Innovation: 5 things you're doing wrong. #2 Your innovation process is too closed

About this series

We know how important innovation is to long term performance. Yet many companies still struggle to capture value from innovation investments. A brand new CSIRO-UQ report ‘Thriving through innovation: Lessons from the top’ identifies the top factors driving real-world financial performance in ASX firms. The report was recently written up in the Australian Financial Review. This blog series will explore these findings and what it means for businesses trying to innovate.

#2 Your innovation process is too closed

We’ve all heard about ‘open innovation’ by now. In fact, some have called it ‘old wine in new bottles.’ Indeed, collaboration to deliver new market outcomes is as old as innovation itself.

But what do we really mean when we say open or closed innovation?

Put very simply, open innovation is about engaging with the external world to accelerate the adoption, development and/or deployment of innovations. 

On the other hand, closed innovation means doing everything internally. I’m not sure anyone does this anymore. The world has moved far beyond the days of Bell Labs (inventor of the transistor). Nobody has a monopoly on talented people, and globalisation and digitisation has accelerated the distribution of knowledge.

These days everybody collaborates a little bit, otherwise commercialisation of new products would never happen.

How does collaboration spur innovation?

Our research on ASX companies shows that having more types of collaborators was a big boon to financial performance. Multiple partnerships with universities, customers, competitors, suppliers make it much more likely that market-leading performance is achieved.

The reason is that different partners play different roles in the innovation cycle. From the report (page 28):

• Other companies “Formal collaborations between companies provide the framework for working through difficult product development cycles, helping to ensure that new technology-based innovations make it through the commercialisation process and into the market.”
• Customers “Equally important are customer collaborations. We’ve known for some time that companies actively engaging with end-users are more effective at understanding their needs and desires, and are more able to translate these into winning products and services.”
• Research sector Universities and research institution collaborations also play special roles in the innovation process. They can be the source of core technology that is then rapidly commercialised by commercial partners or they can provide specialist knowledge that can be combined with intelligence gathered from other collaborators to create new innovations.”

A diversity of collaborations, along a little in-house R&D, seemed to work together to bring about the maximum value from innovation.

See the graphical summary from the report below.

It's formal collaborations that matter – not window shopping 

It’s important to realise that the boon to performance comes from formal collaborations focused on innovation. Collaboration of this type is a formal process of finding and engaging (contractually) with others to do something new.

This formality matters because we also found evidence that being unfocused in your hunt for innovation inspiration (‘broad search’) will not result in top line growth – it will detract. That’s because innovation theatre is just that – theatre - it’s not a structured process and thus not a growth engine. 

We need to increase collaborations between industry and the research sector.

Partnering with other corporates is a relatively straightforward ways to create innovations, especially when we talking about buying and adapting off-the-shelf technology. For example like Microsoft’s Halo Lens to conduct remote maintenance on your hauling fleet during the recent Covid-19 disruption.

But what about collaborating on earlier stage technologies with universities or places like CSIRO?

This type of engagement mystifies many businesses. And to be honest, having worked for 20 years in these places, it’s not always easy to find the front door.

Sometimes people just steer clear - especially smaller companies that fear losing their intellectual property edge and just prefer to stay away.

This of course is a terrible outcome.

The benefits of collaborating with the research sector are that you can get a leg up on the competition by exploiting new science and technology, and then be first in the market with innovations.

Australia has world-leading science in our research sector that can form the bedrock of novel products. But we need more companies to help translate that know-how into world-leading Australian-made products and technology.

We must increase this kind of collaboration between businesses and the research sector.

Here is one way we are trying to help: CSIRO Missions

One way that CSIRO is looking to remedy this situation of industry-research sector collaboration is through our new challenges and missions program.

This program is an explicit recognition that the scale of challenges facing our world require collaborations to solve them. These challenges include things like combating climate change, ending plastic waste, creating the hydrogen economy, achieving net zero goals, etc. Each of these will require a lot of science and even more industry collaboration to make global-scale impact that is needed.

About 12 missions are currently in development ranging from alternative protein industry development to space-based water resource monitoring. They represent clearer 'front doors' to our organisation and a clear invitation to do business with us.

Here are a couple of relevant examples.

SME Mission

One mission is to effectively double the number of small and medium sized enterprises (SMEs) engaging with the research sector. Here we are leveraging our strengths. CSIRO already runs the premier national program to drive this type of engagement, offering R&D matching grant schemes and other support. A great new program called innovate to grow provides SMEs with self-paced learning on how innovation can power their growth. This program is delivered in partnership with Australian edtech start-up Practera using their experiential learning platform to facilitate high quality project learning collaboration.

Critical Energy Metals Mission

The global energy transition (solar, wind, electric vehicles, batteries) is a multi-trillion-dollar market opportunity. However, if Australia continues its ‘dig and ship’ approach to our mineral wealth, we will miss the boat.

That’s why we are developing the critical energy metals mission to tackle this challenge head on (disclosure: I am leading this effort currently).

Ultimately, we want to develop and deploy technology at scale with partners to transform our metals into higher value intermediates and technology products for export, creating new manufacturing industries and jobs in the process.

In principle this sounds straightforward. But we will need international industry partnerships, new science, joint venture structures, and deep pockets to change things like the currently consolidated global supply chain of magnet metals that are critical to wind and electric vehicle motor technologies. We cannot do this alone.

To clarify our strategy, in March 2021, our mission will release a national roadmap (published by CSIRO Futures. This will help us to target the collaboration strategies that will enable us to unlock the significantly more value from our metals. We are eager to engage to co-create the mission opportunity with you.

 Thanks for reading. Opinions (errors and omissions) are my own in their entirety.

More about the series

This 5-part series will:

·      reveal key findings of the report,

·      explore why it sometimes so hard to deliver strong innovation outcomes, and

·      point to possible solutions.

Download the full report here

Read more by visiting the rest of the blogs in this series:

#1 You’ve got the wrong attitude – Corporate Entrepreneurship

#2 Your innovation process is too closed – Collaboration

#3 You are a follower, not a leader – Innovation Novelty

#4 You are not building moats – Triple Threats

#5 You are missing something – Innovation Systems