The best innovation ideas won’t always come from your own employees. A fresh set of eyes from external specialists and other organisations could be what you need to take your business to the next level. That’s where open innovation comes in.
“Regardless of how successful the company is and how talented their team is, there will always be more talented people with more knowledge outside the organisation,” says Bruno Moraes, open innovation hub Wayra’s country manager.
And the benefits can be huge; open innovation could mean new revenue streams for corporations — which translates to higher valuations — and scaling opportunities for startups.
We spoke with open innovation experts to find out how to do it well.
Keep the bigger picture in mind
Open innovation can take many forms — like partnering with a university for research, joining a corporate-run programme like AB InBev’s ‘Beer Garage’, or crowdsourcing advice from the public.
Most often, open innovation takes the form of corporates partnering with startups or scaleups to solve a problem or add a new service to their business — but David and Goliath often have some pretty big differences that can make working together difficult, which can lead to unmatched expectations and derailed plans.
Moraes tells Sifted that an important first step for businesses is finding a clear idea of what you want to achieve — and the next is figuring out how to work together: “Step one is to find the ideas, by generating ideas and finding startups, and two is to really integrate and disseminate these ideas in the big organisation,” he says.
Startups or corporates looking to enter into an open innovation partnership should have a clear idea of what they want their working relationship to look like, and keep an eagle eye over the whole process to make sure they stay in the right direction.
“What matters is the things that you finish, not those that you start, so having a full process from finding the solution to integrating and really internalising them,” Moraes says.
What matters is the things that you finish, not those that you start.
Salima Douven, head of open innovation and incubation at German chemical and consumer goods company Henkel, agrees. She says businesses and startups must establish a clear direction of what they want to achieve with their partnership early on.
“There’s so many facets of open innovation, from cooperating with startups to going into company building (which means you are creating your own startups) to working with other corporates jointly on innovation,” she says. “You need to figure out what is best for you as a cooperation to start with.”
Get on the same page
Speaking of David and Goliath, Moraes says a big part of open innovation is learning how smaller scale startups and big corporations are different.
Richard Anson, strategy director at retail and consumer investment firm True, uses a Red Bull-red wine analogy.
“Startups are like a can of Red Bull: all about speed, agility, data-centricity and making things happen,” he says. “Whereas many corporates are perhaps understandably (due to their scale) almost the opposite: slow-moving, risk averse and often hierarchical — a bit like wine.”
Startups are like a can of Red Bull: all about speed, agility, data-centricity and making things happen.
These differences can create issues, but Moraes says the gap can be bridged by working with a hub such as Wayra.
“Startups and corporates, they tend to speak different languages,” he says. “We are the translators.”
Wayra’s head of scouting and VC ecosystem Remus Radvan says hubs and innovation programmes can provide added expertise, which helps with the translation: “Former entrepreneurs, former VC people, they can understand both sides of the spectrum and can help a startup translate a proposition into a corporate environment.”
Avoid ‘innovation theatre’
One thing that can be really frustrating — especially to startups — is innovation theatre, or when a business tries to show off their ‘innovation’ without actually innovating or allowing it to have any significant impact on the company.
“Companies launch initiatives and have a lot of comms and marketing around it, but that leads to nowhere because all they want is to be perceived and not really embrace innovation,” says Moraes. “Startups need to move fast, and being dragged along with innovation theatre is really bad.”
Businesses can avoid innovation theatre by ensuring they have real support from top management.
“Many companies are still seeing innovation as a luxury,” says Moraes. “If you don’t have a strong belief in innovation and a very fair and open discussion within top management, a lot of initiatives may fail.”
If you don’t have a strong belief in innovation and a very fair and open discussion within top management, a lot of initiatives may fail.
Douven says investment into Henkel dx, a new digital innovation hub, is helping incorporate innovation further into the company. She says over time Henkel has built up its own network of VCs, but it also runs a lot of events where it can identify startups on its own.
“It’s great to have this different roof that shows transformation is happening and to embed that more into the corporate organisation,” she says. “We’re seeing results coming in.”
Innovation looks different depending on the industry
Of course, different industries have different challenges.
Jan Beger, senior director at medical technology innovator GE Healthcare, says the healthcare sector can learn a lot from other industries in terms of utilising digital technology. But healthtech startups often meet unique hurdles, such as regulation and access to the right data.
Because certain sectors, like healthcare, have very specific and niche knowledge, some startups need to rely more on external expertise to help them navigate sector specific challenges.
“There are a lot of fantastic data scientists and software engineers out there with a lot of great knowhow,” he says. “But what they lack is access to healthcare professionals, to get the input from people who deliver healthcare day in and day out.”
Beger says this is where open innovation tactics can differ, as GE Healthcare also needs to help provide access to the market and support with regulatory approval.
Solve a specific pain point
Open innovation is all about solving problems, so it’s important to define pain points precisely. Businesses who don’t will end up working towards solutions they don’t actually need.
“You need to be thesis-led, you need to be strategic,” says Jordan Schlipf, founder of venture studio Rainmaking.
Schlipf says this strategy mimics a headhunter approach, and should lead to identifying scaleups and corporate partners that can form a meaningful partnership.
“What you really want to be doing is headhunting the one, two, three scaleups that really meet your strategic needs and then reaching out to them,” he says. “What are some of the skillsets where it’s cheaper, faster and quicker for you to partner with a scaleup than for you to acquire, invest or do something yourself?”