The Bullies of Open Innovation
Large companies have always used their size and power to get things their way. This is no different with open innovation. So I am not surprised when I listen to people from smaller companies complain about the behaviours of large companies when they start working together.
Such behaviours were confirmed by several large companies at the recent Open Innovation Summit. They shared stories on how they had used their size and corporate power to get deals that favoured themselves and they even admitted that some deals could be so lop-sided that they could discourage other smaller companies from working with them.
This made me wonder whether it is just human nature to be a bully and use the power at hand. I reached the conclusion this is often the case and in terms of open innovation this is just what smaller companies should expect when they engage with large companies.
This is not to say that I approve of such behaviour. I prefer an ideal world in which all companies get along and share the pie in a fair and nice manner. But the problem is that we do not live in an ideal world. So what should smaller companies do about this?
I do not think they can do much to change the behaviours of the large companies. But they can prepare better. They should expect a bully-like behaviour and prepare for this rather than cross their fingers and hope for the opposite. They need to analyze the level of resources needed to work with the larger company and they need to weigh the pros and cons on potential deals. Some deals might not be worth the trouble.
At least some larger companies are aware of this situation. They understand how important it is to be perceived as the preferred partner within their industry. This was illustrated by the fact that some of the companies that admitted to loop-sided deals at the recent summit work to rectify those.
At the summit, a representative from a large company also shared that increasing the leadership position that comes with the perception of being the “preferred partner of choice” is an area of improvement to them.
On this, he mentioned that the company recently commissioned a third party to conduct a blind survey in which they asked a range of potential partner companies that had not yet worked with the given company whether they would like to do so. A large majority replied positively. Later in the same survey they asked companies that had already worked with the given company by revealing their name. Would they like to work with them again in the future? Although still in the high end, the reply here was lower than the first one.
This gives reasons to worry. Hopefully, it seems as if this company is up for the challenge as they show a willingness to confront and rectify this. This is most likely not the case at many other large companies, but let’s hope for the best – and tell smaller companies to prepare well…
Stefan: Another very interesting topic you've surfaced. Your comments invite question as to the dynamics associated with the business relationships you describe. Does it primarily involve a classic beat down from Purchasing which often can degrade a fledgling relationship by turning it into a transaction, rather than a partnership? Or, are there other behaviors that smaller partners would describe as "bullying".
Best regards,
Michael
Great insights Stefan. Its an interesting question as is it about group behaviour or individual behaviour? Ive just been filling myself with neurophysiology of behaviour lately and findings about mind and brain. People have greater empathy and compassion if they have good psychological attachment (approx 50% of americans – dont have research on the others) but we dont have to stay that way – we can change our brain and mind – neuroplasticity.
So individuals can become more and more compassionate and less and less likely to be bullies.
But will organisational behaviour change at the same time? I expect it will and do so at the point when critical mass is reached. (And if we are asking individuals to operate against the org culture critical mass might be quite high).
And we wont get accurate information on large corporates abusing their power unless it is provided anonymously (which carries its own problems).
Longer run maybe both individual and cultural shifts will occur somewhat together and so have a huge impact when they do as they will accelerate the change.
regards
Janine Cahill
Dis-economies of scale are real and numerous: you've uncovered another one.
Large companies who behave like bullies (most routinely do) do so at the risk of repelling, and damaging, a tremendous external source of innovation and entrepreneurship: their vendor base.
Talk about not living in an ideal world: creating, nurturing and delivering innovation is rarely a core competency for any company of any size. Rather than develop their own culture around innovation, many large companies acquire a competitor or contract leadership of that critical process (innovation) to others. They then get frustrated that innovation, with its characteristic uncertainty, are impossible to predict and so such contracts are impossible to enforce in any conventional sense.
Lesson for wise companies of any size, but especially small ones: "Some deals might not be worth the trouble."
In the case of corporate size disparity, it should be not 'buyer beware' but 'seller beware'.
Be well, ALL.
GGG
Stefan, acutely acurate insight again.
Just a couple of days ago i had a meeting in Melbourne with two senior (?) scouts from a very large company that operates in 'open innovation' space. They are famous for sourcing innovation in the open market and have a famous '&' in the name of the company and their open innovation program. They initiated the meeting because i have a cool innovation network in Australia.
So, there were two BFGs (Big Friendly Giants) and me. And the meeting went along the lines: 'we are happy for you to pass to us qualified/target rich leads that are ready for global production or a cat's hair away from production, so we dont have to do any research; & you may do this for free for a couple of years & if we are happy with the leads, then we will see if we can make any other arrangements'.
And while saying this the giants' minds wondered. Their big minds could not focus on even a passing relationship. After two weeks of wandering the land of Oz they were full and a little sleepy…
Open innovation is for equals.
Stefan,
This is an interesting challenge for large and small companies. One large company that attempted to explore solutions for this was Nokia. In 2000, Nokia established Innovent under the direction of the then CEO and President. This group was tasked with building strategic and operational models with the founding principal of parity in early stage relationships between Nokia and promising small companies. For seven years this group negotiated partnerships and investments with early stage entrepreneurs and their companies. In many respects it was a successful undertaking. Promising feedback from the entrepreneurs and the communities that support them. A portfolio of investments that were successful attracting secondary investment and being acquired by other established giants.
Over time, as Nokia executive leadership changed and financial pressures built this type of market leadership became less of a priority and the group was dissolved. They were for a time leaders in this area. It was a program that trained many talented individuals and built intellectual property in the open innovation area.
It was unfortunate, as is said "timing is everything".
Stefan,
"open innovation" is really a messy concept.
In the first place, the concept of open innovation policy has based on the idea that the firm's own organization might not be the best in catching new product ideas for its PD-processes, production and marketing. And on the other hand, open innovation policy by (in the markets) well established manufacturing companies would give excellent opportunities for smaller innovative firms and individual inventors to build partnerships to capitalize their ideas. And, as far as I concern, open innovation policy is focusing on purchasing ideas with IPR guaranteed by patents or equal.
Now, for making a deal, both parties have strong incentives for partnership, and the negotiation would be about splitting the expected risks and profits. That where the negotiation power will come to the picture. Although the large corporation have the markets in their hands and the total domination power for the negatiation, the innovation supplier is the only monopoly holder in this situation. This is where the innovation IPR holder should have the best advizers: analyzing the options how to earn with the innovation, organizing partnership in production and marketing, soft equity, comissions, patent fees, fixed annual fees, job position and compensation etc.
Too often open innovation policy seems to be pushed to the same context as outsourcing of production. Although this production outsourcing might also include some features of open innovation policy ideas, anyhow, the main idea is only in optimizing the production of the principal, not sourcing new ventures or innovations as such.
Concerning NOKIA case, as the first global consumer goods producing megaenterprise in Finland – after the mass production was moved to China – the changing role of Finnish SMI created statement that "Finland became a protoeconomy".
NOKIA might also be a good (or bad) examble of the blind trust that a firm might develop new businesses only with money. The venture concepts (outside the main business) by large corporation have not too often succeeded. To me this is showing the importance of passion to accomplish new ventures, and passion is something which is hard to get committed with money (alone).
Stefan,
Although your insight is often true, my experience is that 'bullying' is amateurish and simply symptomatic of the immaturity of the field of Open Innovation.
My own 10+ yrs experience has led me to a point where I totally agree with something proposed at another recent conference – Open Innovation is all about the relationship, not the deal. Focussing on 'the deal' is what newbies in the space do to their own detriment, but they do learn to change (or fail).
Borrowing from the popular book, perhaps a better parallel for Open Innovation is 'Corporations are from Mars – Entrepreneurs are from Venus.' Although different, as they gain experience, mature and succeed, they come to learn they need each other – especially for the purpose of creating something new. Bad behaviors like 'Bullying' (or 'gold digging' on the part of the entrepreneur) are then replaced by new philosophies about clarifying roles, responsibilities, obligations, etc. wherein all parties see, understand and believe in a relationship of mutual benefit.
So although I agree with the seed of the intitial insight, I propose that 'bullying' may simply be a common stage in early and inexperienced OI relationships – and is most certainly *not* the natural end-state of successful open innovation.
Russ
I believe the freshest innovation, and the openest at that is far more likely to start off amongst smaller outfits, individuals with the passion and a clearly shared vision. Of course at some point in that ventures life money needs to come in to the equation and very often, and to many "little" outfits that means collaborating/partnering with big outfits to provide financial and business backup.
However, I really believe that it can stay in the realm of "the smaller" groups, amongst the folk if you like. It's a question of finding the right people.
Corporations have to by their very nature be greedy and self serving, alas it also usually makes them short sighted.
Stefan: I respect that you've been able to generate a lot of excellent discussion on this compelling topic.
Margaret correctly states "open innovation is for equals"…if not in size, then certainly in terms of sophistication.
Her observation is probably fairly common. I feel it is helpful to consider the scenario she described from both the perspective of the "technology provider" as well as the "technology seeker".
The technology provider invariably has their own innovation as their sole frame of reference (and interest). They are also very likely looking to the technology seeker as a major investor to complete their development.
In contrast, the technology seeker has access to, and likely has knowledge of a great many solutions in the space that the technology provider is seeking to fill. Therefore, the value of the provider's innovation to the seeker must be weighed against these available alternatives. The degree to which a technology seeker will be willing to invest in completing the development is going to be dictated by the suitability of the alternatives available to them and the likelihood that the investment is going to generate a meaningful return.
Of course, a technology seeker's strong and stated preference is to push the cost and resource investment decisions back onto the provider. Realistically speaking, these larger companies can't afford to invest in every potentially attractive opportunity to validate it. That said, a technology provider should decide at what point they feel they have the right to push back and say that in order to conduct addtiional work to satisfy the seeker's questions, that certain investment on the seeker's part is necessary. If the seeker is unwilling to make an investment, then you know that the interest isn't that pressing.
Conversely, the more finished an innovation is, the greater the value it should command in the market with a technology seeker. The point at which the technology provider feels that they have sufficient leverage, they will be able to court multiple customers and likely multiple offers. And large companies can be pretty nimble if they feel that they risk an attractive opportunity getting away from them.
Best regards,
Michael
Very well said. Open innovation works better in open source collaborations but are full of bitter experiences within commercial frameworks.
There are no rules governing open innovation partnerships and smaller participants are just USED by the big bullies
Stephanie brings up a great point – 2 things influenced the change at Nokia – change in management, change in circumstances/business. My experience, both professionally and personally, is that the leader sets the overall tone and culture of an organization (and family and community). Almost all the companies I've worked for and with take on the personality of their leader(ship)…good, bad, indifferent. And since, historically, large companies are run by those who came up through the traditional career ladder, the command-and-control style of management that dominated the late 19th and almost all the 20th century (and still does to a great extent), the sense of power, of 'might makes right' was (and is) infused into the culture. For so many leaders of large corporations it is a power play – and the key is how that power is used – with stewardship and humility or with consumption and hubris (and permutations in between these 2 extremes).
I think this is starting to change – I see more servant leaders as presidents and CEOs, even of large corporations, I see more innovative management styles and cultures all of which should make open innovation more 'equal' (tho not absolutely equal) over time (and generational shifts). If you look at P&G (a classic open innovation company), Lafley was a distinctly different type of leader and the reason it worked there was because of his leadership and how he used his leadership to transform the culture which enabled a more positive relationship with partners in open innovation.
I wonder if those companies that are led by people that were entrepreneurs themselves (and still are) tend to be more fair in their dealings with smaller companies. A few of my clients, who are large, are very fair in their partnerships with smaller companies and even take on a mentoring role for them to help them grow. They see the value the smaller partner brings in terms of some technology, methodology, process, solution, IP etc. but also see it in their best interest to help that small company grow and succeed so they can stay around to be a continual partner and provide value. Now, that's not the norm yet in my experience but it is out there and I'm slowly starting to see it more and more.
That said – I think to some degree 'bullying' is part of human nature – not from a 'mean/evil' standpoint but because I think all humans are basically insecure – we're born that way…and a means to overcome that is to make you feel better about yourself and one way to do that is to stress your gifts and talents that are unique or of high impact (positively) or, the more common, is to put others down in order to elevate yourself. Of course this can get into a philosophical and theological discussion as well, but suffice it to say that we all need to feel important and worthy and there are both positive and negative ways to make that happen.
Great discussion – deb
Stefan –
By sharing experiences about open innovation, as you do through this blog, we gain a better understanding of what is 'normal' and what is 'possible'. Open Innovation is a comparatively young discipline, and each experience helps define the industry. The more reference points we can refer to, the easier it is for us to learn and grow.
We are fortunate that partners who collaborate in open innovation never have far to look in order to see their common interests. They share a common goal of creating progress in their markets and technology. Focusing on our common interests and higher principles, as Janine mentioned, allows us to find strength for the empathy needed to accept our differences and move forward.
As Russ eloquently stated, relationships will triumph over individual deals. By learning from each other, we can ensure that open innovation evolves as a discipline where quality relationships become the currency by which we measure ourselves.
How to collaborative with Entrepreneurial entreprises (small or large) without killing the entrepreneurial spirit of "giving generously" which entrepreneurs or social entrepreneurs do have?
I believe as long as the focus is on the IDEA (content) and not IDEALS (innovation and process), any open source or collaborative relationship will be flawed from the start.
Many open source initiatives with communities are fraught with disappointment on the community side. Working in an open source collaborative way requires a transformational change in relation to how the brand essence is delivered (the one thought which governs all actions) through its people.
Great comments in a great discussion!
Not much to add right now except that I find Russ Conser's comments quite relevant. This is a two-way situation and being a gold-digger is no better than being a bully. Hopefully, the focus on building solid relationships will continue to grow as open innovation matures.
I/my Co. have been ripped off by several global giants – and even a US govenment lab!
In each case I believe it was far more the result of an individual's personal need (for resume fodder etc.) than the policy of the company.
Exception: Re one well-known Asian co., it seemed I was targetted by them (to get blocking/extension patents). – GG
A concept from the world of sales – If I represent the market leader (usually a big company) then I stress the advantages of being big and buying from the big company. If, on the other hand, I represent the new innovative entrant (usually a small company) then I stress the benefits of being small and buying from the small company. I have made many deals from both positions.
The investor and the entrepreneur both need each other, so there is a basis for a deal. Investors often take the approach that an idea (usually technology) is not worth much without the money to make it successful.
I ask the rhetorical question – "if the idea is of so little value, why do the investors want the entrepreneur's idea?" Because their money will not grow by itself.