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LEAD Innovation Blog

Read our latest articles on innovation management and innovation in a wide range of industries.

Date: 04-Mar-2019
Posted by: Michael PUTZ

Why you should get external innovation partners on board

 

The increasing complexity and dynamics of the market means that companies are increasingly opening up their innovation processes and bringing external innovation partners on board. They experiment with various "open innovation" approaches to generate innovation impulses, ideas and know-how from external innovation sources and thus realise marketable innovations. In this article you will learn how promising and how sustainable this development is.

Innovation partners and their contributions - an overview

Customers, suppliers, research institutions and competitors can be integrated into the innovation process as external innovation partners. The following chart shows the diversity of possible innovation partners and their contributions to a company's innovation success.

1_externe Innovationspartner.png

source: Kundenintegrierendes Management, Florian Thiebes, 2012

 

More external innovation partners - more innovation success?

According to a study by the Fraunhofer Institute for Systems and Innovation Research ISI, however, the simple formula "the more external innovation impulses, the greater the innovation success" is not applicable.

 

Vorlage Projektteam Zusammenstellung

The empirical study "Modernization of production" specifically dealt with the relationship between the degree of openness of company innovation processes and the innovation success actually achieved as a result. The result of the study, which is based on company data from around 1,600 companies in the German manufacturing sector, can be summarised as follows:

1. The balance of external and internal innovation impulses promises the greatest innovation success.
2. When it comes to products and product-related services, it is primarily customers and users and the internal R&D department that provide impetus for innovations.

2_impulse produkt u service.png

3. In the case of technical and organisational process innovations, the impetus for innovation comes more from in-house production and management as well as from external suppliers, equipment suppliers and specialist events.

3_impulsquellen prozesse.png4. The successful mix of internal and external sources of impetus can be demonstrated both for products that were new to the company and for products that the company introduced to the market for the first time. Especially for market innovations, a 6 percent higher innovator rate demonstrates the advantage of "mixed" innovation strategies compared to purely internal innovation approaches.

Erhebung Modernisierung der Produktion.png5. In the development of innovative services, as many as 74 percent of companies were successful with a mixture of internal drivers and external innovation partners.

Innovative Dienstleistungen.png6. Companies that use internal innovation sources but also integrate external innovation partners also perform best with regard to process innovations.

Prozessinnovationen.png

The successful cooperation with external innovation partners requires a functioning internal innovation management. Dr. Oliver Som, co-author of the study and deputy head of the Competence Center Industrial and Service Innovations at Fraunhofer ISI, comments on the findings of the study as follows:

"Open Innovation does not promise "quick wins". For the successful implementation and exploitation of external ideas and impulses, a functioning internal innovation management, a consolidated learning and innovation culture as well as a successful design of interfaces and processes to external impulses are of central importance. Open Innovation can only make a positive contribution to innovation success if these elements are present. Focusing on a few but strategically important external sources of impetus is proving to be wise. Otherwise, Open Innovation will quickly lead to information overload in companies."

 

Open innovation is not a fad

The Garwood Center for Corporate Innovation at the University of California, Berkeley (USA), in cooperation with the Fraunhofer-Gesellschaft, investigated whether and how large companies use open innovation and which trends can be read from it. As part of the "Managing Open Innovation" study, 125 executives from the largest companies in Europe and the USA were asked how they practice Open Innovation:

  • The results show that large companies attach great importance to the involvement of external innovation partners and see this as a sustainable concept that will continue to grow in the future.
  • 78 percent of the companies surveyed stated that they have been practicing open innovation for several years.
  • Companies that already have practical experience are satisfied or more satisfied with the results the more experience they have.
  • None of the companies has yet returned to a closed approach.
  • External innovation potentials are increasingly used by realizing innovations together with customers or lead users or by using informal networks. Cooperation with universities and suppliers is also very important.
  • Approaches such as crowdsourcing, in which an unknown number of users are involved in the innovation solution, are still of comparatively little importance.
  • The companies surveyed take a cautious approach to the exploitation of their own ideas and technologies outside the company's boundaries. The free provision of know-how in the sense of the "open source model" or the establishment of spin-offs is still little used. However, joint ventures and participation in standardization bodies are widespread.

Importance of Open Innovation Partners.png

"The results of the study clearly show that open innovation is not a fad, but sustainable development," said Open Innovation father Henry Chesbrough about the study.

 

What are the advantages of external innovation partners?

  • Identification and development of new business opportunities.
  • More innovative results compared to Closed Innovation. The degree of innovation is higher, more radical innovations are being implemented.
  • The accuracy of fit of new solutions is higher. Problems are solved more effectively and individually.
  • The orientation of innovation activities is more in line with the needs of the market.
  • The risk of failure is lower. Lower development risk through risk sharing. - In many cases, innovations are developed faster and in most cases more cost-effectively (more knowledge transfer on both sides, higher efficiency of innovation processes).
  • The ability of companies to build up new value creation networks and industries is increased (strengthening of resilience in times of change).
  • A change of perspective through external innovation partners prevents blindness and creates added value.
  • Access to external knowledge about e.g. customers, market and technical possibilities.
  • Entry into new fields of technology and development of new markets.
  • Utilisation of economies of scale and specialisation.
  • Access to experts and specialists.
  • Potential for public funding through cooperation.
  • Image enhancement through cooperation.

 

Conclusion: External innovation partners + efficient innovation management = success

External innovation partners sustainably increase innovation success. The biggest challenge here lies in the organisational change away from the closed model towards a balance of internal and external sources of innovation and the establishment of new structures, processes and responsibilities.

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Michael PUTZ

Born in the Salzkammergut. After working for Shell and Porsche, he concentrated on innovation management as a study assistant at the Innovation Department of the Vienna University of Economics and Business Administration. In 2003 he founded LEAD Innovation and manages the company as Managing Partner. Lectures at MIT, in front of companies like Google or NASA.

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