OPEN INNOVATION IS GREAT. WHAT ABOUT INTERNAL READINESS?

BY ELENA DONETS, CO-FOUNDER AND COO AT SPYRE. ELENA IS A LEADER IN ISRAEL’S ENTREPRENEURSHIP ECO-SYSTEM AND A MEMBER OF THE G7 FORUM FOR DIALOGUE WITH WOMEN LED BY DR. ANGELA MERKEL.

OPEN INNOVATION IS GREAT. WHAT ABOUT INTERNAL READINESS?

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. ANOTHER CORPORATION IS AN AGRICULTURAL WHOLESALER WHICH WISHES TO HAVE BETTER CONTROL OVER THE TIME IT TAKES PRODUCE TO GET FROM FIELD TO PLATE. THE STARTUP IN QUESTION CONSISTS OF MANY TALENTED PEOPLE, HOWEVER, THESE PEOPLE PROBABLY DO NOT HAVE ANY BACKGROUND IN AGRICULTURE, TRANSPORT OR LOGISTICS. MOREOVER, CHANCES ARE VERY HIGH THAT NO ONE IN THOSE STARTUPS HAS ANY FORMER FAMILIARITY WITH THE TWO MENTIONED CORPORATIONS AND THEIR INTERNAL WORKINGS.

THIS MEANS THAT WITH EVERY GOOD INTENTION IN PLACE, THESE STARTUPS ARE CONSTANTLY IN A POSITION OF BEING OUTSIDE AND LOOKING IN AS THEY TRY TO DEAL WITH AN ESTABLISHED CORPORATION WITH ALL OF ITS INHERENT RESISTANCE TO INNOVATION ON WHICH WE HAVE WRITTEN EXTENSIVELY IN PREVIOUS ISSUES OF THE MAGAZINE. ORGANIZATIONS RESPOND TO INNOVATIVE OPPORTUNITIES SIMILARLY TO HOW THE HUMAN BODY DOES TO POTENTIALLY LIFE-SAVING ORGAN TRANSPLANTS. IT’S AS IF A CORPORATE IMMUNE SYSTEM KICKS IN AND DESTROYS THE OPPORTUNITY AS A MEANS OF PROTECTING THE ORGANIZATION FROM ATTEMPTING SOMETHING NEW AND UNFAMILIAR.

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 is a classic case of corporations 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. The problem is that pilots are usually just scratching the surface of a corporation and the really hard part begins the day after the pilot. Most corporations simply aren’t ready for this effort in terms of the required skill set and a lack of motivation that its employees have to take on such challenging and risky endeavors. SENIOR PERSONNEL LACK OF AVAILABILITY - Corporations are filled with very busy people. The more senior the people the more busy they are. 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. When a startup related opportunity requires the assistance of a senior executive and the meeting is scheduled for two months later, this is just one of the many early signs that the opportunity is going to end on a sour note.

LEGAL OVERLOAD - The legal aspects of cooperating with established corporations usually involve thick “standard” contracts or lengthy NDAs (Non-Disclosure Agreements) that have been formulated over the years to cover every possible base for corporations that simply wish to protect themselves from potential litigation. Once again, 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. As stated above, startups live on borrowed time and delaying the start of activities until a standard procurement process is completed is another major mistake that corporations with good intentions make. This is simply how things are done over there. 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 (for example, the tiny tracking device serving to follow individual fruits and vegetables from field to plate) then this becomes an innovation project that goes through a well-defined process with clear decision gates. This cannot be left to improvisational efforts that simply believe in the good will of corporate citizens. It has to be a controlled, measurable and manageable process. 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 with a supporting cast consisting of innovation coaches, champions and mentors. This eliminates the need from any single central figure to be at the center of every opportunity and creates a distributed network that allows open innovation to take place at scale.

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. We must always remember that when an executive makes the decision to take a startup-related opportunity and create a first version of a product or service as part of a unit’s work plans this has to come at the expense of something else that is of a much lower risk level and whose impact is much clearer in the outset. 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?