How Air Products and Chemicals "Identifies and Accelerates"

Article excerpt

Air Products and Chemicals, Inc., the world's only combined gases and chemicals company, operates in over 30 countries, serving customers in the technology, energy, healthcare, and industrial markets. More than half of the company's $8.2 billion 2005 sales came from outside the United States, and external technology has long been of great importance to us.

Prior to 1995, external technology partnering was conducted by each business area and the supporting R&D group--without any coordination of efforts between business areas and R&D groups. Indeed, it was a "silo" mentality, with no coordination of work processes or central repository of best practices and the resulting contracts. In 1995, Corporate Technology Partnerships was formed to centralize our external technology efforts and to develop and implement best practices across the company; this was the beginning of our "open innovation" effort.

Open innovation is a technology management practice in which external resources are used to supplement a company's internal R&D and commercialization effort. The output of the innovation, when not aligned with the company's strategy or businesses, is used to license out or to spinoff ventures. The practice is the subject of Henry Chesbrough's 2003 book, Open Innovation (1).

Why is there a trend toward an open innovation model? There are many driving forces, of which some of the more notable are:

* Increased pressure for faster, improved and lower-cost R&D.

* Realization that no company has more than 1 percent of global R&D capacity (2).

* Reduced inflow of scientific talent to the United States (3).

* The rest of the world has surpassed the U.S. in science education as evidenced by annual doctorate degrees granted (3).

A recent article from Booz Allen Hamilton recognized open innovation as one of the three pillars of innovation and coined it, "Don't Do It All Yourself" (4).

In this paper, we describe some key elements of the Air Products process for open innovation, "Identify and Accelerate." Specifically, we shall review the process of identifying corporate technical needs and the role of external partnering to accelerate the innovation process. The external partnering strategies reviewed are: global R&D insourcing, Internet-based providers, partnering with the government, and licensing-in. We are also active with university R&D alliances and minority equity investments with start-ups, but these practices have been well covered by previous articles and are excluded from the scope of this article.

Needs Identification

It is imperative to quantify the top needs/problems in order to focus the open innovation efforts. We have initiated a process corporate-wide to quantify and prioritize the top technical needs:

* Solicit top needs from business, marketing and technology organizations using a common problem/needs format.

* Rank-order needs that make the first cut by a specific set of criteria based on financials, risks, strategy alignment, etc.

* Senior business and technology management review and approve top needs.

Top needs are then used to broaden exposure of the needs internally and to focus the identification of external resources to meet those needs.

Technology needs are also posted on our internal corporate web site. A new system, called Needs Tracker, has been introduced as a means of identifying and logging emerging internal needs. This tool is available to all employees to identify and "post" their technical needs. Employees can also propose solutions to the posted needs. Figure 1 is a screen shot from this new IT tool.

[FIGURE 1 OMITTED]

Partnering Strategies

Partnering is the cornerstone of open innovation. Although partnering also includes alliances with internal groups globally, the main focus here is on external groups. …