By: Mario Ernst
There are several reasons why the open innovation process does not deliver on the promise… and probably the simplest solution that companies have found is to fire the manager in charge, who is held responsible for the «bad results». However, by conducting analyses in dozens of companies, our conclusion is that the problem is not a specific person, but an organisation (strategy, culture, silos, incentives, paradigms, technologies and methods) that does not execute the process well. The reasons for the failure of open innovation have 6 origins:
- Poor challenge raising: Not linked to strategy, with low level of impact, focused on continuous improvement (not on enhancing the value proposition) and saturating the organisation with irrelevant projects that do not move the needle of results.
- Limited scope of the solution scouting process: Organisations do not have specialised areas or partners really connected to the solutions ecosystem, so the selection is among few players that perform regularly.
- Difficulty in testing solutions: The selection of startups for MVPs is done based on a presentation with demos and a lot of storytelling by the founders, but the company does not have the right technology (Sandbox) to test the solutions in a real and safe environment, which allows it to validate the solution before undertaking proofs of concept.
- Agency conflicts between the technology area and the innovation area: The innovation area requires a high volume of simultaneous tests carried out with different partners, but the high effort for the IT areas (with limited capacity and multiple open focuses) to be integrating technologies to «only» test them, makes it unfeasible.
- Lack of methodology for an accelerated experimentation process: Lack of metrics that allow pivoting or quickly discarding solutions that do not meet the hypotheses of the MVP.
- Technological obsolescence: The integration of cutting-edge technologies from startups, fintechs and insurtechs with legacy systems that are developed under a closed paradigm increases the challenge, effort, cost and risk of thriving with open innovation.
The big problem is that there are resources and people trying to push open innovation, but the results do not happen, because the process has too many technological frictions and limiting paradigms, from strategy to execution. The volume of experiments is low and partners are often not up to the task or are not mature enough, leaving managers feeling frustrated and wasting time.
«Burning notes» is a practice that has been misunderstood in many institutions, because this is useful when you are a company that shows exponential growth and does not need to generate profits in the short term because investors are waiting for the pie to grow before monetising.
For the rest, the option is to identify relevant challenges, link up with the international ecosystem of solutions, test in a digital sandbox, facilitate integrations with core systems through an integration hub, train the team in appropriate methodology to accelerate experimentation and create centralised technology connections to create a scalable model.
At Evolution Labs Connect, we work regionally to monetise open innovation