In today’s ever-evolving and highly competitive landscape, a growing number of top corporations are leveraging open innovation to fuel growth, diversify their portfolios and reach new markets fast. As explained by Dr Graham Cross, Director of Commercial Acceleration and Commercial Alliances at Unilever:
“Open innovation is not another way of doing R&D, but another way of doing business”
Instead of relying only on traditional internal R&D efforts, open innovation enables companies to tap into a vast pool of external resources, including:
- New business models
- Cutting-edge technologies
These partnerships are helping corporates across industries overcome uncertainty, meet emerging customer shifts, operate more sustainably and boost longevity (just to name a few of the potential benefits).
Companies like AstraZeneca, Walmart, Google, Visa and Toyota have taken the strategy further by building their own corporate accelerators, thus adding speed and lean experimentation to the process. Corporate accelerators serve as conduits for corporations to absorb, acquire, and test new resources. By partnering with and investing in external startups, corporations can gain access to groundbreaking ideas and solutions, create a culture of entrepreneurship and capitalise on existing assets and expertise.
Sound intriguing? Read on to find out more about the relationship between open innovation and corporate accelerators, how they work in practice and how you can leverage them in your own corporate strategy.
Let’s kick things off with some context.
Corporate accelerators vs. open innovation: What’s the difference?
Both corporate accelerators and open innovation are strategic approaches used to innovate, boost growth and gain a competitive edge. While they are distinct concepts, they both emphasise the value of:
- External collaboration for innovation purposes
- Leveraging existing corporate assets to nurture external partnerships
Corporate accelerators are a specific manifestation of the broader open innovation strategy, providing a structured way for corporations to tap into the startup ecosystem and embrace external sources of innovation. Let's take a look at each strategy individually.
What is it?
Open Innovation is a strategy that leverages external sources of technology and innovation to complement and enhance internal R&D efforts. It involves companies reaching out to partners, universities, customers, startups, and even competitors to co-create value.
What’s its purpose?
- Speeding up the innovation process.
- Reducing costs associated with R&D.
- Accessing diverse sets of ideas and talents.
What is it?
Corporate accelerators are partnership programs set up by corporations to engage and partner with startups. They often provide funding, mentorship, office space, and other resources in exchange for equity in the startup or access to emerging technologies, offerings and business models.
What’s its purpose?
- Access to innovative solutions and technologies.
- Early engagement with potential disruptors.
- Introducing an entrepreneurial mindset into the corporation.
Think of corporate accelerators as a mechanism for open innovation. While open innovation opens the door to external collaboration, corporate accelerators help integrate this external entrepreneurial spirit into the core of the corporation through a structured and ongoing program.
Now that we've gone over some of the key differences between open innovation and corporate accelerators; let’s take a look at how they can strengthen your innovation efforts.
Enabling access to strategic resources
To compete effectively in today’s landscape, it's crucial for corporations to harness resources that aren't just rare but also:
- Difficult to imitate or substitute
Corporate accelerators act as conduits in this quest, enabling companies to access new resources created by startups, absorbing, acquiring, and testing their value fast and cost-efficiently.
Example: Mercedes-Benz AG and Startup Autobahn Powered by Plug and Play
Startup Autobahn is an open innovation platform that helps leading corporations in segments like mobility, production, enterprise and more, connect with startups to pilot new technologies and facilitate the implementation of new offerings, products and services.
Its corporate partners include DXC, Porsche, BASF, Bosch and Mercedes-Benz, among others.
By partnering with Startup Autobahn, Mercedes-Benz was able to screen thousands of startups, execute more than 150 pilot projects, and implement 17 new strategic solutions that are helping to future-proof the company for years to come.
Developing in-house innovation capabilities
When you marry innovation opportunities with new processes, it often leads to new innovation capabilities. These capabilities are not theoretical constructs but practical tools, methodologies, and skills that employees harness to drive a company forward in new and innovative directions.
Accelerators, with their external partners and resource-rich environments, act as catalysts in this arena. They create an environment that is different from traditional corporate settings, reshaping employees by giving them the experience and exposure they need to become adept at recognising emerging opportunities and continuously capitalising on them.
Alan George Lafley, the former CEO of Procter & Gamble, is a vocal proponent of this approach. According to him, corporations shouldn’t look at open innovation as something only accessible to a few people but rather as a routine that every employee applies on a daily basis.
Example: BMW and Startup Garage
Recognising the rapid technological shifts in the automotive industry, particularly in areas like autonomous driving, electric vehicles, and connectivity, BMW established Startup Garage. The goal? To collaborate with and leverage innovations from promising cutting-edge startups. Here are a few of the ways Startup Garage is helping BMW Develop its in-house capabilities:
- Integration of new technologies: Startups bring new technologies and solutions that, through the program, get a chance to be integrated into BMW.
- Pilot projects: Before full integration, startups often run pilot projects, allowing for real-world testing, feedback, and iterative development.
- Feedback: By working closely with BMW experts, startups get direct feedback from an industry leader. This helps in iterating their solutions to better fit BMW’s needs.
- Democratising innovation: Startup Garage enables internal BMW teams to work directly with startups to integrate their innovations. This not only fosters a culture of innovation within BMW but also exposes its employees to new perspectives and agile approaches that startups bring to the table.
The example highlights how open innovation and corporate accelerators facilitate co-production in the real world.
Co-production refers to the collaborative production of goods, services, or solutions, often involving multiple stakeholders, including producers, consumers, and sometimes even broader communities. Open innovation and corporate accelerators can play a pivotal role in fostering co-production in the following ways:
- Faster time-to-market: The agility and lean approach of startups, combined with the resources and market reach of corporations, can result in quicker iterations and faster product launches.
- Real-time feedback: Startups often have a closer and more direct relationship with their user base. Collaborating with them can provide corporations with immediate feedback, enabling an iterative co-production process.
- Risk sharing: By co-producing with external entities, companies can share the risks associated with product development, market testing, and scaling.
- Expanded resource pool: By collaborating with external entities like universities, research institutions, or startups, businesses can access not just ideas but also facilities, tools, or datasets that they might not possess internally.
Both strategies, especially when aligned towards co-production, can lead to the creation of broader innovation ecosystems. Within these ecosystems, various stakeholders contribute to value creation, fostering a culture of collaborative development and shared objectives.
Example: Cemex and Cemex Ventures Leaplab
Cemex is a sustainable building materials company that manufactures and distributes cement, ready-mix concrete and other construction products in over 50 countries. Its venture arm, Cemex Ventures, has a global acceleration program called Leaplab aimed at developing successful engagement with early-stage disruptive startups. As explained by CEMEX Executive Vice President of Digital and Organization Development, Luis Hernández:
“The intensive acceleration program perfectly complements our open innovation strategy by giving us earlier access to high-potential Contech startups. By collaborating to test promising value propositions, emerging technologies, and new business models, we are better positioned to continue working with and investing in potential industry disruptors. Innovation is and will remain at the core of everything we do at CEMEX.”
The program is enabling Cemex to pilot, test and scale concepts in areas like green construction, enhanced productivity, construction supply chain, and the future of construction.
Decreasing the innovation risks
Some research has shown that open innovation isn't necessarily cheaper, but it's smarter because you share the risk. Here are a few ways this happens:
- Diversification of innovation sources: Collaborating with diverse external partners (e.g., universities, research institutions, startups, etc.) gives companies access to more ideas and solutions. This reduces the reliance on any single source of innovation.
- Cost and resource sharing: Collaborating with external partners means sharing the costs and resources associated with R&D, prototyping, market testing, etc. This joint investment ensures that no single entity bears the full brunt of potential failures.
- Faster go-to-market strategies: Collaboration can lead to faster product development and market launches. This rapid pace allows for quicker feedback and reduces the prolonged financial risks of drawn-out development cycles.
- External validation: Collaborating with external entities can serve as a validation mechanism. If multiple partners or stakeholders believe in and co-invest in a solution, it's a sign of its potential viability and market fit.
The strong state of CVC funding these last few years is also helping enterprises with their own accelerators “outsource” the costs and risks associated with innovation.
Example: Telefónica and Wayra
Telefónica is a global telecommunications company that initiated the Open Future program to foster entrepreneurship and innovation. Wayra is its corporate accelerator, operating across several countries and supporting startups in the tech and digital space.
Here are just some of the ways Wayra helps Telefónica decrease innovation risks:
- Diversifying its portfolio: Wayra invests in a wide variety of startups across different technological domains. This ensures that Telefónica's innovation bets are spread across ventures, reducing the risk of overcommitting to a single idea or technology.
- Market access: Wayra startups have access to Telefónica's vast assets. This enables them to compete more effectively and scale quickly, increasing their chances of success.
- Resource sharing: While startups bring fresh ideas and agility, Telefónica offers them infrastructure, mentorship, and pilot testing opportunities. The shared investment reduces the resource burden on both parties.
Many Wayra graduates are helping Telefónica provide value-added services for customers without taking on the full risk of developing such a solution in-house. For example, Qustodio, a digital safety tool, was accelerated by Wayra and later partnered with Telefónica to offer its services to the company’s customers. This highlights how accelerated startups can contribute to future-proofing the mothership by adding to its existing offerings.
Open innovation and corporate accelerators go hand in hand. When executed the right way, these strategies can help companies unlock strategic resources, amplify in-house capabilities, champion co-production, and decrease innovation risks. However, the real magic unfolds when corporate accelerators create mutual successes for both the corporation and their startup partners. Good ways to achieve this goal include:
- Making sure the startup and the corporate’s goals align
- Taking a structured approach
- Avoiding innovation theatre
All while ensuring both sides have the platform they need to contribute to the creation and growth of new ventures. For more information about building your own accelerator, be sure to check out our article: 10 Key Steps to Making Your Corporate Accelerator a Success.
Looking to expand beyond your core, access game-changing startups, and boost your entrepreneurial capabilities? We can help you build your own corporate accelerator, leveraging your unique assets to hit your growth goals fast.