Working with external partners to bring better products and services to market faster and/or develop better intellectual property has never been more popular in the world of business than what we see today.
The term open innovation is often used to describe this, but this is more like an umbrella term that can be used to cover many different ways of working with external partners including crowdsourcing, challenge-driven innovation, platform innovation or user-driven innovation.
…as well as my favorite terms: external collaboration, networked business structures or networked innovation.
When I am asked to define open or networked innovation, I often say that it does not really matter how I define this. It is much more important that the company or organization develop their own common language and understanding for this in a way that fits their specific context and situation. This must also work internally as well as externally.
When I am pressed harder for my take, this is what I say:
“…a philosophy or a mindset that must be embraced throughout the organization. This mindset should enable their organization to work with external input and resources just as naturally as it does with internal input and resources.”
The key is philosophy and mindset. I don’t see this as a process or tool.
When I work with executives and their teams on how to further develop their external collaboration capabilities, we look into a triple approach like this one:
- identify business units or corporate functions with pains or opportunities that can benefit from working with external partners,
- identify the key reasons why you want to pursue external partnerships for the chosen units or functions and
- identify the proper stakeholders for exploiting or exploring pains or opportunities and the channels and approaches for working with them.
Below, I share a longer list of examples related to the why, who and how for working with external partners.
What is your motivation for working with external partners? Some examples:
- Develop better products and services together with others.
- Speed up your time to market.
- Find and develop new technologies and approaches that we can’t do by ourselves.
- Partnering with companies to bring new products and services to market.
- Solve problems, pursue opportunities and have more options for doing this.
- Develop platform-based businesses.
- Better work the two sides of disruption – offense and defense.
- Become competitively unpredictable.
- Create new marketing vehicles (crowdsourcing).
- Experiment with and develop towards future organizational paradigms.
- Change the corporate culture.
- Develop better experimental capabilities.
- Access to new knowledge pools.
- Exploring new technologies, trends and markets.
- Identify new business opportunities.
- Establish new partnerships.
- Share / mitigate risk of innovation projects.
- Reduce R&D and innovation costs.
- Outsource chunks of R&D.
- License / sell internal ideas, technologies and/or IP to others.
- Prove the technical and/or commercial viability of projects quickly.
What types of stakeholder groups can you work with to achieve your objectives? Some examples:
- Customers / users.
- Corporations (even competitors).
- Venture capitalists.
- Service or process partners.
- Platforms and communities.
- Universities / institutions.
- Government / regulatory affairs.
You can also work with the term internal open innovation. Here you tear down the silos and make your business units and functions work better together. This is only focused on the inside, but it can be a good way to develop the capabilities needed to work with the outside later on.
How can you work with your stakeholder groups? Some examples:
Is the corporate communication team up for this? Not always as they do not know enough about innovation management.
- 1-1 partnerships.
- 1-many partnerships.
- Many-many partnerships.
- Alliances, joint ventures and consortia.
- Supplier days / startup days.
- Competitions and challenges.
- Platforms and communities.
- Corporate labs / accelerators.
- Just how we do business (the most powerful one).
Three companies I like
- Local Motors – and their networked approach to innovation as well as business.
- GE – for showing the way for other corporate giants.
- Amazon – for developing different ecosystems and platforms and using them to create serial monopolies (great business tactics, not so good for the consumers in the long run).
The impact on corporate business units and functions
Communication is a key element for external collaboration as you thrive to belong to the best ecosystems with impact on your industry – today and in the future. Perception and thus communication is key for this to happen. Is the corporate communication team up for this? Not always as they do not know enough about innovation management.
Innovation – if not business in general – is all about people, right? Everyone seems to agree on this, but the HR function is almost totally absent when it comes to the strategic development of a company even though they are (supposedly) in charge of developing some of the key capabilities (people) for this. I believe we need a triangle of the CEO and other chosen top executives, the corporate transformation and innovation team itself and HR in order to transform and build strong companies today. The latter needs to wake up and get into the game.
Procurement and supply chain. One of the hot terms right now is SEI – supplier enabled innovation – and this looks into how you can co-create value together with your suppliers rather than just bringing down the costs. This requires a whole new mindset and approach for procurement and supply chain executives and their teams.
One of the most important stakeholder groups for external collaboration is customers / users. The front line here is based on the sales and marketing functions in charge of the commercial activities. At most companies, these functions are heavily involved in these interactions. Keep moving on.
R&D is the function that can benefit the most from working with external partners if this is done properly and if the R&D function is not stuck in the past with a not-invented-here, secretive mindset. Some companies are much better than others here. It is also important to have an internal discussion on the differences between R&D and innovation and who should control what.
How can you work with external partners to develop better production and manufacturing processes and capabilities? Some companies are actually looking into this today. It is not easy and there is not much experience to draw upon, but there are potential benefits for many types of companies here.
Legal teams need to decide what role they want to play here. If they come with a defensive mindset, they will slow down the entire company and stall the transformation processes that is needed by many companies. If they come with an offensive mindset (seeing opportunities before risks), they become an important player as they help create a strong support system with regards to collaboration frameworks.
As organizations transform themselves and require different capabilities, a new breed of executives will rule the game. The top executive team either gets up to speed fast or they will soon be out their jobs. It is as simple as this.
A closing remark
I often talk about a new generation of executives that are about to enter the business world. They know how to deal with digitalization and disruption and their understanding of stakeholder management, networking capabilities and platform orchestration are key for this. In short, you need to be a great facilitator in order to become a great executive – or manager – today.
By Stefan Lindegaard
About the author
Stefan Lindegaard is a Copenhagen-based author, speaker and strategic advisor. His focus on corporate transformation and innovation management based on leadership, the work force and organizational structures has propelled him into being a trusted source of inspiration to many large corporations, government organizations and smaller companies. He believes business today requires an open and global perspective and he has given talks and worked with companies in Europe, North America, South America, the Middle East, Africa and Asia.
In his role as a strategic advisor and coach, Stefan Lindegaard provides external perspectives and practical advice for executives and corporate transformation and innovation teams. He is a widely respected writer and he has written several books including The Open Innovation Revolution published globally. You can follow his work on LinkedIn Pulse.