Part 2: Building an Innovation Supply Chain

How enterprises can capture more value from their startup ecosystem.

calendar icon July 24, 2019

We continue our 3-part blog series on how companies are building and scaling innovation supply chains. These insights were gained at a workshop for over 60 innovation leaders representing a cross-section of companies in the Fortune 500, as part of the Innovation Leader Field Study held in San Francisco. In Part 1, we covered the internal network – how to align with executive leadership and business units to understand the needs of the business and to inform whether existing or potential partnerships can meet those needs.

Today we’ll delve into the external network, and what our workshop participants identified as the most effective practices for identifying and growing a network of potential partners that can provide ideas and technologies to accelerate innovation.

Key Learning and Insights: External Network

Most of our workshop participants are pursuing an open innovation strategy. Partnering with startups, universities, research consortia, incubators, accelerators, and even customers is widely accepted as a way to get better products to market faster. That’s no surprise, given the widespread shift from a “go it alone” innovation model to one that augments internal R&D efforts with externally-sourced solutions.

The question then becomes, which external partnerships should be pursued, and which promise the best outcomes?

Partnership models

Workshop participants tended to think about partnerships in one of three ways based on the type of innovation sought, and the urgency for finding best-fit solutions to meet market demands:

  • Customers as design partners: asking users (or potential users) what they need, and where there is pain in the current way they get things done, provides product teams with rich insights for designing new products and services.
  • Co-creation partnerships: working with start-ups, product teams, developers and designers from other organizations to generate new ideas and identify potential technology solutions quickly and collaboratively to meet the needs of the business.
  • Strategic partnerships: developing symbiotic relationships with universities, industry groups, consortia, standards bodies, and even competitors can give companies early looks at important market dynamics and technological advances.

Most common sources for external innovation

In building effective innovation supply chains, our workshop participants identified their top 5 outside sources for ideas and complementary technologies:

1. Design Challenges/Hackathons
The hackathon is a concept that most in the group have adopted or are planning to adopt. Hackathons are seen as an expedient way to generate ideas and problem-solve for customer needs. Many companies conduct internal hackathons; Facebook’s Like button was born out of a hackathon as was Twitter. A growing number of companies invite outside parties to participate in hackathons, which can be useful in identifying and recruiting talented designers, developers, and subject matter experts as well as providing new perspectives on complex challenges. From an ecosystem perspective, hackathons are relatively easy to execute and can be an important tactic in the innovation manager’s arsenal.

2. Universities
Educational institutions are undeniably at the forefront of advancing science, inventing new technologies, and powering new markets. Industry-university partnerships promise great benefits for both parties including funding and student pathways for universities, and ground-level access to promising ideas for industry. Universities also play an increasingly important role as hubs for a regional innovation ecosystems, opening up new avenues of engagement between corporations, startups, and university collaborators. MIT Regional Entrepreneurship Acceleration Program (REAP) and the Carnegie Mellon Center for Technology Transfer and Enterprise Creation (CTTEC) are great examples.

3. Startups
Partnerships with startups came in third on the list. Examples of ‘David and Goliath’ partnerships abound, such GM and Cruise Automation, McKesson and RelayHealth, or Marriott and LiquidSpace. Workshop participants agreed that creating strong relationships with the startup ecosystem was critical to their long-term success. Most were actively researching and/or investing in making improvements to processes and tools to better connect startups to stakeholders across their organizations, encourage more engagement across teams and departments, and manage risk.

4. Accelerators
Our group considered accelerators like Techstars and Plug-n-Play excellent resources for identifying promising early-stage technology companies. Accelerators can act as a bridge between startups and enterprises by focusing on innovators in specific verticals or geographic regions. By pulling together innovators solving the similar types of challenges, accelerators are effectively creating a pipeline of new technology that enables enterprise partners to fill known gaps more expediently. Accelerators provide established companies with market intelligence, vetted startups and expert guidance to help them understand the available talents, cultures, and subtleties of partnering with the startup community.

5. Conferences
Conferences are a good opportunity to connect with other organizations with shared challenges. They tend to attract both industry leaders and up-and-comers who see themselves as disrupting the status quo. Being present at these events helps strengthen personal relationships that are at the heart of effective ecosystems.

In Summary

Companies pursuing an open innovation strategy recognize that partnering with an external ecosystem of innovators can result in faster time-to-market for new products and solutions. As we can see from our workshop’s Top 5 list, the types of partnerships they engage in cover a wide gamut. But the most important element of success in any collaborative approach to innovation is developing a detailed view of the external ecosystem and becoming a partner of choice for leading innovators.

Next month, we’ll wrap up our blog series with how innovation teams can work more effectively within the organization across teams, geographies, and functions to eliminate redundancies and make a greater impact.