According to research, over 50% of today's S&P 500 companies may be replaced in the next decade. Innovation is critical in order to avoid this fate, but many companies don't have the time or people in-house to set up internal innovation labs or teams.
Speed is everything when it comes to innovation. With the right strategy, you can move quickly to get the edge over the competition. If you don’t have the resources inside your company, one of the most effective solutions is to look outside.
This article will discuss the best strategy for innovation — connecting with an external innovation partner. We'll find out why these partnerships are so essential and how you can select the right innovation partner. That way, you can help each other with mutual interests and grow your bottom line.
Let’s get started.
What is an Innovation Partner?
An innovation partner is a platform, organization, individual, or location in which several companies or creators work toward mutual interests to uncover new approaches to solving existing market problems.
The use of the term "partner" is not by happenstance — this is a relationship, not a transaction. Innovation is helped by having a partner by your side throughout the entire process. This dynamic is distinctly different than simply using services or products from a vendor.
Open innovation with an innovation partner can bring several benefits. It helps you expand your perspective, enter new fields, and gain access to new technologies and subject matter experts.
Your innovation partner should be committed to helping you accomplish your goals. Ideally, they will possess the tools and skills to conduct excellent research and development in your market. They should also be excellent communicators, as you will be passing ideas, deliverables, and project tasks back and forth.
Types of Innovation Partners
There are various innovation partners to choose from, each with its pros and cons. However, we can determine the true value of any innovation partner by gauging the return on investment (ROI).
Let’s look at some of the best options for innovation partners:
Entrepreneurs / Startups
Entrepreneurs and those involved in startups are excellent partners for innovation because they already have the expertise, vision, and innovative drive required to stand out in a market.
Specifically, these individuals offer a high degree of technical knowledge and commercial experience. In the digital age, these two currencies are invaluable.
Companies can improve their chances of finding a successful partnership by looking for entrepreneurs in accelerator programs. Corporate accelerators often attract some of the best talent and brightest minds, facilitating excellent networking opportunities for companies looking to bring in new partners.
Open Innovation (Crowdsourcing)
Crowdsourced open innovation invites industry experts, researchers, and entrepreneurs from all fields to generate new ideas and solutions, often with the incentive of a prize. Typically, this is either cash, media coverage, or the chance to partner with or make a pitch to a relevant corporation.
However, keep in mind that there is little to no quality control or "authority" for these ideas. Therefore, the proof-of-concept, MVP (Minimum Viable Product), and vetting are left to the R&D that you perform.
As such, these crowd-sourced services aren’t usually the best solution for all innovation partners. Rather, they can help you with the initial ideation, assuming you have the human resources or partnerships on the backend to see them through.
A consultant provides technical expertise and specialist strategies to solve problems. As these professionals operate on a fee-based service, the transactional nature of this type of partnership can inhibit true innovation.
Therefore, consultant partnerships are often less dynamic or responsive to problems if they evolve beyond the consultant’s usual scope of expertise.
Universities excel in providing top academics skilled in science and technology and the lab resources to perform testing. However, they usually lack "real world" commercial experience (i.e., selling to business and consumers).
Due to the lack of commercial experience, many university partners overlook the business context of new ideas. There may be non-aligned or conflicting interests between the business and academic side of things as well.
Why Corporations Should Work With Innovation Partners
Corporations that are well established tend to get stuck in the same pattern of conducting business at the expense of innovation, content to rest on their laurels. While they have considerable resources, they tend to move slowly, causing issues with a lack of genuine, game-changing innovation.
This status quo often comes in the form of innovating on the same products instead of staying on the cutting edge of the industry. This lack of agility leaves corporations vulnerable to disruption by up-and-coming startups who use lean innovation strategies.
78% of the companies surveyed in the "Managing Open Innovation" study stated that they have been practicing open innovation for several years. The pressure to get involved grows with each passing year.
Corporations must embrace a culture that is inherently competitive and innovative, actively seeking ways to improve their business model. This approach allows you to remain sharp and agile in the face of ever-growing competition in a global marketplace.
The increasing dynamism of the marketplace means that corporations who don't disrupt their own business model will inevitably be disrupted by someone else. You need to take ideas and resources from your established company and apply an open innovation strategy that involves partners who can see concepts from another angle.
Innovation partners enable your company to sustain development and creativity without taking away from the core, proven products, and services you already offer.
Advantages of External Innovation Partnerships
There are numerous advantages of an external innovation partnership. Let’s take a look at some of the most important benefits:
- Identification of New Business Opportunities - Two heads are better than one. With an external partner, you can uncover ideas that otherwise would have remained latent and unseen by your team.
- Better Product / Market Fit - Compared to closed in-house innovation, open innovation with an external partner will bring more results for you to evaluate and test in the market. These external perspectives help create more targeted products, which, in turn, are more likely to result in successful outcomes.
- Lower Risk of Failure - Corporations are known for being risk-averse. The good news is that by bringing in external innovation partners, your risk is actually lower. You can test more ideas, more innovative ones, and do it faster so that if you fail, you can quickly move on to the next idea in a cost-effective way.
- Valuable Networks - Building business networks that are long-term and well-aligned is crucial. Bringing in external innovation partnerships via startups curates these relationships and expands your network to add value to your business solutions and expand into new verticals. It also makes you more resilient to market changes.
- Fix Operational Blindness - Partners help you see what you can't. It is natural for every business to have operational blind spots. After all, you can't see and know everything — or your company would have more revenue and equity than Amazon and every other corporation combined.
- Utilizing Economy of Scale - When you have external partners, you can combine your resources for more purchasing power. You can invest this increased financial means in your innovation and testing activities.
- Image Enhancement - Why do you see celebrities on boxes of cereals and endorsing other products? — Because perceived success or competence by association is real, and it affects how much credibility you have in the eyes of your market.
How to Select the Right Innovation Partner
As you can see, external partnerships bring several advantages to your corporation. If a partnership doesn't work out, you can always part ways. With that in mind, let's take a look at how to make sure you make the right choice in the first place.
Establish a Culture of Trust
The first step is to ensure that you trust your potential partner and that your goals are aligned — this is the basis for mutual support and communication. Your partners should be able to help you get key stakeholders on board for co-innovation.
Remember that this is not a competition. You will be sharing resources, both financial and creative. Your team should not feel that they are being overstepped or taken for granted. Instead, communicate to them the potential positive impact on their productivity and workflow (and ultimately, their paycheck).
There is a certain sense of pride in making something in-house. To bypass this issue, you need to layout the benefits in clear terms, and your partners should have the competency to help you do that.
However, this type of communication for projects is typically not your R&D team members' primary skill. It's one thing to solve a technical problem. It's another thing to communicate the solution to executives. And it's yet another to communicate the solution to the marketplace.
Your co-innovation partner should provide plenty of incentives — after all, this isn’t a charity event. Be sure to discuss incentives (and non-starters) at the beginning of your discussions with any potential innovation partner.
Both you and your external partners should clearly see how working together will boost your respective innovation capabilities, bottom line, and prominence in the marketplace. As such, the whole will be greater than the sum of its parts.
Sustain the Partnership
To ensure that both sides benefit over the long-term, you need to monitor the relationship. Use KPIs as milestones to ensure that the partnership is a continued success rather than failure.
These periodic reviews will keep you on the same page as your innovation partner. With consistent, open communication, it will be easier to resolve issues when they arise. Moreover, the partnership is more likely to continue producing viable ideas that you can bring to market.
Think of it this way: The longer you can sustain any innovation partnership, the less time and money you need to spend looking for new innovation partners. Instead of wasting time on the ground floor, you can stay busy driving business growth by producing profitable products and services.
When it comes to developing new growth products and business models, you can gain a competitive advantage by connecting with business partners who can lend their influence and expertise.
Choosing the right partner isn’t always straightforward. However, when you take the time to find one that aligns with your goals, vision, and culture, the chances of success are much higher.
MassChallenge offers corporations a platform and a ready-made network of innovation partners to connect with and start working on groundbreaking ideas.
Join the MassChallenge today, so you can find the ideal innovation partner to keep your business moving in the right direction.