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Hybrid Innovation Strategies

Innovation now needs Second wave technologies to be integrated

Digital is no longer about digitizing bits and pieces of workflow in the company to usher in automation and be productive. There is a more serious disruption at play involving innovation in products, business models to transform the entire business itself.  It’s not just using IT, but also adopting many second wave technologies like IOT, AI, AR, and machine learning across areas like product, training, customer support, you name it, to disruptively transform the company. Imagine the scale of transformation at Reliance from a Petro chemicals business to one where consumer/retail revenues started contributing significantly, to another innovative transformation involving Jio – using the power of Facebook, WhatsApp, Enterprise apps, ecommerce, financial payments etc. that is set to unfold (as I write this).

Internal Innovation

Until now innovation was mostly internally driven, where companies have their own R&D departments. The advantage is that such innovation provides a sharp differentiation with respect to the competition. But there is a limit to the talent and speed at which this can be done. It is also too expensive and impossible for smaller companies to embark on.

External Innovation

To keep up with the market, companies have been looking at external innovation with partners such as universities and start-ups and this is a kind of open innovation model. Many large companies adopt the model wherein they invest and allow a start up to innovate, and when successful, the start-up is acquired. There are some large companies that have specific teams scouting the world to meet and evaluate innovative start-ups and finally invest in a certain number of best bets every year.

For example, JLR, Fiat Chrysler and Renault Nissan tied up with Google’s Waymo for self-driving cars. But the product that comes out of something like this would essentially not provide any one company with a cutting edge. It will merely raise the bar for all of them to stay afloat. And, this certainly needs to be done or risk extinction.  We’ve also seen this happen in automobiles (say engines from fiat, chassis from ford), mobile phones (all about the screen/processor/GPU/camera sensor from say Samsung, Sony, Qualcomm) or even TVs. There is really nothing to differentiate many products around us.

Hybrid Innovation for Small-mid companies

Now, the time has come for smaller and mid-size companies to also be innovative and survive. It is impossible to have/fund all the required talent inhouse and innovate internally. Being stagnant and slow will put the entire company at risk. At the same time, it is also risky to partner with external technology providers. I’ve come across companies that rolled their idea into products by outsourcing to outside teams, only to get extorted financially towards the end.  Now-a-days there is a great need to use sensors, IOT, AI, a combination of electronics and firmware to transform processes and products. These are not skill sets that we all typically possess. So, we are forced to use external partners. But it should not so happen that the external partner offers this very same innovation to other competitors, thereby nullifying any advantage that was hoped for. Typically many small technology experts/start-ups look for a use case/ data from a brick-and-mortar company; they look forward to build a solution for the brick-mortar company and then spin it off into a full-fledged product at a later stage. This does not benefit the guinea pig. At the same time, the small external partner may feel short changed if the innovation succeeded and they were not part of the success.

Hence smaller companies need to adopt a hybrid approach. Evaluate your capability gaps, and map out the areas where external innovators will be brought in. Then build precise innovative governing models and metrics to monitor and control the partnership. Have in place an internal team that can absorb the innovation and take it forward from there. Smaller companies could explore a build-operate-transfer model. First transfer the capability and then the team.  Also incentivise external partners to be part of the continued success of the innovation once it succeeds in the market. That way, they will also have a stake in further innovation and support for the technology.

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