Not a month goes by that I don’t have a conversation around one of these observations:
“We simply can’t add expertise fast enough”
“We don’t have the capital budget to bring that component to market at scale”
“The return on investment for our core products is flat, and I think the root is in our ability to source really fresh ideas ”
Being an R&D leader is hard work. Holding onto old models makes it even harder.
The Need for a New Model
That old model is that all R&D must be done under our roof, with our own people and our own equipment. To be fair, this is how most firms were established – a great piece of insight, built and tested by the hard work of a small team and scaled by those very same people. Powerful culture is established and the group (unknowingly) drifts towards isolation.
Open innovation, on the other hand, is the concept that firms can work with other business entities on win-win agreements to share in the invention, application and scale-up investments to create products that neither entity would be able to create on their own.
Opening the value building process is not a new idea – yet 88% of the firms embracing it are still unhappy with the results. And I find that even substantial firms with global resources still have the shadow of the old model walking the halls, silently pulling the team into groupthink.
In 2003, Henry Chesbrough published his first book on Open Innovation. Many, many leaders in large firms read it. The case was powerfully made – firms are being challenged to bring innovation and category-defining projects to market and at a pace that was unheard of even 5 years ago.
Reflecting on his work in 2012, Henry acknowledges that much work remains.
Why Would we Risk Opening Up Our Key Innovation Capability?
Beyond funding, we know the bigger breakthroughs happen when cross-domain experts combine to apply insight from one area into another (for a quick idea of what’s possible – look here).
One study published in HBR cited the following results:
“Cisco estimates that the Airbus-DHL-Caterpillar lab-produced internal projects, spinouts, and joint ventures to digitize supply chains, factories, and warehouses that will generate $6 billion in new revenue and save $3.4 billion in costs over the next 10 years.”
And
“We are convinced that these big changes can only be managed and put into place by the right partners. The ecosystem innovation process was a big opportunity to show us a new way to collaborate.”
So, addressing the elephant in the room – how do we open up our firm for external innovation without losing control?
There is a perceived danger that if we expose our hardest problems we are giving away too much intellectual property and giving our competitors a head start.
This fear then pushes us to over control in relationships and removes the very creativity that we need to overcome our deepest challenges.
The good news is that with more than a decade of work in this area, we have some experience that will serve firms well as they move into the next decade. The truth is that in any competitive domain, the core problems are pretty well established. Any CTO worth their salt can write down the current “walls” of progress in 15 minutes on a 3×5 card. The boundaries of current practice are leaned into every day at firms and universities. Their research aims mirror deep issues in the field.
What is not well established is connections to ecosystems outside their domain that lead to an insightful reframing of the problem that then (with lots of hard work) leads to solutions. A second point is that this work needs to be frequently reinforced, due to the truth that the fear shadow reasserts itself silently as soon as the encouragement goes away.
To get you started (or move you to the next step) on this journey, let me leave you with three areas to look at when asking yourself if you are ready for this cooperative approach:
#1: Does your leadership reflect openness? When presented with an issue, do you open the aperture and ask what industry has already solved this problem? Do you utilize frequent “hothouse” sessions to put cross-functional leaders in a room to solve tough client problems that create new approaches and intellectual property? How often has your team worked out a JDA (joint development agreement)?
Pro Tip: This starts with the top of the house. By making investments to go on cross-industry fact-finding trips, you can set a culture of external awareness.
#2: What is your real NIH (not invented here) quotient? Notice I said real, which is how the team actually behaves vs what might be spoken. Does your team work hard to stay on top of cross-industry trends? Do they frequently present problems to solution resources like nine sigma.?
Pro Tip: When prepping for an internal review, be sure to do an external scan and bring anything you’ve found to the session. In no time flat your team members will be looking outside too.
#3: Can your systems work with an outside team? It is no small thing to work through your first joint Intellectual Property Agreement. Similarly, if you have a really strong internal product development system, it can be very challenging to incorporate strong subject matter expert peers into it from another firm.
Pro Tip: Have the most entrepreneurial member of the CFO, CTO or external council’s team talk to their peers in firms that do this well. Get the principles and templates lined out in advance, so when the time comes you are able to pivot into an agreement without slowing the total effort down.
One topic to close – sponsorship is everything. These relationships pivot on trust and authenticity, and they must be personally reflected in the joint sponsorship of the project. These relationships need to be set up in a way that trust is reestablished with each organizational change that works its way through the system as well.
Getting open innovation right in the coming decade is going to be key piece to generating outsized returns for all stakeholders and ecosystem members. If you’d like a partner to support these essential capabilities, please reach out to me at 847 651-1014 or use this link to put a call on my agenda.
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