Elena Donets is a leading member of the entrepreneurial community in Israel and part of the G7 Women’s Forum, led by Angela Merkel. Elena is one of the founders of the Innovation Center of Tel-Aviv University (one of the largest in Israel) and served as the center’s CEO for 7 years. As part of its activities, it has established and managed hundreds of innovation programs, accompanied thousands of successful ventures, set up conferences, hackathons, and other innovation events. In addition, Elena is the co-founder of Start-Israel – Israel’s Entrepreneurship Portal, and the TAU Innovation Conference, the largest entrepreneurship conference in the country.
Have you noticed that organizations tend to have a strong bias either towards organic innovation or open innovation? It seems like executives believe they have to choose either one approach or the other as their main focus for achieving various types of business breakthroughs. This also manifests as completely separate teams running open innovation and organic innovation for organizations that do happen to maintain both in parallel. This article puts forward an approach called the Hybrid Innovation Ecosystem that allows organizations to effectively do both.
Our observation at Spyre is that investment in the right infrastructure can serve both types of innovation while as a result increase innovation success ratio, get senior management enthusiastic sponsorship, and leverage your brightest and most driven employees in an empowering manner that benefits both them and the organization.
At the core of our key observation lies the simple fact that when an external technology is deployed by a corporation in order to impact its business outcomes, it usually serves as the solution component of what is essentially an internal venture.
Let’s take as an example a startup that developed a technology for printing electrical circuits on thin sheets of material. This technology can be leveraged in various ways. An auto manufacturer can use this technology to apply to the hood of a car and use it to generate heat and defrost frozen engines in cold climate locations. A manufacturer of wallpaper can use this technology to create new types of glowing wallpaper. Clothing manufacturers can use this to apply to garments that generate heat using this electric circuitry. The list is endless. In order for such a startup to have even a slim chance of becoming part of the production line of a global auto manufacturer, this cannot be left to a dedicated scouter that identifies the opportunity, has a “great idea” for “fantastic synergies” and executives have to do much more than to state at the demo day that “this is very exciting!”.
What must actually happen is that an internal champion has to be appointed and that champion has to evaluate the business opportunity that this technology opens up for the corporation under the following conditions:
- An assumption that the technology works as advertised.
Too often we see open innovation managers, especially, those with a technical background spending much of their time evaluating the startup technology and testing first if it actually works as promised. Unfortunately, this also means that the focus of PoC’s and Pilots with such corporations that run any startup programs are structured to do just that – test whether the technology works. As for the business value, potential roadblocks, organizational fit and so on, that is left as a secondary topic to focus on once the PoC is successful. In entrepreneurship, validation should come before building.
- They have to realize that the startup is just the solution.
Corporate innovation ventures are startup-like projects taking place inside established organizations. When such an opportunity takes place it is an internal corporate project for which the startup technology is nothing more than an enabler. A critical enabler in case no alternatives exist but an enabler nevertheless. If we consider the lean canvas and its variants, a popular tool for startups that is becoming more prevalent in corporate settings, there are a couple of elements out of the total of nine that are directly related to the involved startup. The solution is heavily based on the startup and the customer acquisition cost which probably includes a component of the startup technology cost. The remaining seven components of the canvas have to do with a broader context which is the opportunity to make a significant impact on the organization’s business outcomes.
In most organizations we encounter that haven’t made this realization yet, the following pattern is quite common:
- A lot of effort is placed on the scouting part where they get to meet cool startups with exciting technologies.
- There’s a focus on visible events such as demo days which are great opportunities to develop the organization’s brand and reputation.
- However, once the most promising technologies are identified they put the startups in contact with the relevant executives or contact persons who have a lot of goodwill but not a lot of spare time or clear guidance on what to do next.
This is a recipe for disaster and a lack of outcomes.
Oddly enough, we meet quite a lot of organizations with organic innovation processes that are run relatively effectively. What characterizes such organizations is:
- Tools – They usually have clear methods applied for this purpose such as lean startup or design thinking.
- Process – A certain process defined with clear stages and conditions for being promoted through the process.
- Leadership – Decision-makers are usually identified in advance and serve as great proponents of innovation ventures within the process.
- Community – Those with advanced ecosystems even train innovation champions that support the process and empower employees to own innovative opportunities and to be the force that drives them forward.
As we looked at organizations struggling to get consistent outcomes with their open innovation activities it became clear to us that the same characteristics of successful organic innovation ecosystems will have a great effect on open innovation activities. Moreover, once organizations invest in the right innovation infrastructure, it can serve both purposes of organic and open innovation. If we consider the key observation above, an innovative opportunity to generate new business by applying a thin sheet of material embedded with electrical circuitry to the hood of an automobile is something that requires the same approach as any other entrepreneurial project running inside a corporate innovation ecosystem.
This is how the concept of the Hybrid Innovation Ecosystem came to be. What we see working very well is having a solid innovation infrastructure internally and using the same rules and the same contributors to promote both organic and open innovation opportunities internally. What’s very interesting is that this approach relieves a lot of the burden that was placed on the shoulders of startups to somehow crack the corporate code. Instead, it is now on the corporate ecosystem to find the right way to introduce startup technology to its business operations. This is not just a much more robust method that generates a high success ratio, it is also, we believe, an approach that is much fairer towards startups that are very young and often struggling companies.
In summary, it appears you can have your cake and eat it after all by leveraging the same innovation infrastructure, when done correctly, for both organic and open innovation. A Hybrid Innovation Ecosystem is the answer for organizations that would like to have the flexibility of applying both organic and open innovation approaches.