One of the activities that we do is run public open innovation calls so that businesses can find each other and collaborate. Like in Colombia CO4, we create and publicise an ‘interesting question’ in the form of a challenge and then we help filter and judge the proposals from new potential suppliers and partners. We usually do this for big companies who have specific needs and who are normally very satisfied with the results.
A recent discussion with Michel Fruhling at BFS Innovations has prompted us to re-examine this open innovation approach and compare it to relying on a company’s existing relationships and supply chain. He asks whether open innovation could in fact undermine existing business relationships in which clients can benefit from the knowledge that a long term supplier/partner can bring. A good question. Here are our observations.
Start with your inner circle
We always advise to start by making sure that your existing partners are part of any innovation network that we create. In many cases it makes sense to contact important partners in advance of issuing a challenge both to protect the relationship and also to find out if they have already been working on an answer to your problem. Quite often we find that the answers are found close to home…
Consider all angles
Open innovation is not the answer to all your business challenges. In practice we find that many clients come to us when they have already tried the traditional approaches of relying on their R&D teams or existing suppliers. So we tend to get challenges that appear insoluble within a reasonable time-frame and budget.
Outside the comfort zone
Sometimes open innovation is perfect for new areas or radical innovation. It is less likely that your existing supplier network will be able to rise to the challenge of a totally new technical approach or a new line of business. Similarly if you are innovating outside your core capabilities then it often makes sense to acquire new skills from the outside. A couple of years back Lego asked us to find ways to reduce static on production lines using open innovation. The company is great at designing and making toys but of course not a specialist in atmospheric electromagnetism!
Similarly, open innovation can be useful when you need a solution fast. It is a truism that many companies can save themselves a lot of time by seeking market-ready solutions that already exist and ‘adopting’ them rather than investing years of research and development.
Collaborate or bust
There are circumstances where collaboration with new partners is essential to innovate effectively. For example we have worked across the water and energy sectors recently where new cross-sector collaborations were the only way to bring about significant change. Similarly, we helped Interface source recycled plastic from beaches in the Philippines using many new and diverse partners such as ZSL.
Spread the risk
We’ve learned that it’s important to share the risks and rewards of innovation so that potential new suppliers are motivated to engage with open innovation challenges. If all of the risk and expense of innovating sits with the supplier, who has a low chance of success, then the programme will not fly. It’s important, in our view, for challenge holders to make public their offer or business model as part of the challenge process. This instils confidence and build trust.
Finally it’s worth noting that open innovation often leads to new long-term supplier and partner relationships. Indeed our brand of open innovation aims to leave the protagonists in a stable state for at least the first project and then hopefully more. So open innovation isn’t really business infidelity in our view. More like enlarging the circle of your friends.
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This is thought provoking stuff. On the one hand all businesses know that they are competing and that if they can’t offer the solution needed then someone else will. That said, strong, long term relationships sometimes mean weighing the optimal solution against building a mutually beneficial partnership. I might be willing to pay a little more per unit for something I need because I know and trust the company selling it or there is some other benefit to me from maintaining a current supplier relationship.
So your first point about starting first with those you already know and trust is key. A good business isn’t simply one that makes a lot of money. A good business ensures that everyone wins; that suppliers earn well, that channel partners make a good cut. Not because it’s nice but because long term relationships are what make a business sustainable.
And here is the nub of it; if you maintain strong relationships with your partners they should not feel threatened by you using new suppliers. Infidelity isn’t a problem because of the act of getting into bed with a new supplier, so to speak, it’s the break down in trust that matters. In this way open innovation is more akin to an open relationship or the occasional swinging session! All good fun and nobody gets hurt. Unless you like that kind of thing.
I like the article and agree with Aran’s points. One thing about OI is that it always seems to have the feeling of a cartwheel about it as opposed to a web. Lots of separate bilateral relationships emanating from the centre. I have always felt that facilitating across spoke OI relationships and the addition of new ones into that mix enables the possibility of super supplier relationships. Helping suppliers to enhance their business and not just your business with them is really worth doing. OI networking.
Thanks Aran, you make a great point that if there is a strong supplier relationship in place then there should be less ‘threat’ – more healthy competition.
Thanks Nick that’s a great image. In practice it’s often hard to facilitate supplier-to-supplier relationships but I guess that’s what we do in collaboration with other agencies for our client.
I like your blog and the points you make. I also think the readers points are terrific.
My point about open innovation possibly eroding existing business relationships was intended more to refer to the fledgling market for services like graphic design, PR communications and the like that tend to make relationships transactional versus enduring and promote contingency based business models similar to executive recruiting. (I am pretty sure you have considered the analogy of retained versus contingency recruiting and open innovation services, too). I wasn’t thinking about it as much in terms of technical open innovation, but the question still applies.