External Innovation is Broken:
Here's How To Fix It "Parties often enter into external innovation engagements with good intentions and high enthusiasm, but surprisingly little clarity."
Why do so many companies struggle with external innovation? It's because they often don't plan their engagements before getting busy doing stuff. Parties often enter into external innovation engagements with good intentions and high enthusiasm, but surprisingly little clarity. Let's take a closer look:
Let's assume that one party has a technical challenge and the other has a possible solution. In external innovation, most solutions are not available ready-to-go. So, let's also assume that the solution provider will need to do a certain amount of development and or customization. With this as background, entering into most external innovation engagements, the solution provider will typically lack:
a commitment from the customer to buy the resulting successful solution. (this is extremely common, and is the topic of next week's newsletter).clarity as to the size of the business opportunity that a successful solution will represent for the solution provider's company in order to justify resource commitments, clear definition of specific process steps, decision criteria and timeline for commitments and actions, and,clarity regarding the development costs and which party will assume each of these,
Given this vagueness, the parties often do not make good progress. Here are some recommendations to help address some of these hindrances. It is best to manage these at the outset of any external innovation engagement. I realize that some of these recommendations, especially the first two, are pretty radical for the industry:
As soon as is practical (i.e. under confidentiality) the customer should be totally transparent about the nature of the engagement. This means to reveal whether or not the inquiry represents a real project with an internal sponsor and a commitment to go to market with the winning solution (note: it often isn't, or at least, it often isn't clear that it is). It also means to disclose whether or not other candidates are also participating in a given challenge. This gives the solution provider the option to opt in or out, if desired.
Without committing to final business terms, dimension the potential "size of the prize" for the solution provider and seek to reach basic alignment about the resulting business agreement, if the project is successful and their solution is chosen. It is ridiculous to go through a development cycle and then learn that the parties are not on the same page in terms of business/financial expectations.
Set proper and mutually agreeable goals, objectives and expectations, including timing and commitments (where appropriate) if certain milestones are achieved. Be transparent and open with chosen partners about the process that the parties will follow. This includes a regular cadence for communications. Far too many partners "go silent" for extended periods, which raises uncertainty and creates anxiety.
Decide if the partners are compatible before making substantial investments and commitments. Communication, trust and reliability are good predictors. With incompatible partners, sometimes it just isn't worth the bother.
Ensure that the partnership is properly resourced to help ensure best outcomes. Established companies shouldn't rely solely on the parties who propose the desired solution, especially if they have limited resources to help solve and properly qualify technical solution. Enlist additional resources too, if necessary.
Ultimately, we get the types of outcomes that we deserve based on how we design our external innovation relationships. If we take the time to do this work at the outset of engagement, we should achieve substantially better outcomes.
"Connecting You With The Right Solutions" BFS Innovations, Inc.