Metaio: A Small Company Perspective on Open Innovation

In the coming months, I will interview and write about SME’s and their experiences with open innovation as I hope this can help us develop a more holistic view and understanding of open innovation.

The first interview is with Metaio, which develops software products for visual interactive solutions combining real and virtual elements. It is a privately held software company founded in 2003 with 65+ employees, based at 3 locations in Germany, South Korea and the US having 340+ customers.

A key to Metaio’s success is innovation with other partners. In this interview, Jan Schlink shares the some views on how a small company looks on this.

Before we get into the interview, I want to share a comment by Jan. He wrote “to be honest: I wasn’t pretty much aware of the term and circumstances of “open innovation” (definition-wise) and I hope my answers are not too much in  layman`s terms… As far as I understood it, it is more a perspective for huge companies to include SME into the product life cycle at an early stage and share knowledge in order to innovate jointly. Is that correct?”

Jan is very much correct. What I like about this is how a small company actually does open innovation without really knowing the definitions. I think this is very common in many small and medium-sized companies. They just do it whereas most big companies engage with open innovation as a clear, deliberate and strategic choice. Understanding this difference is important when big companies implement open innovation.

To the interview…

Why should small companies embrace open innovation?

They have the chance to play their specific role in the development of products and services they would otherwise not have had with by only marketing their own solution. Especially with consumer products there are many hurdles SME never can overcome, but being part of an OEM or an eco-system can help a SME grow and scale their revenues.

It is also very interesting to learn from the bigger partner about processes and Product Lifecycle Management.

What does open innovation mean to small companies? How does this differ from how big companies view open innovation?

The main difference seems to be the market entry strategy for SME’s versus a innovation / technology leadership positioning on the big companies side.

For SMEs it often is an opportunity for their market entry strategy (getting into new markets). The big companies want external know-how in order to keep their position as the innovation leader or enhance their products with new unique selling propositions.

What are the benefits of innovating together with others for small companies?

In an emerging market there comes the time when established players enter it with their own solution. Sometimes they have bought a specialist in advance or they developed it themselves. Now, if you are one SME, which wants to stay independent you have to join forces with bigger partners in order to compete with the jointly developed solution.

In addition, I can mention that marketing and PR get easier with big names and brands, an internal and external multiplicator effect kicks in when you are part of an OEM eco-system, you get highly profiled external feedback on the things you do / did and you get the possibility to create long-term roadmaps and fund R&D for these goals.

What concerns should small companies have about open innovation?

Maybe some fear that their knowledge gets “stolen” or that the asymmetric power balance could influence their strategic plans. I think that a good preparation and elaborate contracts together with a comfortable feeling help to prevent being taken by surprise. I bet, that big companies with a good  “open innovation” image have it easier entering partnerships. Mistrust is a bad starter…

How can small companies prepare themselves for open innovation?

They have to be adaptable (daily builds, quality and industry standards), approachable (international, open minded, soft skills) and self confident, i.e. knowing exactly where their strengths are and that their solutions play a notable role of the joint venture.

Strategically experienced management members are very important. You have to be able to speak the same language like a CTO a billion dollar enterprise without sounding cocky.

Which business functions should “own” open innovation at small companies? What kind of people should work with open innovation at small companies?

The CEO and/or high-level management should own this if they are technologically experienced, but ideally every unit should be involved with open innovation because projects need to be initialized, created and marketed.

Can you elaborate a bit on this?

Well, let´s say there is a management contact between two companies and they agree on an innovation partnership. The project will not be implemented and deployed by these initial persons. Developers will get in touch, same as the marketing or PR department in order to develop, optimize and at the end communicate the project. That´s why almost every division should be able to work under these – say asymmetrical – circumstances.

Open innovation is very much about ecosystems with several partners. Small companies often take the back seat in such setups. Is this a problem?

I think this is a matter of time and performance. And I think it’s not always bad to be in the back seat. You see all the players.

Small companies often have limited legal resources. What can they do to get better deals and protect their intellectual property?
IP management and enough legal resources are important. They should not save the money here!

You have a better position in negotiations with a good IP portfolio and a good lawyer who can help you understand complex NDA’s and contracts.