The Open Innovation Leverage in the GCC
Noora Mukhtar, Research Specialist, GPCA
The Open Innovation (OI) term was first coined in the current century by Henry Chesbrough from University of California Berkeley, USA, in 2003 in his seminal book titled, “Open Innovation: The New Imperative for Creating and Profiting from Technology”. However, the origins of OI can be traced back over decades ago.
The chemical industry has always collaborated with external bodies, whether they be competitors, customers, consultants, contractors, or academia, and will continue to do so. For example, Standard Oil of New Jersey (Esso), now Exxon, cooperated with I.G. Farben between the two World Wars in the development of technologies for heavy oil. In the 1920s, the French inventor, Eugene Houdry – based on a catalytic procedure used by the pharmacist E. A. Prudhomme – was able to develop a catalytic process to produce butadiene from butane gas derived from crude oil production, which was later commercialized by the American firm, Vacuum Oil Company.
OI is about establishing strategies and investing in infrastructures to maximize access and use of external ideas, technologies, processes, and skills to find solutions for customers and end-users, whether through joint development, sponsored research agreements, use of innovation portals, crowdsourcing solutions, or joining consortia, and more.
Figure 1: The Open Innovation model
Source: Chesbrough scheme of Open Innovation, 2003
Today, OI is growing in importance for the business strategies of GPCA member companies, as chemical and petrochemical players in the region are required to grow their competitiveness and innovate new solutions to society’s challenges. It also benefits organizations’ financial performance and resilience through higher quality of innovations from multi-disciplinary approaches, increased learning capacity and access to an advanced knowledge base, speed of innovation and market introduction, returns to investments, acceptance of innovations and integration of users and suppliers, as well as risk reduction.
What is the status of OI adoption in GPCA member companies?
GPCA has commissioned a survey in June 2022 to gain insight into the OI landscape growth in the regional industry, compared to the survey results conducted back in 2016, and in the aftermath of the COVID-19 pandemic.
There is a notable rise in leveraging OI among GPCA member companies and integrating it as part of their growth strategies, with 92% of respondents currently supporting and practicing OI activities. Customers, academia and research institutes remain the key OI partners for the GCC industry.
The majority of GPCA members are currently in the validation stage of the OI process rather than in the identification of a new business opportunity as in six years ago, showcasing an evolving level of maturity. Also, it is found that through the implementation of OI projects (new product development, process improvement, etc.), 80% of GPCA member companies are trying to resolve environmental and sustainability concerns.
The level of maturity of GCC producers has increased in terms of the number of years in practicing OI activities and has started to move away from conventional innovation practices. There is a 21% increase in the level of satisfaction with OI where practicing OI activities has been very impactful for their company’s performance between 2016 and 2022.
Venture capital funded start-ups are a new emerging pursuit in the short- to long-term plans in the GCC, unlocking new opportunities for the industry. There is a belief that this will take on a larger share over the next decade and beyond.
The main hurdle in OI adoption in the GCC region is concerns over managing IP due to the complex infrastructure and web of IP rights. Whereas globally, increased time and managerial costs are the main obstacle as deduced from a survey conducted by Economist Impact.
Figure 2: OI landscape overview between 2016 and 2022
Source: GPCA Open Innovation survey, 2016 & 2022
What is the way forward?
There is stronger support from management for boosting OI dynamics within the GCC petrochemical producing organisations, through placing strategies to cultivate a sustainable culture where collaboration, knowledge sharing, and co-development are highly valued. There is no doubt that the role of culture and attaining valuable behavioral competencies such as initiative taking, attitude and motivation play a critical role in successfully enabling OI activities.
Improving in-house capabilities, hiring the right professionals, and better integrating OI with internal processes and systems are some other key factors to extract the best value out of OI adoption. In addition, stakeholders’ engagement in planning and removing any challenges faced during the OI process with effective communication; choosing the right external partner(s) to collaborate with; and establishing a methodology, setting the basis for collaboration early in the discussion – which mutually understands and respects IP terms for all parties are all fundamental pillars for having a rewarding OI journey.
When dealing with OI projects, there is a need to have some appetite for risk and develop a comfortable and accepting environment to work with a certain degree of ambiguity and knowing when to continue, close or archive an innovation project. The journey may not always lead to the intended conclusion, but it will always offer valuable knowledge.
The new GPCA report entitled, “The Evolution of Open Innovation in the GCC Chemical Industry”, will showcase the full results of the survey analysis and compare it with the results obtained in 2016 in terms of OI activities practiced, level of maturity, key drivers, benefits, key barriers and future plans for the implementation of OI in the GCC.
The report will also narrate some of the regional industry players’ successful collaboration stories and case studies with external partners such as SABIC’s collaboration with the University of Bradford, OQ’s collaboration with Sultan Qaboos University, QAFCO’s collaboration with Hamad Bin Khalifa University. It will also provide learnings from some of the global chemical companies, such as Evonik Industries, Reliance Industries and Dow Chemicals.