Small Companies and Open Innovation

A P&G Perspective

Small Companies and Open Innovationby Stefan Lindegaard

This is part of an interview I did with Chris Thoen, Managing Director of the Global Open Innovation office at P&G. The overall topic is the intersection of big and small companies in open innovation.

Chris shares some great insights and I hope you will enjoy this…

How well informed do you find small companies to be about open innovation?

How well a company understands and adopts open innovation isn’t linked to its size, but more so to the focus of its leadership, its openness to new ideas and its commitment to innovation. We’ve seen small companies deeply engaged in leveraging open innovation to grow their businesses. And others either not committed, or still working to understand what it means and how it can really work for them and their goals.

What have been your key learnings in working with small companies on open innovation projects? What advice would you give small companies that want to innovate with big companies?

A critical learning for us, and a key piece of advice to other companies, is to really understand what a prospective partner needs and expects. For a larger company, it’s important that they take the time upfront to explain global business needs, time lines, IP issues and staffing structures. That way, your prospective partner knows what to expect. Larger companies also need to check any possible arrogance at the door – they cannot assume that they know best what a partner might need.

Both sides need to share and really understand each others’ pluses and minuses and what’s important to each side. That calls for a high level of respect. It’s also unwaveringly crucial.

How can big companies improve their ways of innovating together with small companies?

To make any collaboration work and work well, you need to ensure you have the right people with the right skills at the table when you begin talking, and then working to build and develop the relationship as the project progresses. In many cases, the inclination is to bringing in your brightest minds. But that’s not the right answer if those people are also arrogant and fixed in their own approaches. Keep those folks in the lab. Instead, bring in the team that is capable of making decisions, but also understands that they are not negotiating deals, they are building relationships.

What are the benefits of innovating with small companies?

There are a number of reasons big companies look for opportunities to engage with small companies and entrepreneurs. Key is that they often are at the leading edge on a variety of fronts. They are not bound by the same business limitations we are in big firms, and don’t have a larger, established business to defend and protect. They can be risk takers, and thus their approach and mindset are different. That can be refreshing, inspiring and breakthrough for larger firms, and also can be the source for truly disruptive innovation.

What are some early signs of danger / promise when you engage with small companies?

When we start talking to a potential innovation partner, we first look to ensure we have an “integrity match.” Does the other company have the same ethics and values? If not, it will likely surface later in product quality issues and in relationship challenges. Second, is chemistry. Do we fit, can we collaborate, do we really like each other? Can we build this relationship into one of real trust? I can’t stress enough that this is all about relationships, not just deal negotiations. We have walked away from prospective deals where the innovation was promising, but the fit was simply not right. Looking back, those were clearly the right decisions – for both us and the other company.

What has surprised you the most when working with small companies?

I don’t know that I’d use the term “surprised,” but one of the things we see a lot is companies misunderstanding, and then misrepresenting their own value. Quite often, they either bring to the table an inferiority or a superiority complex. Each serves as a disadvantage to them and the prospective partnership.

When they undervalue themselves, they are afraid to fully engage. They worry that they might not have the technical and/or commercial knowledge to be a worthwhile partner.

On the other hand, some enter a meeting thinking they’ve invented hot water and want to be compensated in platinum. In these cases, discussions are almost always doomed to fail because it’s hard to reach really effective collaboration.

It’s critical for everyone to be realistic about what they know and have, and present it appropriately to potential partners. Don’t under or over-sell.

Can you give some insights on the people aspects of open innovation?

Building open innovation partnerships that are both mutually beneficial and lasting is not easy work. I think it calls for an interesting blend of traits. We look for people who:

  • Fit the “T-Profile” – have a breadth of knowledge, that also runs deep enough for them to be dangerous; they have their PhDs in generalism;
  • strong>Balance on a “three-leg-stool” – have technical and substance mastery; business mastery; and also organizational mastery, so they can influence the organization internally and externally;
  • And, have a mix of both hard and soft skills – so they can negotiate, but also understand the value of the person.

A Guide to Open Innovation and Crowdsourcing

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Stefan LindegaardStefan Lindegaard is a speaker, network facilitator and strategic advisor who focus on the topics of open innovation, intrapreneurship and how to identify and develop the people who drive innovation

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  1. Nancy Pekar on March 22, 2011 at 8:52 am

    Great overview of a great chat. We at Fuentek also found Chris Thoen’s insights interesting. In particular, we appreciated P&G’s broad definition for open innovation, which closely matches what we call definition of Symbiotic Innovation (proactively pursuing spin-in *and* spin-out practices in a complementary way). You can read Karen Hiser’s blog post about it here:

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