The power of Open Innovation

In today's rapidly evolving business landscape, the concept of innovation has taken on a pivotal role in determining an organisation's success. Open Innovation, a paradigm that emphasises collaboration, information sharing, and partnership, has emerged as a powerful strategy to drive creativity, enhance competitiveness, and foster growth.

Open Innovation refers to the practice of leveraging external ideas, technologies, and expertise to complement internal efforts for achieving innovation. Unlike traditional closed innovation models, where all innovation activities are confined within the organisation's boundaries, Open Innovation advocates engaging with a diverse network of stakeholders; including customers, suppliers, research institutions, and startups. This approach enables a broader range of perspectives, accelerates problem-solving, and capitalises on the collective intelligence of the ecosystem.

Our 2023 Open Innovation Report developed in partnership with Ipsos and INSEAD, focused on startup collaboration. We surveyed over 1,600 startups and organisation spanning 10 European countries and the results highlighted that Open Innovation is mainstream.

61% of UK organisations are now running collaboration projects with startups, while 81% of UK organisations rate startup collaboration as ‘Important’ or ‘Mission Critical’ for their business strategy, highlighting the growth of this innovation practice to deliver business change.

Market forces

According to the 2023 Gartner Hype Cycle, Open Innovation is one of the most important innovation management techniques; with Open Innovation currently on the slope of enlightenment and expected to reach the plateau of productivity within the next two years.

There are three key factors driving the adoption of this innovation practice:

1. Rapid technological advancements: The pace of technological change has outstripped the capacity of any single organisation to maintain a competitive edge. Open Innovation allows access to cutting-edge technologies and expertise without heavy internal R&D investment.
2. Globalisation and market dynamics: Businesses operate in a globalised marketplace with complex consumer demands. Open Innovation facilitates customisation, localisation, and rapid adaptation to diverse markets through collaborative partnerships.
3. Risk mitigation: Sharing risks and resources with external partners can mitigate the financial burden of innovation, especially for high-risk, high-reward projects in a challenging economic environment

Our Open Innovation research

Our report focused on the relationship between organisations and startups, wherein we identified several reasons why organisations and startups specifically are collaborating now.

Organisation drivers

As reported by 46% of organisations, the primary driver is the opportunity to discover unknown business opportunities. By collaborating with startups, organisations can become exposed to completely new technologies and unexpected ideas. They find it valuable to broaden their horizons by looking outside the organisation’s boundaries for fresh ideas, knowledge and expertise.

The secondary driver is the opportunity to create new solutions. Organisations seek to fill knowledge gaps with immediate access to expertise. Instead of starting from scratch, they can partner with a startup that has already developed the solution they need; avoiding pitfalls and incorporating valuable lessons. This significantly reduces time-to-market.

The third driver is the ability to improve internal business practices. Unencumbered by traditional company structures, startups tend to be characterised by a hyper-creative and entrepreneurial mindset with high levels of autonomy and agility. A key reason why our respondents are engaging in startup collaboration is to allow inspirational culture and ways-of working to add value to their own organisation.

Startup drivers

As reported by 50% of startups within our report, the primary driver is access to market, and the ability to leverage existing, established relationships to introduce new products and services. Instead of a cold introduction, they benefit from being part of a group with a recognised and trusted delivery partner with relevant credentials and experience.

The secondary driver is access to financial capital; demonstrating that corporates are considered more important as a source of growth than a source of finance. 44% of startups still referenced financing however, wherein collaboration opportunities provide a way for startups to demonstrate their product/service, with the potential for investment and/or acquisition by corporates.

The third driver is access to people. This most often relates to depth of capability as opposed to subject or domain expertise; where SMEs tend to be resource constrained and rely upon larger organisations to provide the delivery capability required to implement large scale transformation.

Driving growth: the benefits of Open Innovation

Open Innovation enables our clients to respond to market challenges and capitalise on new opportunities to develop and retain competitive advantage.

While numerous, the key benefits can be summarised as:

1. Enhanced creativity and problem-solving: Collaborating with external partners brings fresh perspectives and expertise, fostering innovative thinking and novel solutions to complex challenges.
2. Access and accelerated time-to-market: Partnering with external organisations can provide access to untapped markets, customer segments, and distribution channels; while leveraging external resources can expedite the development and launch of new products and services, giving organisations a competitive advantage.
3. Improved resource allocation and diversified risk: Efficient allocation of resources through partnerships ensures that each organisation focuses on its core competencies, leading to increased operational efficiency. Sharing risks and costs with partners reduces the impact of failures, enabling organisations to explore more ambitious projects.

The innovation ecosystem

Open Innovation depends on more than collaboration with startups alone. There are a whole range of partner categories; where each provides a specific capability required to ensure an all-encompassing approach to Open Innovation.

Navigating the key challenges

Through our experience, we understand the key challenges and mitigation strategies for Open Innovation:

1. Cultural resistance and relationship management: Foster a culture of openness, risk-taking, and continuous learning to overcome internal resistance to external collaboration. Build strong, transparent relationships with partners, focusing on effective communication, mutual trust, and shared goals.
2. Intellectual Property concerns: Establish well-defined commercial agreements that ensure a fair distribution of rights and benefits while protecting proprietary information from the outset. x
3. Core capabilities: Executives and boards must accept that “Not invented here” sometimes provides a competitive advantage and decide what core functions their own organisation must master, and where external partners can support with their expertise.

Success factors

As an Open Innovation partner, we act as a catalyst for Open Innovation; enabling ecosystem-based innovation to deliver strategic outcomes.

Our experience and research identifies the key determinants for success when pursuing Open Innovation:

1. Strategic Prioritisation: Innovation and associated initiatives, including research, trials and pilots are regarded as strategic priorities; rather than being pursued for the sake of novelty and optics.
2. Innovation Function: A consolidated innovation function is established; prioritising and co-ordinating strategic initiates across business units and managing partner ecosystem relationships. 89% of corporates who managed innovation through a dedicated function always achieved their objectives. Moreover, ensured there are established and well-defined methods, approaches, and tools. Innovation is creative but it needs to be structured; with people, processes and systems that are oriented around addressing real user needs and delivering meaningful business outcomes.
3. Expert Intermediaries: Experienced Open Innovation partners provide proven capability that accelerates outcomes, increased partner reach, and complementary capabilities that enable solution scaling and implementation.

Our capability

We act as a catalyst for Open Innovation; enabling ecosystem-based innovation to deliver strategic outcomes.

Sopra Steria Scale Up is underpinned by a proven framework and catalogue of services to realise the benefits and address the challenges associated with Open Innovation.

This includes consulting services focused on how to increase internal innovation capabilities for our customers to enable them to work with partners and to improve their outcomes from innovation.

Contact us today to work through our Innovation Assessment to baseline your level of innovation maturity, with actionable insights to develop the capability required to successfully leverage this critical innovation capability. 

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View some of the key trends across Europe in Open Innovation