Traditionally, it was the large corporations, with the time, resources and R&D budgets, who took the lead in developing new ideas. Big corporates were extremely protective of new developments, viewing other companies solely as competitors. The playing field is changing however, and some large businesses are experimenting with a more open form of business: recognising that the innovations that can give them a crucial competitive advantage can come from outside the business as well as inside.
Mining the SMEs
Small and Medium-sized Enterprises (SMEs) are a rich source of innovation for large companies flexible enough to deal with them, as Thames Valley Enterprise Hub Director Ed Cooper explains “Entrepreneurs are by nature innovative, and good at taking risks, and consequently generate ideas quickly and often. Large companies may have a limited pool of researchers, so by opening up to SMEs there is the opportunity to draw in ideas from exactly the sort of people most likely to spot opportunities.”
It’s not just a case of finding ideas from outside, however, as Ed Cooper continues, “Big corporates may even have Intellectual Property (IP) residing in their business that for strategic reasons may never be developed in time for it to be exploited. It may be possible to license this IP to a smaller, fast moving company that can then exploit it and produce a commercial proposition. The corporate then has the option to take the IP back in via acquisition or partnership.”
The advantages to both parties are clear: SMEs get the opportunity to leverage their ideas and the capacity for agile development with the resources of a much more powerful (and richer) partner; big corporates get access to innovations and new thinking that is unavailable to them through established routes. It seems an obvious fit.
The fact that this kind of cooperation is still relatively rare suggests that the situation may be more complicated than it seems, however. One serious issue is that SMEs and large companies differ from each other, as Ed Cooper explains, “Cultural differences between SMEs and large corporates result in many problems:
Acceptable time frames differ – three months can be a very long time to an SME, but it’s an insignificant amount of time to a large company. A corporate can inadvertently “string along” an SME for what is (to the SME) a long time. The SME will probably need a quick decision, but big companies with complex decision making processes don’t work to that sort of timescale.
Legal agreements can get in the way – the corporate needs to recognise that the requirements of the SME are legitimate, and have a process to make decisions quickly; but equally SMEs have to be realistic about the processes and safeguards that a larger company will reasonably expect.
Complex decision trees – staff in big companies can believe they are being helpful passing an SME around internally, but that process may seem interminable to someone working on a small scale. The SME will need to quickly identify a decision maker, but the corporate may not even have a single person who can make a decision.”
Joined up thinking with the H-I Network
It might seem that, however attractive the prize, the process of small and large companies working together is just too difficult to be worth the effort. But there is specialist help available. Andrew Gaule is CEO of the H-I Network, which focuses on fostering innovation and growth within established organisations. He has first hand experience of the difficulties small and large companies can encounter when attempting to work together.
“Corporates have a need to innovate,” he explains, “particularly in response to pressures such as changing technology, global competition, and big theme issues. They can’t do everything, so some of them are adopting a policy of ‘Open Innovation’ – actively encouraging ideas and expertise from outside their organisation.” After all, says Andrew, organisations routinely outsource other vital business processes, such as accounting or payroll, so why not innovation?
The H-I Network helps organisations to work through the process of Open Innovation.“They’re used to running big businesses under normal circumstances,” says Andrew, “that’s not necessarily a good basis for innovating in new spaces. If you are a large company, Health & Safety, and Profit is your focus – that might not leave a lot of energy for looking for the Next Big Thing.”
To help bridge this gap, Andrew and his team have developed a new technique. Called Joint Opportunity Assembly (JOA), it’s a way of tying organisations together to look at specific opportunities jointly.
“It’s more about finding common ground and synergy than it is about macho deal making,” explains Andrew, “Big companies are dealing with the unknown, and collaboration is one way of managing the risk associated with that.”
The JOA process is designed to be driven by from whom and where the requisite skills and opportunities can be found – so small companies are as likely to be involved as large ones – and it’s proving to be an effective way of bringing different organisations together around a theme. JOA has already been used to develop ideas around the themes of the Ageing population, Converging Technology, and Sustainable Energy.
GlaxoSmithKline’s consumer health division is an example of an organization with an active Open Innovation programme focused on making use of outside ideas, and one of the places it has found innovation is the Enterprise Hub Network.
Shafik Saba, responsible for Consumer Health Innovation at GlaxoSmithKline in the UK said,“The ideas we’ve seen through the Enterprise Hub Network and SEEDA have stimulated new thinking and generated propositions for us to evaluate.”
“By building these relationships our ‘wants’ in the areas of pain relief, dental care and smoking cessation are becoming more widely known, and breakthrough ideas are more likely to come through in the future.”
However, although the thinking behind the Open Innovation approach is gaining ground among the more forward thinking corporates, not all big companies are interested in looking outside themselves for inspiration. Andrew thinks that attitudes to finding innovation will affect the way the corporate landscape develops, “Historically, few large companies maintain their dominant positions for long,” he says. “Either new companies come in and take market share, or the market changes radically. The organisations that have prospered over time are those which actively search out and embrace change. The amount of effort spent on innovation differs between industries and between organisations: not all organisations spend, or have to spend, a large proportion of their time on innovation.
“Even so, the most innovative companies will be open to the idea of looking outside themselves for new ideas and ways of doing business. And it’s those companies, whatever their size, that will be in the best position to take advantage of what the future brings.”
Contact
H-I Network
