How to overcome the fear of looking foolish (FOLF)

Hi, everyone, I'm Sea Matilda Bez, associate professor at the University of Montpellier, and one former post-doc of Henry Chesbrough, also known as 'the father of open innovation'. I'm super happy to participate in this Henry Stewart talk dedicated to open innovation. Today I will present, for the first time, a phenomenon that Henry and I discovered, and which explains the lack of results of some open innovation initiatives. We call it 'the fear of looking foolish'. During this video, we will discuss how it manifests and how to manage it.

Let's begin this presentation with a figure. Eighty per cent of large firms surveyed in Europe and North America practice at least some aspects of open innovation, such as outside-in practices. If you want to do a little experiment, go onto the websites of these large companies, and most of the time they have a page dedicated to open innovation. When you look more deeply into these web pages, you will notice that they mainly (or even only) refer to outside-in open innovation. I am not your first Henry Stewart video on open innovation, so I'm sure you already know what outside-in practices are, but just in case, let me remind you. Outside-in open innovation is what made the first book on open innovation, written in 2003 by Henry Chesbrough, famous. We loved the concept of outside-in, because it challenged the idea that innovation necessarily comes from inside the four walls of your company. Instead, it argued that company should use smart ideas wherever they come from, even from outside the company, you can see that represented by the blue arrow in this figure. What is less known about Henry Chesbrough's 2003 book is that the phenomenon that Henry Chesbrough thought was really interesting was not outside-in open innovation, but inside-out open innovation. For him, everything started when he realized that there was a huge waste of innovation inside large firms. Managers in large successful companies tend to filter out or even cut budgets for promising technology, because they do not have an innovation budget, because it's not the right timing, or because it doesn't fit their current business model. This rejected technology ends up on the shelf, unused, inside the company. For Henry it is a waste, because this rejected technology is a potential false negative. It means technology that could have been successful if someone had commercialized it. To avoid this waste of promising technology, large firms can use inside-out open innovation. They can let external actors finish the development and commercialization of the innovation, in return they will receive royalties. Let me now walk you through an empirical and successful example. Eli Lilly, a pharmaceutical company, discovered a new kind of antibiotic. Instead of leaving it unused on the shelf, they out-licensed it to an external company. This external company launched the drug, and generated more than $800 million in sales. On this $800 million, Eli Lilly received $300 million in royalties, what a success for Eli Lilly.