A framework for Open Innovation

At Tetuan Valley we have seen how over the years, the number of open innovation initiatives at enterprises has multiplied. More and more companies are seeking to work with startups in Open Innovation programs to benefit from their agility and technological knowledge.

The speed of technological change, the hyper-competitiveness of markets and the across the board decrease in market costs of entry have made it impossible for companies to keep up without innovating. As was said before, startups work with agile techniques and lean innovation methodologies that are of great benefit for companies looking to create change faster within traditionally slow institutions.

On the other hand, one of the biggest difficulties for B2B startups is to get their first customers and to see their technology validated with their clients. An entrepreneur from the Tetuan Valley community once encountered this statement in the UK:

“If you have not managed to work with any bank in Spain, why should we believe that we should work with you?”

Open Innovation programs allow for B2B startups to meet potential clients and for companies to get to know the startups and perhaps try out pilots with them.

A study on the status of corporate innovation in Spain

The purpose of this article is to shed some light on the different forms of open innovation programs that tend to work well:

We would like to propose a 4 stage approach to working with startups.

The following 4 points, seen from the point of view of the company, are meant to help create programs that will have the greatest return for the company and to get them to adopt technology, new ideas and business models in an efficient way. The idea is to follow each stage one after the other to ensure great quality for your programs.

1st stage: What’s this all about?

It’s important to understand the value these programs can bring into the company. Do your homework beforehand, prepare your company for the program. This should be done at two levels:

  • C-level managers: it is extremely important for top level managers to be involved in these initiatives and play an active role. If the program is done properly the startups should move through the different departments of the company and eventually get to directors.
  • Intrapreneurship programs: they are aimed at training employees to understand the technologies and methodologies that entrepreneurs use, the phases leading from idea to prototype and how to iterate quickly and effectively. Having these kinds of programs will facilitate collaboration between employees and startups.

Awesome! My employees and managers are totally ready, now…

2nd stage: where can I find startups to work with?

In this phase we have to leave the office and get to know what’s out there. Here, partnering with incubators and accelerators is very useful to see what kinds of startups and forms of collaboration exist.

Here are some of the ways to get to know startups:

  • Visiting and being involved in startup events: This way your employees can meet entrepreneurs and directives can meet teams that they might want to do pilots with.
  • Vertical events within the company’s sector: organize an event for startups in your sector where you get to personally meet the startups and see what they are doing.

Great, you have now found interesting startups, but…

3rd stage: how can we work with them?

Work fast. Get rid of the bureaucratic processes. We once heard this from a company:

“We promised a startup to do a pilot program with them, it took 8 months to complete all the necessary documentation, and when we came back the startup was no longer interested in working with us”

Of course, before you marry the startup you have to start dating them. Test out the startup’s technology and how you work with the team on short term collaborations. If it works out, you can go for a longer term contract with them. For the startup, just having tested their technology with you is of great help and they will be happy to do it. If it doesn’t work out this first test serves as a springboard for them to get other customers.

When doing a test run with a startup’s technology, see if it increases productivity, makes you more competitive or brings new business that fits in with the company. Here’s a very interesting post by Javi Santana on enterprise software development and its challenges.

4th stage: take it to the next level

Once you have tested out a pilot program with one startup and proved that it works, the process agile enough and you can easily work with more projects in the same way. Oneway to get to do many pilots in one year is to do a corporate accelerator program.

During these intensive programs, the company gets to meet and work with the teams directly over the length of the program, and then choose a few of them to do a pilot with over a year. There are important things to remember for both parties when doing these programs:

Startups: it is very important to do your homework beforehand and know what you want to ask of the companies. Explore what the company is already doing and build a business case. When you start working with the company, make sure you ask for what you need and chase the mentors down. Be on top of it!

Corporates: have clear objectives to pursue with the program, both for you and for the startups. It is very important that you know what you are trying to achieve and that the participants know it as well.

From our experience, one of the most important reasons why startup programs many times don’t work out for companies is that they skip one or a few of these stages and try to go big too soon.

Is this all we can do?

Certainly not. This is a relatively new phenomenon and we are also learning on the go. We will write a few more posts on this and related topics (such as corporate venture capital and Spin off) in the future.

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