How open innovation drives greater ROI
A recent study by CB Insights found that almost 85 per cent of companies said innovation was very important and an effective strategy against disruption by emerging technologies. Yet, those same companies invest in innovation primarily to enhance existing products and services, cut costs or improve productivity. Not to invent new ways of addressing disruptive risks.
Increasingly companies are turning to external science and research organizations to partner in open innovation models. Global 1,000 customers, USA government agencies, universities, and research institutions are turning to CSIRO for help in developing big ideas into disruptive products. Along the way, they have created 2,000 patents and 150 spinouts, to date.
Partnering in open innovation not only brings deep scientific research competencies to the table but also deep experience with a wide range of real-world problems. CSIRO US, which facilitates relationships between US companies, government agencies, academic institutions and Australian researchers and scientists, helps customers have the opportunity to reap tangible success and gain their own in-house innovation competencies.
Delving deeper into what drives open innovation initiatives and corporate venture groups, The Global Corporate Venturing Survey 2019, found that almost 20 per cent have the aim to “gather market intelligence, having optionality for a potentially disruptive technology or simply access to external innovation.” Fourteen per cent of the respondents stated their goal was to procure innovation that could benefit their parent company’s products or services. Thirteen per cent were interested in partnering or collaborating with start-ups, and 12 per cent were motivated by finding new revenue sources and streams.
The investment areas reflect these motivations. The study found that in 2018, the corporate investors in the industrial sector invested $7.9 billion in 47 robotics and drones, 33 in agriculture and agtech, 21 in space and satellite technology, and nine in artificial/advanced material companies, to name a few of the categories. And these are just from companies that self-report their investment activities. In the Health sector, $20.7 billion was invested in 2018 in 192 pharmaceuticals, 109 medical device and diagnostics, 78 healthcare IT/administration and 33 care provision and on-demand services companies.
In analyzing high-performing innovative companies, CB Insights found four unique, differentiating characteristics:
- The propensity to invest in disruption
- Greater appetite for risk
- Cross-functional culture of innovation
- CEO ownership.
Innovation is both a mindset and process
The most successful companies have leaders who see innovation as a catalyst to organizational transformation and agility. In other words, innovation can keep large and small companies ‘on their toes’. Whether it’s the product team, engineering, R&D or finance, employee curiosity should be encouraged so they become motivated to try new things. A good dose of “going against the grain” is required if innovation is to pay off.
According to James Mawson, Editor in Chief of The World of Corporate Venturing, some of 2018’s most memorable funded innovations include dexterous robots, fusion as an energy source, natural language processing for machines, use of ions as a potential quantum computing architecture, and new ways to treat health issues.
Global Corporate Venturing reported that in 2018, the vehicles of preference used to invest in innovation were 57 percent in a venture capital fund, 24 percent as corporate venture capital (CVC), and 11 percent in accelerators with the balance of funding in other forms including incubators. North America still leads the world in funding initiatives, with Asia in second place and Europe a distant third. It is important to note that Asia, by far, raised the largest amount of funds in 2018, eclipsing North America, Europe, Australia and New Zealand.
Harvard Business Review recently discussed that creativity, a ‘fail fast’ mindset and collaboration must be balanced with individual accountability, rigorous discipline, candor, and strong leadership for innovative cultures to be successful. That paradox might explain why companies are more comfortable with incremental improvements based on ideas from customers, employees, vendors/suppliers and competitors.
Ideation is easy. Evaluation and commercialization is harder. Fifty-seven percent of organizations do not have an innovation process, according to CB Insights. That stems from companies lacking the confidence and skills in development/design, commercialization/launch and management. The result is often a ‘not invented here’ mindset.
To that point, 51 percent of companies prefer to do their own research and commercialization which, unfortunately, takes too long to bring innovations to market. Sixty percent of companies require over 12 to 24 months commercializing innovations. By then the market opportunity may have shifted.
Companies that partner with external research organizations experience accelerated innovation to realize faster results and more successful commercialization. Open innovation is becoming widely adopted as it is proving to be an effective model. All types of companies are involved in CVC and open innovation across all industries – it just requires a willingness to fund what many might label ‘a crazy idea.’
CSIRO US facilitates relationships across a range of industries from food and agriculture, space, water conservation, and wildfire management to smart cities in order to support innovation. Partnering in open innovation not only brings deep scientific research competencies to the table but also deep experience with a wide range of real world problems. That kind of partnership is a win-win that enables companies to move beyond the hype talk of innovation.