In today’s rapidly evolving business landscape, open innovation is critical for corporations seeking to stay ahead of the curve. Engaging with corporations and assisting them with scouting and other measures to facilitate their journey toward open innovation is crucial to what we do at Value+. We discovered many commonalities after speaking with dozens of people across various industries, countries, and corporate positions.
This blog aims to share some key features that corporations must adopt on their journey to open innovation. While this is not an exhaustive list, and every organization has its way of doing things, implementing some of these strategies will contribute to achieving open innovation’s goals.
1. High-Level Sponsor – Having someone at the highest level of the organization who is willing to push innovation forward within the organization is crucial. We have observed the innovation team will sometimes be the first to pay the price when struggles occur. An executive who encourages open innovation provides the resources and enables the different business units to work with startups and take risks will likely succeed more in implementing new technologies and staying ahead of the curve.
2. Working With Business Owners – Having a high-level sponsor is not enough; business owners must be part of the process. That means ongoing meetings with the Corporate Venture Capital (CVC) and corporate open innovation team, sending problem statements, evaluating startups, and providing continuous feedback to all stakeholders. Involvement is the key. Internal marketing – newsletters, innovation workshops, and finding champions in each division can also help promote open innovation in different parts of the organization. According to the Economist Open Innovation Barometer survey, 64% of respondents reported satisfaction with the Open Innovation business performance. (https://impact.economist.com/projects/open-innovation/Open%20Innovation%20Briefing%20Paper.pdf)
3. Clear KPIs and Goals – It is essential to define what you are optimizing for. What are you trying to achieve? What will change your organization’s needle? Is it financial returns, strategic partnerships, new business models, or growth engines? Whatever you define will be what you should aim to measure. For many corporations, the main innovation goal is the number of Proofs of Concept (POCs). When this is the primary KPI, you will probably have many POCs, when the question should be how many of them will convert into commercial business? Suggested goals should include implementing technology in final products and purchase orders. Another essential aspect to measure is the collaboration with startups and the involvement of business owners (as mentioned in the 2nd point) – are they merely sending problem statements, or are they actively working towards open innovation? It is well known that between 70 and 90 percent of acquisitions fail, so setting appropriate goals for working with startups is crucial in preventing failure. (Harvard Business Review- https://hbr.org/2020/03/dont-make-this-common-ma-mistake#:~:text=According%20to%20most%20studies%2C%20between,integrating%20the%20two%20parties%20involved.)
4. Focus on Value – this word is often forgotten in this process – but it is what everyone is ultimately seeking. It can be a financial or business value, or any kind of advantage innovation can bring to the organization. Value doesn’t always have to be economic or strategic – it can also benefit in terms of increased customer satisfaction, operations efficiency, or even improved employee morale (for example, in the Future of Work).
5. Effective Sourcing – There are many ways to get deal flows and startups (including Vintage’s Value+). Optimizing your time requires finding people who understand your organization and problem statements, whom you can trust, and who understand your incentives and interests. While you should focus on the most valuable connections, reevaluating your network on a regular basis, ensures you find the right people to bring, the best possible deal flow, and access to the best startups available.
6. Collaboration Across Departments – In a corporation, numerous departments are devoted to open innovation. CVC, Corporate Development (M&A), business development, partnerships, innovation managers, scouting offices, and many more. Generally, Fortune 500 companies have the same departments across many business units. You can have a few CVCs or Corporate Innovations serving different business units. Those departments fuel one another, and they must work together for deal flow, reviewing startups, and finding the most effective way to collaborate with startups.
According to The Economist, 72% of organizations have a centralized team dedicated to open innovation. This centralized team manages the entire open innovation cycle, from scouting to deal-making and implementation. The team also keeps track of trends and metrics to assess the performance of the open innovation program. This allows them to make better decisions and ensure the program is successful. The downside is that sometimes, this team can be a bottleneck in the decision-making process. Thus, it is essential to encourage cross-department collaborations, regardless of the number of teams involved.
7. Corporate Hierarchy – As mentioned, many departments usually work on open innovation inside an organization. Do they all report to the same executive? And who is it? Is it the Chief Information Officer, the Chief Strategic Officer, or the Chief Technology Officer? It is vital to identify the one leading innovation efforts at the C level and ensure that all departments are aligned and serve the same goals when it comes to innovation. This can only be accomplished once the individual leading innovation in an organization is actively making sure all departments are working together and serving the same goals.
While this is not an exhaustive list, focusing on these key strategies that we noticed on our corporate innovation journey will ultimately contribute to your own and add value to your organization. If you take one thing from this article – value is the most important, as innovation is all about value.