TOP 6 WAYS TO PRACTICE CO-INNOVATION IN EUROPEAN SMES

Karl-Heinz Schulte & Daniela Hellwig

Karl-Heinz Schulte & Daniela Hellwig

Author Biography

Karl-Heinz Schulte Founder, C-Level as a Service Chair of the EU Tech Chamber Digital Transformation Alliance
& Daniela Hellwig Digital Innovation Consultant C-Level as a Service

If we were to ask right now how innovative your company is, what would your answer be?
Hidden champions might say, highly innovative in our segment, and that is why we are so successful for
long years. Lots of European SMEs might say, we continuously improve our products for our
customers. Probably, all might be reasonably ready for innovation and open for cooperation.

A good basis, no doubt.

But in order to keep up with the rapid pace of digitization, it is almost impossible to get around
one concept: Co- innovation. The basic idea is simple. Companies no longer worry about
revolutionary product and technological developments on their own but join forces with suitable
partners. In addition to much shorter innovation cycles, this has other positive side effects:
Costs are reduced for the individual company, the inherent risk of every innovation is spread over
several shoulders and existing resources are multiplied. In the best-case co-innovation delivers
competitive advantages for both partners beyond their own capabilities.

A concept that you are certainly familiar with from the world of startups, but have you already
given some concrete thought to how you, too, can utilize the manifold advantages of co-innovation
for your business? And, above all, how you can use the benefits of your European location to your
advantage? After all, there is hardly a better place to work on the next disruptive innovation with
different cultures and thus ideas and skills. Let us show you exciting ways and opportunities to harness the power of co-innovation in your company as well.

Before we dive into the practicalities, however, let us address one concern right at the outset.
Because one argument we come across again and again on the topic of co-innovation is this:

“If we share our knowledge and skills, we lose our competitive advantage.”

Our knowledge, our methods and our skills are our company’s asset. We keep this a secret to protect
our company.

What’s true: There is lots of potential in sharing knowledge and enriching the knowledge of
partners. If you don’t share your knowledge, you might lose competition as competitors partner up
with others and you might soon no longer be a relevant part of the market. Most of the time, the
question is not whether an innovation will come, but from whom. However, if you take the right
steps today, it is you who will be in charge of this innovation. Instead of just reacting, you
shape the market. Especially for medium-sized companies, it may seem an unusual or even utopian
idea to be able to exert so much influence. But that’s exactly what becomes possible when you start
to open up and network with bright minds. I would now like to describe the options available to you here:

  1. Co-Innovation in Innovation
    Hubs: Outside-In

The reality in many companies: Innovation is written down as a corporate value but
is not reflected in everyday life. This is a problem that affects medium-sized companies in
particular. For years or even decades – work structures and habits have been
geared toward process optimization, leaving little room for “thinking outside the box”.
Launching innovation projects within such structures is often doomed to failure. It’s
good to be able to leave your own four walls and set off on the adventure of innovation.

An excellent way to do this is through these so-called innovation hubs. Innovation hubs
are outsourced offices – usually separate from the corporate headquarters – that were
created entirely for the purpose of innovating. Their design is geared toward startups:
lots of open space, flexible workstations, creative corners and work materials. Ideally, a
mix of established company employees, new employees and external people work in them,
which is one of the most important aspects of a co-innovation. An Innovation Hub can be set
up by a company itself, but there is also the option of using “neutral” locations that are
open to several companies. Here, the networking idea is particularly in focus.

Examples of use:

  • Use of a tech innovation hub to collaborate on disruptive product ideas for your industry yourself.
  • Use of a hub for small and medium-sized enterprises in order to bundle forces and survive in competition.
  • Use of a hub to outsource innovation projects and initiate new lines of thought.
  1. Co-Innovation with the right partners: Inside-out

Perhaps your company is in the comfortable position of already having accumulated
a lot of witty, innovative ideas internally. Innovative thinking is part of your corporate
culture and change is welcomed rather than shunned. But one big problem you may have
encountered is implementation. Especially process- heavy large corporations find it
difficult to provide the necessary space or resources in their day-to-day business. In many
cases, the necessary expertise to solve a problem is simply lacking internally. For
classic production companies, in particular, it is a huge challenge to suddenly develop
software to keep pace with the standards of digitization.

Co-innovation can be the key to turning ideas and necessary developments into
reality.

The classic but very cost-intensive route of commissioning external companies to
develop a digital innovation is by no means the only option available to SMEs.

Partnership-based developments are particularly valuable. What do you have that
many, young development companies lack? That’s right – industry experience and the knowledge
of what software must be able to do and deliver. You have a lot to give. With this
basis, it is obvious that a symbiosis between production companies and software
manufacturers is a very fruitful union. You get exactly the software you need to digitize your core
business, and the software company has a product that is excellently tailored to market needs. This
principle can, of course, also be applied to other areas.

Examples of use:

  • Outsource a project or product idea to specialists and become a customer or supplier of it yourself.
  • Benefit from strategic partnerships that are created through knowledge exchange and give you an important role in the partner’s network.
  1. Co-Innovation with the competitor:
    Co-opetition

Those who are already in shock at the headline may still be subject to the widespread
misconception that shared ideas mean stolen ideas. Quite the contrary. Especially in the
field of technologies, it is sometimes the only chance to bring developments to market within
a relevant timeframe. Co-opetition, for example, has long been an established method in
the USA and Japan, but is still viewed critically in Europe. However, this means that the
continent is missing out on massive advantages that would result from a merger within
an industry. The fact is that it is usually not the product itself that sets a
company apart from the competition, but the way in which it is marketed.

The automotive industry, for example, has perfected this model. It would be almost
impossible to cope with the enormous competitive pressure and development costs otherwise.
For example, the first car- sharing concepts were developed in the form of competition.
But what does this mean for small and medium-sized businesses? That there is a lot to
learn here! When large corporations manage and, above all, find it necessary to
innovate with the competition, this is a clear signal for SMEs. What’s more, they benefit
from fewer regulations and greater flexibility when it comes to structuring such
collaborations.

Examples of use:

  • Working together on necessary technology prevents an entirely different industry from
    taking over the segment.
  • Share costs and resources with the competitor when you would otherwise have to put
    all your eggs in one basket.
  1. Co-Innovation at your fingertips:
    Rapid Prototyping

Another reason why many ideas are not even put into practice is the lack of belief in them and the
reluctance to put a lot of work into something that could possibly fail. Especially when
you have a lot of established products on offer that you could improve instead… (we
all know the outcome of the Kodak™ story). What if, however, the new development could take
place without gigantic investment sums and yet rapid customer feedback could be obtained
from nearly fully operational new developments?

New forms of prototyping make it possible. Driven in particular by technologies such
as 3D printing, there are now numerous companies that specialize in the production of
individual prototypes. Consider, for example, the opportunities that the Internet of
Things (IoT) presents for your company. For many, this may be a field that still
sounds very exotic and possible applications in the company are poorly perceived.
But these doubts can be quickly investigated with the right “prototyping partner” at your
side. For instance, with the help of design thinking workshops, ideas can be turned into
tangible product ideas or new production possibilities in just a few days.

Examples of use:

  • Save high development costs for new product lines by using innovative techniques for
    prototyping (For example 3D printing) – outsourced to an innovation partner.
  • Apply design thinking methods to quickly test product ideas in the market and
    incorporate ideas and thoughts from people outside the industry.
  1. Co-Innovation on Demand:
    Innovation via Challenges

Co-innovation also stands for one thing in particular: using concentrated global
knowledge to solve a problem. But how do you gain access to it? And rather, how do
you inspire the right minds for your own challenges? The answer: crowdsourcing platforms.
Except that, in the spirit of innovation, it’s not money that’s being collected, but
ideas. Under the keyword “collaborative idea management”, there are numerous platforms
that specialize in this type of innovation. In the form of challenges, companies around the world
can post their research or development topics on a variety of fields. The best solution
receives a sum of money to be determined individually. Incidentally, Netflix used the
same principle in 2009 to offer $1 million to anyone who could develop a significant
improvement to the platform’s recommendation algorithm – one of the reasons for the
streaming provider’s success story.

  • Examples of use:
    Start a challenge with a focus on sustainability in order to make our own
    production more resource efficient.
  • Test the feasibility and efficiency of new technology through a developer
    challenge – and thus reduce the risk of investing high development costs in an
    unrealizable product.
  1. Co-Innovation via research and technology networks

In addition to the wealth of opportunities in the free market, there is another
option that is perhaps well-known but often underestimated: Collaboration with
universities and research centers. Because these bring something with them that is a basic
prerequisite for co-innovation – excellent networking. The principle of working together on
research problems has long been established here, and forces are combined to achieve
a goal. Of course, this works particularly well
for those companies that have a strong need for research to further develop their
products or their services.

Examples of use:

  • Outsourcing complex research topics that also involve the legal environment, for example, to
    universities or their commercial spin-offs that can put together interdisciplinary teams.
  • Use the global research network to check the existence of an idea and, if necessary, bring
    partners on board at an early stage.

Have an open mind for co-innovation

In addition to these examples, there are numerous other forms and opportunities for
co-innovation. After all, it is the nature of innovation itself to constantly develop and
evolve. It is a good thing to already know some methods and how they can be applied
in practice. It is no less important to ask the right questions
in relation to your own company.

Did you come across any other form of co-innovation? Any multi-sided co-innovation of more
complexity? Have you realized some success stories by co-innovation already? Eventually,
driven by a win-win set-up with partners? What does hinder you to enter the field of
co- innovation? What characteristics or attitudes do you miss in your company that have
prevented co- innovation so far? What do you expect to be the essential benefit your
company could achieve through co-innovation? Do you work already with some contractors, suppliers
or partners, which might be predestined to become a co-innovation partner?

After all, nothing is better on the road to successful co-innovation than starting with an
open exchange! Looking forward to reading your
thoughts.

Did you come across any other form of co-innovation? Any multi-sided co-innovation of more
complexity? Have you realized some success stories by co-innovation already? Eventually,
driven by a win-win set-up with partners? What does hinder you to enter the field of
co- innovation? What characteristics or attitudes do you miss in your company that have
prevented co- innovation so far? What do you expect to be the essential benefit your
company could achieve through co-innovation? Do you work already with some contractors, suppliers
or partners, which might be predestined to become a co-innovation partner?

After all, nothing is better on the road to successful co-innovation than starting with an
open exchange! Looking forward to reading your thoughts.

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