Is Co-Innovation Worth the Effort? Here’s How to Achieve 5 Major Benefits from Working Together

The probability of coming up with a creative and innovative solution to a problem rises with the number and diversity of brains involved. That’s why, throughout the IT industry, the concept of co-innovation – two or more organizations joining forces to solve a new and challenging problem – is on everybody’s lips.

But not everybody is talking about the same thing when they use the term. The variety of definitions of what co-innovation really means is part of the confusion surrounding the topic. A common challenge to successful co-innovation projects is when partners have different understandings and expectations.

Differing expectations about the outcome of co-innovation is not the only issue that may arise during a project. When you hear co-innovation, you may think of workshops, endless discussions, or your precious IT resources working full-time on a project with an uncertain outcome. Unfortunately, all these issues can arise.

A closer look at the benefits and prerequisites can help determine whether engaging in co-innovation is actually worth the effort and resources that go into it. The answer to this question depends on the outcomes. There are major benefits to co-innovation, but they won’t just fall into your lap. Let’s take a closer look.

Co-innovation benefits

  1. Understanding the customer

Customer co-innovation usually takes place in the validation or prototyping phase and targets “jobs to be done” within a customer‘s cross-company business processes. The solution should address the needs of a particular customer by means of target-oriented innovation. By getting to know your customer’s issues, you will gain a knowledge and understanding of your customer that will pay off well beyond a particular co-innovation project.

The first step is to define what the customer’s requirements are and how well they are currently addressed. In other words, the customer’s actual problem needs to be considered in an open-minded way and not through the lens of a possible solution that has already been chosen. Based on these findings, the business value for the customer derived from a proposed co-innovation project needs to be identified.

  1. Closing portfolio gaps

Often, customer requirements are so specific that an IT company’s standard portfolio cannot cover them all. Because co-innovation can also mean the integration of a partner solution into your own portfolio, co-innovation not only benefits the customer but also helps close gaps in your own product portfolio.

Startups, with their great innovative power both in terms of business models and adoption of new technologies, are a natural source to which to turn. Typically, startups need to scale, so co-innovation with big companies is attractive because it provides access to their partner’s customer base. Both partners can then sell their solutions to new customers. This collaboration is also a win for customers as they gain access to the latest cutting-edge startup offerings, increasing the value of their investments in existing solutions.

Hiker jumping across gap in rocks
  1. Accelerating innovation

Portfolio development in large enterprises can be slow and heavy – and there are good reasons for this. However, customers may not want to wait until a company has introduced the solution they are looking for into their standard portfolio.

By entering into a co-innovation project, customers may enjoy the benefits of innovation much sooner. Also, by working with an external party that brings a fresh eye to the company’s routine processes, customers may be able to identify the potential for further innovation within their own processes much more quickly.

  1. Fostering a vibrant ecosystem

By now, co-innovation has become an industry trend. The environment companies operate in is increasingly competitive. Since there is no such thing as a monopoly on good ideas, there is much to gain by bringing together different people or groups to solve a problem.

Over 400 businesses have digitally transformed through IBM and SAP’s partnership

Co-innovation is one of the ways to bring in diverse viewpoints that can help a company in a competitive environment. One reason why it’s so popular is that companies have also become much more open with each other even though they still compete in the marketplace. The idea of having an ecosystem of different partners and organizations that are not only competing but at the same time collaborating with each other holds a lot of appeal in the modern business world.

At first glance, these two trends – intensified competition and intensified collaboration – seem to be opposites, but in truth, they are interconnected. Partners in an ecosystem may take on different roles and different attitudes towards each other at a given point in time. A company may compete with its partners at some times and partner with its customers at others.

This trend – having a competitive relationship as well as a vendor or purchaser relationship – is called co-opetition, a term coined in the early 1990s by Raymond Noorda, Novell’s founder.

  1. Attracting amazing talent

While co-innovation with customers and competitors offers its own rewards, academic co-innovation is special in terms of outcomes. It often takes place during the ideation or incubation phase and is usually not so much about developing a new solution or solving a problem or even applying a certain product, but focuses more on recruiting aspects and promoting one’s image as an innovative company.

Typically, open co-innovation in an academic environment means that students work on a problem set by an industry partner. An IT partner often provides technological and methodical expertise and makes suggestions on products and solutions. But it can be unwise to make the use of a certain product or technology a prerequisite for the project.

One of the goals in this instance is to present your company as innovative and as an attractive future employer. Narrowing the choice of technologies to be used in the co-innovation project can be counter-productive because young talents often have a broader view of what the market offers in terms of solutions.

Diverse group of people sitting around a table, co-innovation

Co-innovation prerequisites

The right partner

There are many facets to co-innovation. Broadly speaking, different stages of the innovation process – ideation, validation, prototyping, and go-to-market – require a different setup of co-innovation partners.

It’s important to pick a partner with specific expertise that can help you achieve your objectives. The power of co-innovation lies in gaining access to the brain power of people outside your own organization who see things differently simply because they are not part of your company, not used to the same processes, and not beholden to the cultural mindset that makes it hard to think outside the box. And, of course, it works the other way around as well.

The right project team

Fully understanding the impact people have on business performance is key to success

The right people also need to be brought to the table. This means involving not only the partner’s IT department, but also the business – the people responsible for the budget who will, in time, make the buying decision and those responsible for the corporate strategy. Typically, it’s also a good idea to find a sponsor within the customer organization.

Participants also need a certain mindset. They should be open to new ideas and new methods to implement them. They should keep a broad outlook on things, keeping suppliers and the customer’s own customers in mind. And finally, it’s imperative that the co-innovation team has access to the relevant data. That means information around processes on the customer side must be available in digital form.

The right scope

As with co-innovation between a company and its customers, clear boundaries and goals with the right scope must be set. The first prerequisite is to always understand what a particular co-innovation engagement will be about. While this may sound obvious, experience shows that co-innovation projects are often set up with ill-defined goals.

Knowing what your co-innovation will encompass includes, for example, the definition of ownership of the intellectual property expected to come out of it. But there are some very fundamental questions to be addressed in the beginning: Why this co-innovation? What is it supposed to achieve, such as a solution to go into the standard portfolio or a validation of certain assumptions around a product? What are the parties providing in terms of resources and budget? What is the timeline and what are the milestones along the way?

This is how a co-innovation hangover can be avoided.

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The right communication channels

As your reputation for co-innovation grows, others will begin to reach out to you to start co-innovation projects. The larger the company, the more important it becomes to establish channels for outside-in co-innovation requests. You want a great proposal from a startup or a customer to land on the desk of the people who will immediately recognize the potential because they are working on something similar. Also, you should establish clear procedures to share this information internally because it’s not desirable to have several teams unknowingly working on the same problem.

Yay or nay? Is it really worth the effort?

As indicated above, there is much to gain by co-innovating – provided the appropriate rules, requirements, and expectations are set. The sooner in the process you meet the requirements for successful co-innovation, the better.

Co-innovation lowers the barriers for engagement because there is no multimillion-dollar contract to be signed. It also reduces investment requirements for the parties involved, helps vendors close portfolio gaps, and ultimately opens new markets to them. It allows for scouting candidates for mergers and acquisitions as well as for potential talent acquisition in the case of academic co-innovation.

All of these are long-time goals connected to co-innovation that go way beyond the outcome of a specific project. Since all of these may, in the long run, ensure the survival of your company, the answer to the question “Is co-innovation worth it?” is undoubtably “Yes.”