As more and more organizations seek to reap the potential rewards that innovation offers through the means of open innovation, they encounter frustrations that are very similar to those experienced when innovating internally. The narrative goes more or less like this: “We invited startups and had a fantastic event. Management even approved a few pilots to follow up on. Six months later, no real impact has been achieved”. Innovation theater is a term often attributed to internal events of creativity, ideation and workforce engagement that while do achieve a positive effect of employee engagement in the short term, leave a bitter aftertaste months later as no substantial business or operational outcome can be identified as a result.
We are now seeing this open innovation theater effect in organizations that tried opening up to the ecosystem with the best of intentions but a common attribute for all of these failed attempts is a lack of internal readiness for open innovation. Our observation is that such internal readiness is what sets apart organizations that were successful in generating open innovation related outcomes from those that failed in doing so and could never go beyond open innovation theater.
What is open innovation internal readiness?
Let’s take a hypothetical example and imagine a startup that developed a technology which allows a device which is the size of a few millimeters and doesn’t require a power source to report its position from anywhere in the world within a 20 meter radius. Now, this startup participates in an open innovation event of a large transport and logistics corporation, which identifies an opportunity to attach such a device to any of its millions of parcels and containers being transported worldwide and thus, have much better control and data collection over its activities. The startup in question consists of many talented people, however, these people probably do not have any background in transport or logistics. Moreover, chances are very high that no one in those startups has any former familiarity with the corporation and its internal workings.
These startups are constantly in a position of being on the outside looking in as they try to deal with an established corporation with all of its inherent resistance to innovation.
For open innovation there are certain specific scenarios we encounter frequently that cause any such opportunity to stop dead in its tracks. Here are some of the most common:
The day after the pilot – This involves focusing on the front end of the process and dedicating attention to the exposure stage, selection of most promising startups and a few weeks of attention until a pilot is created. Most corporations simply aren’t ready for this effort in terms of the required skill set and motivation for its employees to take on such challenging and risky endeavors.
Senior personnel lack of availability – Corporations are filled with very busy people. Startups on the other hand have a very limited runway for takeoff and every passing day brings them closer to the end of that runway. Startup related opportunities cannot afford to move in “corporate time”. This is just one of the many early signs that the opportunity is going in the wrong direction.
Legal overload – The legal aspects of cooperating with established corporations usually involve thick “standard” contracts or lengthy NDAs (Non-Disclosure Agreements). This is not okay when dealing with startups that do not have the manpower nor the access to legal resources for such purposes.
Procurement setbacks – When a corporation decides to pay the startup for its time investment in the pilot (a common practice), it is not uncommon to see a lengthy procurement process that exhausts what is usually a very small and young company. This is simply how things are done in the corporate world. However, this practice is detrimental to open innovation efforts.
So what should corporations do in order to develop internal readiness for open innovation?
The answer consists of three aspects:
An orderly process – When a corporate employee identifies a startup that could become an opportunity within the context of this corporation then this becomes an innovation project that goes through a well-defined process with clear decision gates.
A supporting internal community – We tend to use the term ecosystem to describe the external environment of startups, corporations, academia and the relationships between them. For open innovation to thrive in an organization, it must have an internal innovation ecosystem as well.
Involvement of key executives – For open innovation to generate clear, valuable outcomes, every organization has certain key executives that must be involved in the innovation process. In order to get executives to make such a decision, there are very specific ways in which they must be involved in the process. This involvement has to generate maximum effect while requiring as little of their time and attention as possible.
In summary, open innovation has many similarities with internal innovation simply since internalizing a startup technology into a corporation and generating products and services based on that startup, is essentially like taking an internal idea through an innovation process.
The technology the idea is based on is simply based on a startup technology and the opporunity’s success depends on how well the organization handles its interactions with that startup on one hand and its internal ability to handle the opportunity on the other.
What about your organization? Are you internally ready for open innovation?