Co-innovation is fundamentally a business method. It blends benefits of an acquisition strategy with the benefits of organic growth. Why is co-innovation a compelling business model for innovation-driven companies in today’s rapidly evolving technology landscape?
- Innovation is global
- The pace of innovation is rapidly accelerating
- Innovating is expensive, with high-investment risk
- World-class expertise is broadly distributed
WHAT IS CO-INNOVATION?
- Co-innovation brings appropriate world-class expertise from different companies together to solve hard problems
- The innovation partners share the investment and risk
- Co-innovation splits the technical solution from the commercialization model
- The combined expertise accelerates development time reducing overall cost and risk
- Once the development completes all business models are available for commercialization
- Companies can take the development results and agree to meet and compete in the marketplace
- They can also pursue traditional relationships like merger, acquisition, partnership or joint venture to commercialize
For example, MEMS technology (Micro-Electro-Mechanical Systems) is a unique expertise. MEMS manufacturers etch small-scale systems in silicon. The development cost of the MEMS device and its supporting control electronics (ASIC) is very expensive. Co-innovation might make sense between two MEMS manufacturers. They could jointly design and develop the system and share IP access. Working together, they dramatically reduce development time and share the development expense. Once complete they can choose to bring it to market as a single offering with a revenue sharing structure or they can compete directly in the marketplace.
Another example is the way HP worked with Canon on laser printers. Canon produced print engines. HP produced the rest of the HP printer. Canon and HP met in the marketplace and competed directly in laser printers.
Some leading companies have been “co-innovating” for years, even if they didn’t call it co-innovation.
Universities have also operated in a manner similar to co-innovation where the research was inherently disconnected from direct commercialization allowing world-class researchers to collaborate directly on projects.
Historically, tools like mergers, acquisitions, partnerships, and joint ventures were the methods companies used to bring together expertise focused on commercialization. The challenge with these methods is they tightly couple innovation with the commercialization business model. Co-innovation decouples innovation and development stages from commercialization.
- Address hard problems with world-class domain experts
- Accelerate development
- Accelerate time-to-market
- Reduce risk
- Share cost
- Eliminate redundant investment
- Maximize commercialization options
Co-innovation provides structure for engagement and planned paths for managing IP, which frees the development teams to focus on the project deliverables instead of burdensome administration.