Manabu Tsujimura
Senior Managing Executive Officer
What is Ebara Open Innovation (EOI), which was launched as a natural outcome after the dissolution of Ebara Research Co., Ltd. (research laboratory of Ebara Corporation) in 2009? The year 2019 being the 10th anniversary since the start of EOI, I would like to look back at the past, examine the present, and look out to the future. At the time of the dissolution of Ebara Research Co., we were faced with two major concerns involving researches, namely ① the gap between research and product development and ② low research efficiency. Consequently, ① we tentatively set our research objective to “improvement of product competitive power.”② Next, we abolished fiscal year-based researches in an effort to improve research efficiency and set up a virtual research laboratory concept, so that personnel who works for the research laboratory could also serve as business division members. After establishing the basic concept as “starting business on a small scale and growing it gradually,” our research activities in collaboration with academia were started at first with only three researchers. This marked the beginning of EOI operations. After this, we established Ebara Open Laboratory (EOL), which is used to conduct researches for developing products without full-time research personnel, Ebara Innovation for “X” (EIX), which creates new businesses, and Ebara Open for Supplier (EOS), which is an organization of suppliers that provides support for our newly created researches with the assistance of small and medium sized support groups. EOI operations have evolved into these forms of research up to this point in time.“Ebara Open Innovation” is still a work in progress before becoming a truly efficient research and development establishment that will continue to evolve in the coming years.
When I am asked “What is innovation?” I always answer that “Innovation is born of a combination of technological revolution and rapid expansion of the markets.” In other words, even if we develop a wonderful and revolutionary technology, it cannot be recognized as an innovation unless it can quickly expand and capture market share (based on business logic). Similarly, when I am asked “What is Open Innovation (hereinafter referred to as OI)?” I give my answer based on knowledge from books as follows. OI has become popular after the book “Open Innovation”1) written in 2003 by Professor Henry Chesbrough came out. Even this year, all kinds of organizations have issued a number of white paper-like publications on OI. According to these publications, however, there are (seems to be) not many successful cases of OI.
After dissolving Ebara Research Co., Ltd. (hereinafter referred to as “research laboratory”) in 2009, Ebara Corporation has proceeded with reconstruction (closer to completely new construction) of its research laboratory by incorporating the OI-oriented concept as a new model. Although our OI-oriented model is slightly different from the global concept of OI, I suppose our OI can be considered as a type of OI because it is actually successful. Recently, exchanges with various organizations that are researching or promoting this form of OI have been increasing and I have had several opportunities to re-examine “What is Ebara Open Innovation (EOI)?” In this paper, reflecting on 2019 as the 10th year since the dissolution of the research laboratory, I would like to look back at the past, examine the present, and look out to the future.
The diagram that illustrates the characteristics of the OI concept in the abovementioned book “Open Innovation” 1) is shown below in Figure 1.
In the conventional closed innovation method, a company conducts researches on its own and therefore the types and number of researches are limited. The technologies that can be applied are further narrowed down and the products introduced to the market constitute just a fraction of the accumulated technologies owned by the company from before. For that reason, even if the probability of a product being introduced to the market is high and the probability of success is also high, the height of technological revolution and level of market expansion in terms of innovation are naturally constrained. On the other hand, in the open innovation method, which is a new concept, the types and number of researches increase significantly since a company seeks researches widely from outside its own organization. For example, there is a case where the company’s in-house technology may be introduced outside the company and this technology is combined with another company’s technology in the research phase to create a new market. There is also a case where another company’s technology is introduced to a company and is combined with the in-house technology to produce a successful product in the existing market. In this way, it appears that the boundary line of research and development between one company and another has ceased to exist. For that reason, you may be able to expect that the OI concept may result in achieving the height of technological revolution and potential market expansion. However, unless a company has engineers capable of understanding its in-house technology as well as another company’s technology, the company may become involved in a wider and larger number of researches that do not result in the development of successful products. This is the current situation in many companies who have introduced the OI concept.
Fig. 1 Concept of OI<sup>1）</sup>
I will introduce an example of OI that Ebara has experienced in the past. Figure 2 compares the development processes between Precision Machinery Company of Ebara and a US competitor for creating a product in 2004.
Figure 2 is an example of development processes in the semiconductor manufacturing sector that our company has experienced. Japanese equipment manufacturers such as Ebara collect information on market demands and technologies (②) from sources such as users, consortiums, and various organizations (①) in the upstream of the process flow. All development processes are carried out based on this information that we collect. Japanese manufactures first decide the development concept ( ③ ), and then perform coupon testing (④), make an alpha prototype machine (⑤), make a beta evaluation machine ( ⑥ ), and then eventually manufacture and introduce a mass-production gamma machine (⑦) to the market. The US manufacturers also collect information from sources ( ① ) same as Japanese manufacturers. Apart from the process of collecting information, however, the other development processes are slightly different from Japanese processes. In many cases, start-up companies (⑧) are supported by angel investors, and the start-ups make an alpha machine and start marketing the machine (⑨). Then, US manufacturers buy out this alpha machine from the start-up company ( ⑩ ) and manufacture and introduce a mass-production gamma machine ( ⑫ ) to the market after they make a beta evaluation machine ( ⑪ ). In the case of Japan, a competent specialist for making critical judgements in the decision of the development concept ( ③ ) is required. In the case of US, a competent specialist for making critical judgements in evaluation of a start-up company ( ⑩ ) is required.
If the Japanese development processes are assumed to be closed innovation, the US method can be identified as open innovation that uses various start-up companies. At that time, we did recognize these differences, but we were not ready to apply the same method as that of the US. Nevertheless, Ebara was able to compete more than equally with US manufacturers because vital information was delivered to our company quickly from the upstream and we were able to develop a product immediately and foster engineers capable of judging the development concept. It is true, however, that during that time we experienced some pressure from US competitors who took up the challenge by taking full advantage of OI.
Fig. 2 Comparison of development processes between Japanese manufacturers and US manufacturers
Ebara began working on OI for the first time in 2009. Our company was founded in 1912 and the research laboratory had a history of about 50 years until its dissolution in March 2009. Two biggest concerns involving researches that we felt at the time of the dissolution of the research laboratory were ① the gap between research and product development and ② low research efficiency. Since then, ① we tentatively set our research objective to “improvement of product competitive power” and ② we abolished fiscal yearbased researches for the purpose of improving research efficiency. We also introduced the virtual research laboratory concept, so that the research team could also serve as business division members. This is the definition of “Ebara Open Innovation” that continues up to the present day.
Now, I would like to review the situation at that time in order to answer questions such as “Why did the research laboratory have to be dissolved?” and “Why was it not restructured instead?” To provide this answer, I would like to use a risk equation as a tool.
The risk equation of management is defined as follows:
When you feel there is a risk ⇨ Reconstruction (including destruction) ⇨ Growth strategies [1] Globalization and [2] Diversification
To be more specific, when you feel that there is a risk in your business management, you must draw growth strategies such as [1] globalization and [2] diversification and restructure the organization to make it suitable for those strategies. At times, simply restructuring may be not enough and you must also consider destruction (or dissolution) as a part of your strategy.
The risk equation of research activities is the same. We defined this equation as follows:
When you feel there is a risk ⇨ Reconstruction (including destruction)⇨Growth strategies “Improve product competitive power”
We defined the risks as ① the gap between research and product development and ② low research efficiency, as mentioned earlier. The growth strategies are defined as “research for improving product competitive power” and “producing a new and more efficient research method by abolishing fiscal year-based researches.” As a result of this assessment, the former research laboratory was dissolved in 2009 and all personnel of the research laboratory were transferred to the business units of Ebara.
The former personnel of the research laboratory mainly worked on product development or were involved in the production itself and various business processes. In 2009, we began the process of building a new research laboratory (organization) from scratch.
This endeavor was actually started from scratch, heralding the beginning of Ebara Open Innovation (EOI).
Figure 3 shows the flow of EOI, EOL, EIX, and EOS. Since the research laboratory was dissolved in March 2009, the research personnel and investment for the new research laboratory was started absolutely from scratch. We utilized the first year of operation of the new research laboratory to reorganize the facilities of the previous research laboratory and develop a concept of this new research laboratory. In the second year, we started research activities with only three engineers. Since the new research laboratory had only three engineers, we were obviously compelled to rely only on outside organizations, or in other words, universities. We started research activities collaborating with universities in the fields that Ebara excelled at, or more likely the fields that were the specialty of these three engineers.
Fig. 3 Emergence of EOI and related research activities
It was a new industry-academia collaboration concept where Ebara comes up with ideas for the researches and provides the fundamental technologies despite of a shortage of personnel. The universities carry out a research suggested by Ebara as a new project and researches are conducted while providing guidance to students. Today, the new research laboratory has evolved into a facility where more than 30 universities and 50 research laboratories and about 150 researchers are involved in collaboration activities. We have named this new research facility the Ebara Open Innovation (EOI) laboratory based on its characteristics where Ebara provides the fundamental technologies and the universities provide flexible analytical capabilities to solve the problems of the researches.
While we moved forward with EOI, product development by Ebara personnel was also started. This development activity does not mean an increase in the number of researchers at the laboratory. In this process, the business unit of Ebara dispatches an engineer to work for EOI in a research and development project that is required for product development of that business unit. The dispatched researcher will work on the project jointly with EOI members and return to their original business unit after completion of the project. This research model is called the Ebara Open Laboratory (or EOL).
Such EOL activities are not fiscal year-based research projects. The research can be finished at any time. It could be a short project that is completed in three days or a long project that can take three years to finish. As a result of this endeavor, research efficiency has been improved dramatically.
Around the time EOI and EOL got on track, we constructed a platform for creating new business. In other words, we set up an environment of innovation for creating new unknown business, represented by the letter ‘X.’ This platform is called Ebara Innovation for ‘X’ (or EIX). EIX also supports the basic concept of “starting business on a small scale and growing it gradually.” When EIX was started, we established a ground rule.
This rule stipulated the need to “List up all of the finest cutting-edge technologies that are popular in society and redefine the significance of these technologies in relation to our company!”
As an example, we highlighted the significance of “IoT and robotics.”
Both IoT and robotics are technologies that have spread worldwide to a level where they are becoming dated. Nevertheless, they are brand new technologies as far as Ebara is concerned. So, we redefined them as “technologies that are useful for the innovation of manufacturing technologies.” At first, the Manufacturing Engineering Group started to study IoT and robotics technologies on a small scale. Subsequently, this undertaking evolved into a bigger “fully-automated plant” project that was incorporated in E-Plan 2019 (Ebara’s Medium-Term Management Plan). In this manner, we started EIX activities based on the policy of how all kinds of popular technologies can be made useful for Ebara. Besides the above, EIX naturally has a role in creating Ebara’s own cutting-edge new businesses and intends to take this task further.
In the next section, I will introduce EOI and EOL cases that were successful. The comparative assessment of fiscal 2016 is presented using the following equation based on the fiscal 2008 performance of Ebara Research Co. as 100 on the scale.
When the research expenses and in-house labor costs (①) were 50% or less, the number of research projects exceeded 150% and the number of technology transfers and presentations of research results to the outside of the company exceeded 200 % (②); the labor costs of researchers outside the company and the number of joint research projects exceeded 250 % ( ③ ); and the number of patent applications for researches exceeded 450 % ( ④ ). In other words, we were able to improve the research investment efficiency dramatically.
Next, let’s discuss Ebara Open for Supplier (or EOS) activities. When EOI activities as well as EOL and EIX activities have become as solid as this level, an organization that actually manufactures a developed product is required. Our manufacturing plant (we refer to this organization as a manufacturing plant) has large-scale special machining equipment but not the small-scale equipment that can machine special parts made for researches. Therefore, we outsource the manufacturing of those parts to outside companies. The activities from this point were critical challenges that we had to tackle. I have a strong personal belief that superior product research and development cannot be achieved unless the manufacturing method of a new product is fully understood. Please refer to Figure 4.
In this figure, researches are directed from a garagelike headquarters via IT systems (such as a teleconference system). Each plant, each university, and each supplier are connected and a virtual organization is formed effectively. In this way, EOS operates as a system that virtually creates a plant facility that Ebara does not currently possess.
Fig. 4 Virtual plant of EOS that we seek
The Technologies, R & D and Intellectual Property Division is conducting its activities with the slogan “BRDIP (Business, R&D and IP) + ABA (Association, Business and Academy).”
BRDIP (pronounced as burudip) means to implement management of the three aspects of business, research, and intellectual property. On the other hand, ABA means mutual contributions made by a business organization, industrial groups, and academic sector. Ebara offers wholehearted cooperation to industrial groups and academic sector and makes significant contributions to these entities. We believe that in exchange for our cooperation and contribution to an industrial group or academic institution, we will gain access to valuable reference materials and information compiled by each industrial group and also improve our corporate value by appealing our company’s technological achievements in academic meetings. Although this undertaking appears to be nothing special, we have coined a catch phrase and proclaimed this matter over and over in order to make our researchers recognize once more the importance of intellectual property protection so that the related personnel fully understand the issue.
So far, I have explained the past circumstances of the dissolution of Ebara Research Co., and the emergence of Ebara Open Innovation (EOI) after the dissolution of the old laboratory as well as the current status of EOI. When I look back at the last ten years, I can rerecognize that EOI has evolved as a result of the tireless efforts of related personnel and simultaneous occurrences of inevitable and coincidental events during its formation process. This concludes the history of the past and present EOI. Now, let’s discuss the future prospects of EOI!
The wide variety of new challenges is already moving ahead. The new challenges that follow EOI, EOL, EIX, and EOS are NIH and EHU. NIH stands for Not Invented Here, which involves collaboration between Ebara and a company who has technology that we do not possess. EHU stands for Ebara Hi-tech University, which is intended to be an Ebara style university supported by EOI and EOL members.
EOI has started evolving further in another form. We named this new form of EOI as “Enhanced Open Innovation.” I am just going introduce this new name in this paper. Please look forward to reading details about EOI next time. “Ebara Open Innovation” is halfway through its evolution and will continue to grow further. I myself am looking forward to seeing this evolutionary process.
1）Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology (Harvard Business School Press) (2003).
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