The speed of innovation by younger companies and academic researchers hold enormous opportunities for corporations, if they can tap into it through collaborations and partnerships. It takes a willingness to do things differently, assume uncertainty, and let the innovators innovate unimpeded.
— By Daniel Perez
The World Economic Forum (WEF) defines innovation as the “successful commercialization of novel ideas, including products, services, processes, and business models.” Innovation drives business growth and competitiveness, and enables businesses to meet growing and changing market needs. Producing innovation internally is important to business sustainability, but quite often, keeping creative ideas flowing becomes challenging.
Turning to external resources, like businesses in unrelated industries and academic research institutions, can generate innovations through collaborations and partnerships that benefit all parties involved. The keys to success are flexibility, accepting uncertainty, and creating structured arrangements that address critical factors like intellectual property (IP) ownership.
Scientists at Siemens collaborates with the University of Tennessee to develop new scintillators that will enhance the performance of medical imaging devices manufactured by Siemens.
JPMorgan Chase and Syracuse University (SU) collaborated to transform the way students are educated in preparation for technology careers in global organizations, with the goal of delivering long-term value to JPMorgan Chase, Syracuse University, and the broader community.
Procter & Gamble collaborated with the University of Cincinnati to develop strategic modeling and simulation capabilities for advancing product and process development (R&D).
Caterpillar built a smart-mining innovation ecosystem that includes four types of collaboration: Partnerships, minority investments, joint ventures, and M&A. An ecosystem involves multiple partners across different industries and perhaps different countries. The partnerships improved its proprietary industrial Internet of Things (IoT) platform’s technology. The minority investments were made in areas of expanding the platform’s automation, analytics capabilities, and optimization.
PayPal has established more than 25 strategic partnerships with technology, marketplace, retailers, financial networks, issuers, acquirers, social sector organizations, and governments in pursuit of a cashless global environment.
Samsung piloted virtual reality, pain management solutions in local hospitals. The system uses Samsung smartphones and Gear VR.
Sharing Intellectual Property
This small sample of collaborations and partnerships reflects a shift in attitude toward innovation.
Historically, innovation was considered something created internally and IP as something to jealously guard at all costs to remain competitive and exclude rivals. The issue with this business model is that it puts boundaries on innovation because new perspectives, ideas and approaches are limited to only those working within the company.
Technology in particular is changing that perspective because every company is a technology company to some degree. Complex advanced technologies like artificial intelligence (AI), blockchain, and IoT, and new yet-to-be imagined technologies, are developed by sophisticated technology companies and small ones started by future-thinking entrepreneurs.
Turning to external resources, like businesses in unrelated industries and academic research institutions, can generate innovations through collaborations and partnerships that benefit all parties involved.
The result is that new opportunities exist by collaborating with the technology and other companies, academic research facilities, suppliers, and others to create new products and services in new markets. Corporations have long-standing IP, but their value declines as technology companies produce disruptive IP. IP is still a valuable asset that is central to business strategy, but it gains value through collaboration and partnerships.
The keys to achieving mutual benefits include working out the contractual legal details with great care as to how the relationship is structured and how things like IP will be shared but protected. Unlike Tesla, which opened its electric-car patents to competitors, most companies want to retain some level of IP control. Options include opening some IP; sharing IP while retaining full ownership in the original IP; sharing new IP that emerges from collaboration; letting new ventures utilize underused patents; and opening incubation in which pre-innovation IP owners maintains the same ownership, but IP developed jointly with customers is owned by the customers.
Flexible Enough to Accept Uncertainty
One of the challenges of IP is not letting ownership block innovation.
Johnson & Johnson created JLABS, a life science incubator that begins the innovation process by exploring potential partnerships without worrying about IP or competition. Events are held in which startups, granting agencies, research labs, and competitors are invited to discuss shared scientific challenges. The J&J innovation team then identifies the most promising ones and invites them to work at one of the JLAB incubators. At the incubator, the participants have access to J&J equipment, talent, data, and funds or help raising capital and all with J&J taking no economic stake. Since there is no pre-determined ROI, unconventional collaborations are encouraged. J&J gets access to research and ideas it would not get otherwise.
Beyond IP issues, there are a myriad ways to structure collaborative and partnership agreements. They can be informal for the purpose of knowledge-sharing to formal M&As. The structure depends on the unique factors of the collaborators or partners, but there are common points to keep in mind. One is that these arrangements assume the involved collaborators are willing to assume some uncertainty for the purpose of generating unfettered innovation. IP is a major factor in these collaborations for innovation generation, so it is important to come to an agreement before beginning the arrangement.
There needs to a be a win-win approach that does not defeat the intent of generating real innovation. The larger firm could easily exert too much control over the smaller firm, defeating the purpose of the arrangement. Establishing the rules early for the collaborative team is crucial, as is working out the contractual legal details, but this is actually about the level of risk-taking companies are willing to assume.
There should be clear guidelines for IP ownership and equally clear guidelines for participants interacting with each other on projects. The caution is to not create so many legal requirements that smaller innovating companies are overwhelmed or unable to meet them due to time and expenses related to compliance.
The WEF's leading practices for collaborations and partnerships include setting up lean governance structures that promote flexibility and informal communication channels and acknowledging uncertainty that is a natural element of these kinds of effort.
There should be new, flexible IP arrangements that enable both parties to share a balanced arrangement and benefits. Thijs Jurgens, Vice President, Innovation, Royal Dutch Shell, told WEF that larger firms must ensure they are more flexible, faster, and agile too because the younger innovating companies are not willing to wait for the typical process of established corporations.