This is the fourth of several ‘Innovation Perspectives‘ articles we will publish this week from multiple authors to get different perspectives on ‘How should firms collaborate with customers and/or value chain partners to co-create new products and services?’. Here is the next perspective in the series:
by Mike Dalton
Innovate with Your Eyes Wide Open – Five Upfront Actions to Improve Any Collaboration
Henry Chesbrough put it best, “You cannot meet your growth objectives if you ignore all of the smart people out there who aren’t on your payroll.” Hearing that, you can’t help but think you’re missing out on something really great if you don’t have a portfolio full of outside alliances. No wonder open innovation has become a “best practice.”
Unfortunately, so-called best practices lead many companies astray. In fact, one study showed that more than 70% of attempts to collaborate fail when partners venture outside of traditional buy-sell relationships. Now that should be an eye opener – one that you need to consider before running out and developing that next value chain collaboration.
Clearly many companies have used OI very successfully. So the driver for that failure rate isn’t the practice itself, but actually the lack of practice. By that, I mean that companies simply get caught up in the thrill of the hunt and don’t take the time to do the less glamorous work of getting clear on how their needs, capabilities, and objectives align with those of potential partners. Just like with managing projects, up-front planning and reflection pays huge benefits in OI collaboration.
Here are five actions that you and your value chain partners can take to avoid being another statistic and instead co-create new products that create value in the marketplace.
- Make sure you know what you need: Each partners goals and objectives for the collaboration must be explicitly spelled out. Let’s face it, most companies aren’t patient about new product investments so you can’t afford to start off in the wrong direction.
- Make sure you really need a partner to get what you need: From a Theory of Constraints based approach, OI adds to or “elevates” innovation capacity. However, it’s not for free so before adding capacity, and its inherent complexity, you should first take actions to get everything possible out of your existing capacity.
- Make sure you know who’s going to do what: In any collaboration, each partners role and resource contributions (including intellectual property) must be spelled out explicitly so that you know whether the sum adds up to enough to get the job done. This of course applies to technology roles as well as those for sales, marketing, manufacturing, and distribution.
- Make sure you know what you need will need invest: Too many companies enter alliances as if OI is some magical approach that adds capacity without adding cost – as if the innovation efforts of outside partners came at no internal cost. But that’s also a big part of why the failure rate is so high. Successful OI practitioners know that and add the infrastructure necessary to manage OI.
- Make sure you’re up to the task of collaborating: Managing alliances is complex. If you thought getting silos to cooperate internally was a challenge, try dealing with three sets of them: those in each partners business and the new ones that can form in the alliance. You must not only agree on how to manage the alliance, but you must be confident that both your organization and your partner’s organization will cooperate.
So do you and your potential supply chain partners a favor. Start your collaboration with your eyes wide open and take these five actions before you begin.
You can check out all of the ‘Innovation Perspectives‘ articles from the different contributing authors on ‘How should firms collaborate with customers and/or value chain partners to co-create new products and services?’ by clicking the link in this sentence.
Mike Dalton is author of “Simplifying Innovation” and founder of Guided Innovation Group, whose simple mission is helping companies turn their new product innovation into bottom-line impact. His innovation improvement framework was sharpened over 24 years of product development, marketing and executive leadership at the SC Johnson family of companies.