Many CEOs see collaboration as key to their success with innovation. They know they cannot achieve their innovation targets using internal resources alone. So they look outside for other organizations to partner with. A good example is Mercedes and Swatch, who collaborated to produce the Smart car. When Mercedes wanted to produce an innovative town car they did not choose another automobile manufacturer – they partnered with a fashion watch maker. Each brought dissimilar skills and experiences to the team. The whole idea of collaboration is to replace traditional customer/supplier win/lose negotiations over who gets what proportion of the pie with a win/win approach where both parties succeed by making a much bigger pie.
Costa Coffee is a chain of coffee shops which is in fierce competition with Starbucks and Café Nero in the UK coffee bar market. It has had considerable success by collaborating. Costa develops concessions with key partners. Current concession partners include coffee stores in Abbey National banks, W. H. Smiths and Ottakars book stores and Homebase DIY stores. The concession stores are managed by the Costa team who provide high quality coffee and service experience to businesses who want to provide their customers with that little something extra. Customers in concession stores can relax with a cup of coffee and food offering as they take a break from “retail therapy,” consider that purchase or await an appointment.
The next step beyond collaboration: Open innovation
The next step beyond collaboration is open innovation. This is a trend which was led by the major FMCG companies such as Proctor and Gamble, Unilever, Reckitt Benckiser, Johnson and Johnson and Kimberly-Clark. They have focused on as a way of driving innovation. Now they are competing to be the partner of choice for small companies with great technology who want to a fast route to large markets and big royalties. Open innovation replaces the vertical integration of innovation processes within one company with a network of collaborators working on innovation projects. Using outsiders can speed up processes, reduce costs, introduce more innovative ideas and reduce time to market.
Kimberly-Clark reduced the time is takes to bring out new products by 30% through open innovation. It launched Sunsignals in just six months by collaborating with a smaller company, SunHealth Solutions. Sunsignals is a self-adhesive sensor that changes color when the wearer is in danger of burning in the sun.
Proctor and Gamble aims to source 50% of its innovations from outside the company using open innovation. Early results include new products such as Mr. Clean Magic Eraser and Pringles Prints. Kimberly-Clark partners with more than 30 companies including joint-development, joint ventures, co-distribution, and licensing deals.
The adoption of open innovation is widespread across all industries. Here is a list of 40 examples of open innovation.
More details in the book A Guide to Open Innovation and Crowdsourcing.