Open innovation: how to ensure a successful deployment
By Julie Durban - 29 March 2021
In an increasingly competitive ecosystem, large groups must respond to the challenge of innovation to stay ahead of the pack. Their internal knowledge and resources can sometimes be limited to keep up with new tech trends, so many of them call on external players. This is known as open innovation. Startups, often characterised by their agility and innovativeness, come into the equation to provide new solutions. Despite 87% of startups having partnerships with large companies, their collaboration can sometimes turn sour and end in failure. The main obstacle observed lies in the transition from Proof of Concept (POC) to large-scale deployment. How can they optimise this transition and increase the chances of a successful deployment?
Putting the startup to the test
The gateway to open innovation is undoubtedly the pilot phase. What better way to test the adequacy of a startup’s innovation with a corporate’s expectations than through practice? This is why the POC is essential. By testing the solution in real conditions, whether free of charge or not, they can check that it meets the needs of both stakeholders.
In large companies, the open innovation team usually manages startup sourcing and the launch of POCs. Thus, startups interact with a limited number of stakeholders, most frequently the innovation department and a few business representatives. These representatives are essential to understand the specific needs of each business unit and the concrete use cases for startup solutions.
As the POC phase is an iterative process, several rounds of feedback will take place between the startup and the open innovation team. This qualitative feedback will benefit both the startup and the large group. Indeed, it will enable the startup’s offer to be refined in accordance with the corporate’s expectations, to arrive at a final version that perfectly meets their needs. For the large group and its open innovation team, it is important not to carry out too many POCs at the same time in order to preserve sufficient resources for the deployment of the best startup solutions.
At the end of this test phase, three outcomes are possible for the startup:
- Positive, leading to deployment within the corporate
- Negative for a product as is (needs to be improved)
- Definite negative (fails to meet the need of the corporate partner)
Deployment, a critical phase of the startup-corporate collaboration
The FrenchTech Barometer shows that the average conversion rate of POCs into commercialised and/or industrialised products is 37% among respondents. That is 12% higher than what was found in a recent study of the US market. Research shows slowness is one of the main problems. 96% of startups and 75% of large corporations find deployment times too long. Fast and efficient conversion is therefore a key factor of successful collaboration, especially for startups whose survival may be threatened by delays.
Also, despite open innovation teams being close to the startup ecosystem, deployment can be hampered by communication problems. Indeed, other players come on board at the time of the deployment: procurement, risk and IT departments, business units, etc. The responsibility no longer lies solely with the open innovation team. This multiplication of collaborators carries the risk of creating confusion and frustration. Who has the final say? Who is responsible for what?
Deployment at group level implies moving away from the startup-open innovation team relationship. It requires infusing a startup culture in the broadest sense of the term within business units and departments that may be quite set in their ways. Successful deployment is dependent on the education of employees who are not familiar with the new solution. Identifying the levers of commitment to foster adoption is also a decisive factor. Failure to deploy a startup solution can also sometimes be attributed to the startup itself, if it is not able to ramp up production on a large scale.
Structuring the collaboration for a successful deployment
The maturity and stability of a startup are, by definition, much lower than those of a large group. This is why, before any collaboration, the corporate must be able to evaluate the scalability of the startup. Early Metrics’ ratings do take this criterion into account, notably through the evaluation of the startup’s commercial traction, its business model and speed of technical and commercial development.
Moreover, successful deployment requires a rigorous but streamlined administrative structure, given that startups are special companies with their own way of operating. France’s national state-owned railway company, SNCF, is among the successful examples of such practice. The group set up a simplified contract for startups to facilitate collaboration. This framework kit ensures that the group and the startup share the same vision and the same priorities. It clarifies all prerequisites and provides a framework for the development of the POC.
Other large groups choose to set up specific teams, dedicated to the deployment of solutions derived from such collaborations. To ensure a good framework, some also choose to include key success factors in POC contracts in order to scale up the collaboration faster. These KPI references can act as a checklist for different POC steps and optimise the chances of concrete results.
How to avoid the culture clash
To overcome the potential culture clash between startups and large groups, it first needs to be acknowledged. This is what open innovation departments do, they enable dialogue between two diametrically opposed worlds. This role of mediator is key to ensuring sound communication and follow-up with the various players. Each stakeholder generally has different concerns, the effects of which are not necessarily negative:
- Startups are worried about an imbalance between the time and effort involved and the potential benefits. They also fear losing their autonomy or bargaining power.
- Large companies are afraid that startups will not be able to scale up due to lack of resources or skills.
It is therefore up to everyone to smooth out these fears in order to overcome the culture clash. The corporate group must play a key role in the growth of the startup. It can act as an accelerator, thanks to the resources and network it can provide. For its part, the startup must move quickly, be adaptable to its partner’s needs and find the ideal market-timing.
But giving a startup too much business at once can be counterproductive. It is therefore necessary to move away from the traditional supplier-customer model to mitigate the risks and move towards a win-win partnership. The question of governance within the collaboration also arises. Should the open innovation team take on a wider scope of responsibility? In general, open innovation departments are responsible for identifying relevant startups but only have a monitoring role during the deployment phase. It is the business units that are ultimately responsible for the success or failure of deployment.
A new approach to innovation deployment?
A recent survey by Village by CA and Capgemini showed 56% of startups and 53% of large companies have had to suspend their collaborative projects due to Covid-19. This doesn’t mean open innovation will disappear, far from it in fact. Large companies will continue to collaborate with startups to seek solutions to new issues and changing demand, even with a reduced budget. They now need to put in place best practices to prioritise projects and increase the chances of a successful deployment. In so doing, they will also optimise the costs of open innovation. Given the context, why not imagine a complementary step or an alternative to the traditional pilot, by turning to VR or AR simulation? These technologies would make it possible to test new solutions, despite not being able to be physically together in the same workspace.