Embracing Both Internal & External Change
Innovation can be both internal and external, and which one you choose can depend upon your company’s goals, the systems in place, and the resources that are available. There are advantages and disadvantages to both concepts. In “The Role of Internal and External Innovation,” from digital consultancy Netguru, both options are examined through the lens of innovation experts from several brands and companies.
For some brands, embracing external innovation might be the way to test emerging trends, technologies or ideas. This could be through partnerships with startups or other innovation incubator programs. This might involve the outside-in approach, which gives companies a far greater understanding of what’s happening around them, and what’s happening in the competitive space of their products, notes Netguru.
Of course, the advantages of taking an internal innovation approach include that it may be backed by key decision-makers who can unlock the company’s expert knowledge and resources, observes Netguru. Other pros include clear objectives and access to innovation training, coaching, processes, and methods.
Ultimately, Netguru points out that a mix of both internal and external initiatives, which could be termed a hybrid model, might be the key to successful innovation. For example, forging external partnerships or investing in startups might be an avenue to quickly acquire a new digital technology or tool to help the business grow. Meanwhile, building a robust internal capability that focuses on collaboration might support the development of external partnerships down the line.
The Agility to Move Partnerships Forward
All Things Innovation further looked at this topic in, “Creating the Right Innovation Partnership.” Corporations often face many challenges when it comes to developing innovation in a fast, evolving market. They can face barriers such as inertia, the silo mentality, a large bureaucracy, and even risk aversion can permeate the company culture. That’s where partnerships with startups can come into play, as these firms tend to be smaller and more flexible, creative, agile and disruptive. The partnership between an established corporation and startup can benefit both parties, as they leverage shared resources and a singular vision, whether it be rolling out an innovation or expanding into new markets.
Looking forward to FEI 2024? The conference, which will be held June 10 to 12, will feature the session, “Corporate Innovation: Internal & External Best Practice,” presented by Carley Hart, Director of Corporate Partnerships, Runway Startups, Cornell Tech. One of the reasons that good corporate startup partnerships succeed is due to a clear division of responsibilities based on what each party brings to the table. Corporates traditionally don’t move quickly due to refined and efficient processes. Startups, by definition, need to focus on finding scale. Dive into successful corporate innovation through corporate start-up partnerships. Register for FEI 2024 here.
Creating Innovation Partnership Synergies
Combining the best practices of internal and external corporate innovation offers numerous benefits that leverage the strengths of both approaches and mitigate their respective limitations. We asked ChatGPT to highlight the key benefits of a combined, hybrid approach:
- Synergy and Complementarity: By combining internal and external innovation practices, organizations can leverage the strengths of each approach to create synergies and complementarity. Internal capabilities, such as deep domain expertise and understanding of organizational context, can be combined with external perspectives, technologies, and resources to drive more impactful innovation outcomes.
- Accelerated Innovation: External partnerships enable organizations to access external expertise, technologies, and market insights, accelerating the pace of innovation. By complementing internal R&D efforts with external collaborations, organizations can bring new products, services, and solutions to market more quickly and efficiently.
- Risk Mitigation: Combining internal and external innovation practices helps organizations mitigate the risks associated with innovation investments and initiatives. Internal innovation provides a degree of control and ownership over the innovation process, while external partnerships allow organizations to share risks and costs with external partners, reducing the financial and operational risks of innovation.
- Access to Diverse Perspectives: Integrating internal and external innovation practices exposes organizations to a diverse range of perspectives, expertise, and ideas. Internal teams bring deep domain knowledge and understanding of organizational context, while external partners offer fresh perspectives, alternative approaches, and novel technologies, enriching the innovation process and enhancing the quality of outcomes.
- Enhanced Flexibility and Adaptability: Combining both ways provides organizations with greater flexibility and adaptability to respond to changing market dynamics, customer preferences, and competitive pressures. By leveraging internal resources and external partnerships strategically, organizations can pivot quickly, seize new opportunities, and navigate uncertainties more effectively.
- Expanded Network and Ecosystem: External innovation partnerships enable organizations to expand their network and ecosystem of collaborators, stakeholders, and influencers. By cultivating strategic relationships with external partners, including startups, research institutions, and industry associations, organizations can access new markets, technologies, and talent pools, driving innovation and growth.
- Maximized Value Creation: Integrating internal and external innovation practices enables organizations to maximize value creation by leveraging the complementary strengths of each approach. Internal innovation provides a foundation of organizational knowledge and capabilities, while external partnerships offer access to external expertise, resources, and opportunities, enhancing the overall value proposition for the organization.
- Cultural Transformation: Combining internal and external innovation practices can catalyze a cultural transformation within the organization, fostering a mindset of openness, collaboration, and continuous learning. By embracing both sources of innovation, organizations can cultivate a culture that values creativity, agility, and adaptability, driving long-term success and resilience in today’s dynamic business environment.
Championing Innovation
The best of both internal and external worlds can unite various parties and their innovation efforts. Netguru points out that internal innovation can come in the shape of senior executives or groups of executives, a corporate innovation board, chief innovation officer, innovation labs, intrapreneurs, and R&D units. On the other hand, external innovation can range anywhere from startup acquisitions, incubators, accelerators, and funding/VC to the more mainstream external innovation partners or consultancies.
Overall, combining the best practices of internal and external corporate innovation enables organizations to harness the full potential of innovation, drive growth, and maintain a competitive edge. By integrating internal capabilities with external partnerships strategically, organizations can accelerate innovation, mitigate risks, access diverse perspectives, and maximize value creation, positioning themselves for long-term success.
Video courtesy of McKinsey & Company
