Collaborative innovation definitely has its benefits. Whereas at first, it may seem intuitive, it is actually not so simple and straightforward to integrate your innovation practices with another company through collaboration.
According to Akyuz and Gursoy, collaborative innovation can be defined as “the process of managing the interaction and collaboration of multiple partners to deliver new solutions within a business ecosystem.”
The need for collaborative innovation arises because each participant individually does not have the capacity to carry out the innovation implementation, so they reach out to partners to deliver it.
A great example of collaborative innovation is P&G’s Pringles Prints. In 2009, the company conceptualised a new product, which would have custom words and images printed on each Pringle crisps.
In collaboration with a small-bakery, which came up with a method for printing in ink-jet method on edible products, P&G managed to quickly adapt its technology. This enabled them to reduce product development costs and time-to-market.
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But there are many prerequisites that need to be met before successful collaborative innovation can be implemented within a company:
- Preparation for sharing intellectual property
- Organisational mindset that is beyond competition and adversarial sentiments
- Ability to learn and combine different company or department cultures
- Synchronised analytics and measuring
Although this seems achievable (and with the right amount of time and resources, it definitely is) a total transformation has to happen on a company or department level before collaborative innovation is implemented.
Surpassing limits
The most obvious benefit of adopting open, collaborative innovation is that a company will be free of the constraints of closed innovation. Every company that decides for a closed innovation approach will also have to factor in its limits.
However, this closed innovation paradigm is not all negative, the way open innovation is not all positive. Closed R&D, after all, let to some of the most important achievements and business successes in the 20th century.
It was also an innovation model that was used by most US companies in the previous century.
At the same time, this past success of the closed innovation model does not guarantee efficiency in the 21st century’s realm of warp-speed technological progress.
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Why has the Silicon Valley of the 21st century become a playground for collaborative innovation?
The answer is the exact benefit we’re talking about – getting rid of the limits of closed innovation: high investment requirements, a limited span of ideas, high demands from employees and the costs of creating high-performing teams.
Higher returns
According to Kalypso’s whitepaper Best Practices in Collaborative Innovation, there is a potential for a 10-15 per cent increase in sales and profit for companies that decide to take this approach.
This is achieved through a reduction in R&D costs, speeding up time-to-market and creating new revenue streams.
In closed innovation models, a huge portion of the revenue is spent on in-house R&D, talent and product development. When you take this out of the equation, there is a much higher profit that will remain to be used by the company for other purposes that can boost sales, such as marketing.
Rethinking labour division
According to Pavitt and Steinmueller’s Collaborative Innovation study, collaboration within companies prompt innovations in the division of labour and will ultimately lead to “enquiry into the future of capitalism”.
In another research paper from 1947, Schumpeter argued that the major determinant of the future division of labour and the very nature of capitalism, our companies, and corporations, will be their ability to make innovation routine.
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In a less apocalyptic and world-shattering sense of the word labour division, collaborative innovation actually has the capacity to remodel organisational hierarchies in the short-term.
Creating customer focus-friendly environments
When different departments within a company gather to provide an innovative approach, their common view will reflect that of a customer. Given that the issue has to be viewed from all sides at the same time, the final solution will be exactly what the customer would want in each step of the buying process.
For example, a tech employee or team from the IT department might have an innovative idea, but the sales and marketing department might contribute and add that this idea is not really marketable to the general audience.
The finance department might warn that the idea is not very cost-effective. In this example, in order to come to a collaborative solution, all three departments will have to make up these differences in order to actually achieve the desired result.
“When we think about innovation, we usually think about disruptive businesses and industries and ways in which this disruption will skyrocket their profits. However, those who actually use these products and services – customers – are the ones who are on the other side of the story, and focusing on customers should be the number one priority of collaborative innovators within a company,” says Mitchell Foreman, HR manager at AllTopReviews.
When the joint goals of partners in collaborative innovation are to create win-win situations, this is always done through the lens of the customer.
Optimised resource allocation
Collaborative innovation can have far-reaching consequences for the business ecosystem, which is often among the primary goals of companies in collaboration. However, it can also result in many other positive effects, such as better use of your own company’s resources.
More often than not, innovation and optimisation are sparked by an employee or a team noticing that the company is “losing” money somewhere in the operational process. For example, a customer support team at one of the paper writing websites or at a skills assessment software company might notice that they’re wasting too many hours on identical tickets and demands and recognise the need for an AI-powered chatbot.
In this way, innovative thinking and collaboration among different departments can lead to savings and better attribution of your company’s resources. This can also happen in collaborative innovation processes with another company.
Agility and adaptability
An important aspect of innovation is also for a company to be able to adapt quickly to market demands, requirements and challenges.
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If your departments are cooperating and collaborating on innovation issues, it will be much easier to predict where adapting is in order. It will also be much easier to speed up the innovation process and actually see ideas come to life (from ideation, analysis to commercialisation) much more quickly.
The time to market acceleration is also one of the major benefits of collaborative innovation. Given that products are developed faster than ever and it’s important to launch a high-quality product faster than your competitors, this will become one of the main benefits of companies competing in crowded markets.
Agility and time to market are one of the most important factors that led to the popularity of collaborative innovation in the ICT industry.
Improved decision-making with data
Of course, shopper and customer data is a precious resource across all departments within a company, and innovation is no different. Not only that, but innovation is actually among sectors that can benefit from data and insight the most and translate it to actual business results most evidently.
In innovation departments and collaborative innovation processes, ideas don’t have to appear “on their own”: they can actually result from a question or issue posed in consumer data analytics.
For example, an e-commerce company might notice that women over the age of 50 are most likely to abandon their carts. The task of the collaborative innovation team would be to identify the possible causes of this and to generate ideas that would tackle this issue.
This also happens to be one of the double-edged swords of collaborative innovation: when you share your consumer insights with a partner company, you will simplify the decision-making process and make room for better, insightful ideas. On the other hand, you will also be sharing one of your most valuable assets.
Higher degree of differentiation on the market
This is another benefit of CI that is intuitively understood but is rarely utilised and taken to its maximum.
When you’re working with a partner company in a mode of collaborative innovation, you can present the best of both worlds to the market you’re competing in: and the same goes for the company you’re partnering up with.
This is especially applicable when you have an exclusive R&D or collaboration arrangement with another company.
There are so many benefits to collaborative innovation within a company that it’s become simply irrational to not include this approach in your operational structures, when possible and when necessary.
Whether you want to decrease your product development costs or simply start cooperating with companies that possess high-value innovation property, this is one of the best approaches you can make as a company.
However, it’s important to keep in mind that the model does have its drawbacks, so you will have to do a careful cost-benefit analysis before you even enter that realm.
For example, for companies that find it very risky to share their intellectual property or consumer data, collaborative innovation will be a no-go.
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