Open innovation: the benefits of collaboration for startups and corporates
Why should startups consider collaborating with corporates as a key part of their growth strategy? Since it was established, InnovEcos has been connecting startups, colleagues and clients to foster innovation and growth, and we have seen firsthand the key role that this open innovation model plays in a successful strategy.
Startup and corporate collaboration, like any partnership, requires learning on both sides. We are writing a series of articles to help startup founders navigate and understand the value of collaborating with corporates. In this first article, we will take a deep dive into the different collaboration models available and their benefits.
InnovEcos is the CRIF Open Innovation Hub. Our mission is to guide the discovery of business models and technological trends of the future to innovate services, products and processes through research, experimentation and collaboration with startups.
Open innovation (OI) has proven to be the most efficient type of innovation model. Let’s look at some examples of OI models and how InnovEcos leverages OI to boost corporate innovation and create new ways for startups to grow.
What is Open Innovation?
Traditionally, companies innovated using internal resources only, applying what is known as a closed innovation model. The main reason for this was that they thought that by protecting their ideas, they could introduce products onto the market before anyone else and benefit from being the first.
Organizations using closed innovation models tend to have large research departments generating plenty of in-house knowledge.
Nowadays, companies that use closed innovation models have the following issues:
- The internally generated knowledge is often The contribution of external sources is a must since technology is evolving very fast globally and it is becoming increasingly difficult to keep pace with it;
- Sometimes, this knowledge gets surpassed before hitting the market, or it doesn’t exactly meet market needs. In fact, ifinnovation is too slow, either the knowledge becomes obsolete or business priorities change.
The term open innovation, on the other hand, means a situation where an organization doesn’t just rely on its own internal knowledge, sources and resources (such as its own staff or R&D, for example) to innovate, but also uses multiple external sources to drive innovation.
That’s why open innovation is a new trend that many major companies are adopting all over the world, and it is here to stay.
A company uses this innovation model when it acknowledges that there is a lot of talent and significant knowledge outside the organization.
Benefits for startups in collaborating with a corporate
Open innovation and collaboration in general are particularly beneficial for startups, whose growth is constrained to some extent, which can be alleviated by working alongside a corporate.
Some examples include the difficulty in accessing new markets, most of the time caused by another compelling problem, which is a lack of resources (both human and financial), and finally a lack of visibility.
Working alongside a corporate partner gives a startup the possibility to learn from the corporate’s know-how and get advice on certain areas, as well as find investors to get the capital to finance growth. Given the opportunity to test its products, the startup can also reduce its time to market. Furthermore, a corporate partner can also support and guide the development strategy of the startup, helping its founders to make the best decisions for the future and the startup to get to greater exposure, enabling it to attract more customers.
Different collaboration models
There are four commonly used collaboration models as briefly described here:
Strategic alliances are collaborations between two or more firms, which remain independent but temporarily combine resources and efforts to reach a common goal.
Alliances are still used, but as the years pass, collaboration models have evolved toward looser forms of partnership.
Portfolio management is about establishing agreements between independent companies aimed not only at developing a product, but also retaining this knowledge within the company even after the end of the collaboration.
Large pharmaceutical companies have benefited from this form of collaboration, working with small biotech firms to assimilate knowledge in the most efficient and effective way possible.
The third type of collaboration for innovation is the network. Networks include groups of firms that share R&D goals related to products, services, processes, or business models. Networks are mainly used to:
- Scan firms’ environments for technological advances;
- Develop individual and group capabilities; and
- Secure long-term survival.
Ecosystems are defined as:
- “loosely interconnected networks of companies and other entities that coevolve capabilities around a shared set of technologies, knowledge, or skills, and work cooperatively and competitively to develop new products and services”
- “relatively self-contained, self-adjusting systems of resource-integrating actors connected by shared institutional arrangements and mutual value creation through service exchange”.
In this kind of model, innovation no longer serves the focal firm, but is now a jointly orchestrated activity.
The InnovEcos’ (Innovation & Ecosystems) approach to innovation is different from the ones listed above. This approach was developed with the aim of creating and implementing an advanced and customer-centric ecosystem, based on collaboration between Fintechs.
The mission of the InnovEcos team is to discover new cutting-edge tech firms, to help them test and guide them to discover the business model and technological trends of the future through research, experimentation and brainstorming, while benefiting from CRIF's thirty years of expertise.
InnovEcos operates along three main lines: Collaboration, Research, and Integration.
- Collaboration: through contact with various Fintech Hubs, accelerators, investors, and Business Angels to identify high-potential startups and strengthen their business together. In 2020, CRIF partnered with TechQuartier, the leading Fintech Hub in Frankfurt. The shared goal of the hub and InnovEcos is to support global organizations and startup founders at all stages of development.
- Research: with the aim of continuously innovating and anticipating external changes, the most disruptive technologies are explored on topics such as Artificial Intelligence, Blockchain, Digital Assets, Natural Language Processing, and so on.
- Integration: InnovEcos has created an ad-hoc path to facilitate rapid testing of startup solutions on a small scale and, as a consequence, their integration.
InnovEcos is not a Corporate Venture Capital Investment Vehicle, but rather a Collaboration Engine, in which the selected companies are tested and helped by InnovEcos and CRIF.
InnovEcos addresses 3 different categories of companies:
- Young Startups (pre-seed, seed and Series A/B) active in the Fintech and Insurtech industry, and who are considering growth through collaboration;
- Innovation Hubs looking for Corporate and Tech partners, to which InnovEcos offers unique operational collaboration opportunities that could be key to the growth of the startups that are part of their communities;
- Traditional Banks or Insurance Companies looking to innovate to find new sources of growth or simply stay relevant: InnovEcos is an Open Innovation Partner that can help them accelerate innovation programs.
The InnovEcos process
The InnovEcos process is structured into four different phases:
- Use case exploration: the InnovEcos process starts inside CRIF, with the identification and selection of the innovation needs that can better be addressed through collaboration with startups.
- Scouting for the ideal startup partner: the second stage is the identification of the startups to collaborate with;
- Proof of concept: the PoC’s goal is to understand if there is the basis to build a successful collaboration between InnovEcos and the chosen startup. It is important for InnovEcos to understand if the company has the right technology, synergies, and team.
- Pilot: the startups that best fit with CRIF’s needs move on to a Pilot phase, with the aim of testing the practical integration and, if positive, implementing it.
A startup which is interested in joining the InnovEcos program can write to InnovEcos@crif.com to submit its project and verify its eligibility to access the InnovEcos ecosystem.
Advantages for startups in collaborating with InnovEcos
There are many advantages for startups that collaborate with InnovEcos. The startups can:
- Learn from a global knowledge leader;
- Build their network and talk to experts in the Fintech world, who have already collaborated with various startups;
- Speed up the acceleration of internal knowledge;
- Become a global player by getting support in the process of internationalization;
- There is no guarantee, but in the past, successful collaborations have led to financial investment by CRIF.
Advantages for InnovEcos in collaborating with startups
At the same time, InnovEcos benefits from this collaboration:
- By working with different startups in the same field, InnovEcos is able to understand different needs from multiple stakeholders and better understand the market;
- The implementation of solutions, together with the startups, can bring tangible benefits to CRIF's customers and to the companies that collaborate with CRIF.