Sponsoring a hackathon or having sporadic interactions with external partners won’t significantly enhance your innovation ability.
To achieve innovation goals and secure competitive advantage, corporates should learn how to work with innovation ecosystems strategically and systematically. Most fail to leverage these ecosystems effectively despite the potential benefits.
How to identify what you need from innovation ecosystems? Who are the key players in the ecosystem? How to engage with them?
During our recent Innov8rs Learning Lab on Startup Collaboration & Ecosystem Engagement, we discussed these topics with Dr. Phil Budden (Senior Lecturer at MIT Management School). As summarized below, Phil shared practical insights to help leaders build such a strategic engagement and decide how and where to engage.
Strategically Engaging With Innovation Ecosystems: Here’s How
Innovation can’t happen in a vacuum. Even the most innovative organizations require external resources, expertise, and perspectives to drive innovation. This is because innovation often involves new ideas, technologies, and approaches that may not be present within existing resources and expertise. Engaging with innovation ecosystems offers a solution to this problem.
An innovation ecosystem is a network of diverse stakeholders – including startups, investors, and universities – working together to drive innovation and economic growth. These collaborative environments can exist in various industries, regions, and countries and take different forms depending on the local context and resources available.
“Where startups, researchers, and investors cluster, opportunities to accelerate corporate innovation abound”.
Engaging with innovation ecosystems means accessing a wealth of collective knowledge and assets. However, many corporations don’t fully reap these benefits because leaders fail to establish clear interaction goals. Often, leaders spread their efforts too thinly across superficial activities that provide little value to startups and investors. Additionally, coordinating innovation efforts across departments can be challenging for leaders. And this lack of coordination leads to unnecessary noise and confusion about whom to engage and for what purpose.
Phil has created a systematic framework to help business leaders establish clear goals for their interactions with innovation ecosystems and develop a targeted approach that aligns with stakeholders' needs and preferences. This framework requires leaders to answer the following three questions:
- WHAT do you want to acquire from (and offer through) the innovation ecosystem?
- WHO do you wish to engage with, and who will engage from your side?
- HOW will you engage, and will the approach ensure effective interactions?
1. WHAT do you want to acquire from (and offer through) the innovation ecosystem?
First and foremost, leaders must identify what resources they need to drive innovation and what they can offer to the ecosystem.
“When corporates fail to understand the needs of others – whether entrepreneurs, risk capital providers, or universities – they can fail in their engagement and in meeting expectations, despite having valuable and complementary. A negative reputation can be challenging to overcome”.
For example, a startup may need funding and mentorship to develop their product, guidance in navigating intricate regulatory and supply chain pathways, or access to infrastructure to support testing and scaling up. On its side, a corporation may want to access resources such as market insights and new distribution channels. In general, leaders can build mutually beneficial partnerships within the ecosystem by identifying all these needs in advance.
That being said, it's important to note that every ecosystem has unique requirements and traits. And to interact effectively with it, it’s essential to deeply understand its features. And so, to determine your “WHAT”, you should:
- Identify the resources you need: identify the gaps in your organization's capabilities that need to be filled. Be specific about the resources you need so you can clearly communicate them to potential partners who can help fill the gaps.
- Determine what you can offer to the ecosystem: understand your organization's unique value proposition and expertise, and identify how this can contribute to the entire ecosystem. Be prepared to clearly articulate what you can offer and how it aligns with the ecosystem's needs.
2. WHO do you wish to engage with, and who will engage from your side?
Second, leaders have to identify the right partners from the diverse stakeholder groups in the ecosystem. Hence, they must decide who from their organization will engage with these partners.
A healthy innovation ecosystem draws value from – and delivers value to – five different kinds of stakeholders: universities, governments, corporations, entrepreneurs, and risk capital providers. You should select a partner based on your corporate’s overall strategic goals and needs. For instance, if it lacks insights into future innovations, you shouldseek links with very early-stage ventures; conversely, if there’s a gap in its near-term portfolio, you should engage with late-stage startups.
“There's a flip side to building the right relationships within the innovation ecosystem: who in the corporate should be the one engaging with them? Never send a team of lawyers to speak to the startup entrepreneur, as this will create problems and lead to failure”.
As a flip side to the "who" question, leaders should choose someone from their staff with the proper knowledge and experience to lead the engagement. And so, to identify your “WHO”, you should:
- Identify key stakeholders within the innovation ecosystem: research and analyze the ecosystem to identify key stakeholders and their roles- they should be as relevant as possible to your organization's goals and needs. Prioritize stakeholders based on their potential impact on your innovation efforts and be open to exploring collaborations with partners that may have different perspectives or approaches.
- Determine who from your organization will engage with them: determine who has the expertise and knowledge to effectively engage stakeholders. Make sure they're equipped with the required resources and support to succeed.
3. HOW will you engage, and will the approach ensure effective interactions?
Lastly, leaders must identify ways to engage and interact with ecosystems and ensure that these interactions are effective. For example, a corporation may host innovation challenges to engage with startups and identify potential partnerships.
“Too often, leaders put the cart before the horse, for example, by launching their organization into the ecosystem with a shiny new space or a single massive event while gaining little from these efforts other than publicity”.
However, you should plan how to engage with innovation ecosystems only after considering what your organization needs and the right partners to work with, i.e., the “what” and the “who”. A common mistake leaders make is to invest in numerous hackathons, accelerators, competitions, and other challenges without having a clear strategic interaction plan. This unfocused approach may even create confusion among stakeholders.
Yet determining which mode of engagement matches the “what” and “who” can be really challenging. Using existing communities where entrepreneurs already gather is a good place to start, suggests Phil. This will help you quickly develop a broad array of relationships than you could by targeting startups individually.
And so, to establish your “HOW”, you should:
- Identify the best approach for engaging with stakeholders: create a targeted approach for engaging with them using the information you've previously collected about them, such as their needs and preferred communication channels.
- Ensure that your interactions are effective: be clear about your objectives and the value you can offer the ecosystem. Listen actively to stakeholders to understand their needs and perspectives, follow up promptly, and deliver on commitments made to build trust and foster long-term relationships.
