and personal commitment of the top management, in the case study Mr. Michellone, appears as a further critical ingredient for a successful transformation toward (Outbound) Open Innovation.

The case study is useful because it helps the reader understand how Open Innovation can help companies navigate through economic downturns without losing control of their technological competencies and stopping promising, although long-term and risky, innovation projects. As we all know, this appears to be a critical challenge for most innovative enterprises today, given the current generalized economic and financial crisis. Secondly, the narrative will stimulate discussion regarding what it takes to organize Open Innovation activities and, most importantly, bridge the cultural and routine gap which separate Closed and Open Innovation models. As we all know, this is still an open debate of particular interest for both Open Innovation scholars and practitioners.

References

Di Minin, A., Frattini, F., & Piccaluga, A. 2010. Fiat: Open innovation in a downturn (1993-2003). California Management Review, 52(3): 132-159.