The Power of Open Innovation

Guest blog from Staley, Technology Advisory and Innovation Lead at Sopra Steria. Part of techUK's #SuperchargeUKTech Week 2023.

In today's rapidly evolving business landscape, the concept of innovation has taken on a pivotal role in determining an organisation's success. Open Innovation is a powerful approach that emphasises collaboration, information sharing and partnership, and has emerged as a powerful strategy to drive creativity, enhance competitiveness and foster growth.

Open Innovation refers to the practice of leveraging external ideas, technologies and expertise to complement internal efforts for achieving innovation. Unlike traditional closed innovation models where all innovation activities are confined within the organisation's boundaries, Open Innovation advocates engaging with a diverse network of stakeholders; including academia, institutes, suppliers, startups and more. This approach enables a broader range of perspectives, accelerates problem-solving, and capitalises on the collective intelligence of the ecosystem.

Market forces

Open Innovation is featured on the Slope of Enlightenment within Gartner’s most recent ‘Innovation Practices’ Hype Cycle and is expected to reach the Plateau of Productivity within the next two years. There are three key market forces driving this practice.

Rapid Technological Advancements: The pace of technological change has outstripped the capacity of any single organisation to maintain a competitive edge. Open Innovation allows access to cutting-edge technologies and expertise without heavy internal research and development investment
Globalisation and Market Dynamics: Businesses operate in a globalised marketplace with complex consumer demands. Open Innovation facilitates customisation, localisation, and rapid adaptation to diverse markets through collaborative partnerships
Risk Mitigation: Sharing risks and resources with external partners can mitigate the financial burden of innovation, especially for high-risk, high-reward projects in a challenging economic environment

Startup collaboration

Our 2023 Open Innovation Report, developed in partnership with Ipsos and INSEAD, focused on startup collaboration. We surveyed over 1,600 startups and organisations from the public and private sector across 10 European countries, confirming that this type of collaboration is now mainstream.

Once relatively niche, open innovation has rapidly become the norm, with 61% of UK organisations now running collaboration projects with startups. While significant, this is below the European average which stands at 72%. More importantly however, 81% of UK organisations rate startup collaboration as ‘Important’ or ‘Mission Critical’ for their business strategy; highlighting the perceived importance of this innovation practice to the future growth of the UK economy. We identified several reasons why organisations and startups specifically are collaborating now.

Organisation Drivers

As reported by 46% of organisations, the primary driver is the opportunity to discover unknown business opportunities. By collaborating with startups, organisations can become exposed to completely new technologies and unexpected ideas. They find it valuable to broaden their horizons by looking outside the organisation’s boundaries for fresh ideas, knowledge and expertise.

The secondary driver is the opportunity to create new solutions. Organisations seek to fill knowledge gaps with immediate access to expertise. Instead of starting from scratch, they can partner with a startup that has already developed the solution they need; avoiding pitfalls and incorporating valuable lessons. This significantly reduces time-to-market.

The third driver is the ability to improve internal business practices. Unencumbered by traditional company structures, startups tend to be characterised by a hyper-creative and entrepreneurial mindset with high levels of autonomy and agility. A key reason why our respondents are engaging in startup collaboration is to allow inspirational culture and ways-of working to add value to their own organisation

Startup drivers

As reported by 50% of startups, the primary driver is access to market. The ability to leverage existing, established relationships to introduce new products and services. Instead of a cold introduction, they benefit from being part of a consortia with a recognised and trusted delivery partner with relevant credentials and experience.

The secondary driver is access to financial capital; demonstrating that corporates are considered more important as a source of growth than a source of finance. 44% of startups still referenced financing, wherein collaboration opportunities provide a way for startups to demonstrate their product / service, with the potential for investment and / or acquisition by corporates.

The third driver is access to people. This most often relates to depth of capability as opposed to subject or domain expertise; where SMEs tend to be resource constrained and rely upon larger organisations to provide the delivery capability required to implement large scale transformation.

Government policy implications

The Open Innovation drivers for startups provide guidance for UK policy. Startups want to focus on growth and use corporate collaborations as a means to accelerate access to new markets, however, they are forced to consider their partners as investors.

The International Technology Strategy, launched to guide the UK to become a tech superpower by 2030, depends on the ability for UK PLC to be able to access finance; enabling startups to focus on growth and realise their potential. Despite the abundance of bright ideas and promising ventures, startups in the UK often face significant hurdles when it comes to accessing the necessary financial resources to fuel their growth.

One of the primary challenges for UK startups is the risk-averse nature of traditional lenders and investors. Many financial institutions are hesitant to extend credit to startups due to the uncertainties associated with early-stage ventures. According to the Bank of England, 25% of small firms that apply to banks have their loan applications rejected.

The bureaucratic and time-consuming nature of funding processes presents another significant challenge for UK startups. Whether seeking bank loans, angel investments, or venture capital, startups often find themselves navigating through complex application procedures and due diligence requirements. The lengthy process can hinder their ability to seize time-sensitive growth opportunities.

For startups, financial support goes beyond just the capital injection; access to networks, mentorship, and industry expertise is equally crucial. Many startups in the UK struggle to find the right mentors and advisors who can guide them through the challenges of scaling up. This lack of mentorship can impact their ability to refine their business models, improve operations and attract investors.

It is recognised by Government that a lack of finance prevents UK companies from scaling up and fulfilling their full commercial potential. And while the government-owned British Business Bank created British Patient Capital in 2019 with an initial £2.5bn to invest over 10 years, Catherine Lewis La Torre, its outgoing chief, noted that “we really need to try to attract in much more private-sector capital to make a dent in what are quite significant funding gaps.”

Policymakers need to work with investors, and industry stakeholders to create an environment that fosters innovation and growth. Government should seek ways to increase the pool of available capital, creating alternate public and private funding options and streamlining funding processes. It should also encourage knowledge exchange through innovation networks that provide mentorship and industry expertise.

Conclusion

In conclusion, today’s business world is closely connected to innovation. In this context, Open Innovation stands out as a dynamic approach that highlights the importance of collaboration, information sharing, and partnerships in driving creativity, competitiveness and growth.

There is a need for policymakers to nurture an environment that fosters such growth, ensuring that financial constraints do not prevent the growth of UK PLC. Access to finance and a well-informed, well-connected market that prioritises collaboration can enable startups to thrive on the global stage.

The UK's aspiration to become a tech superpower by 2030 underscores the importance of Open Innovation and addressing these key challenges.

As an experienced Open Innovation partner, we act as a catalyst for open innovation; enabling ecosystem-based innovation to deliver strategic outcomes. Find out more [link https://soprasteriascaleup.com/]

Download your copy of the Open Innovation report [link- sopra-steria-open-innovation-report_2023.pdf (soprasteria.com)]

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