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The 21st century executive

Innovation Networks: 3 Strategies for Building a Beneficial Partnership

Innovation Networks

Innovation is at the forefront of almost every tech company’s vision: to develop new, radical technology that will shake up the market and transform the user experience. 

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Innovation, however, does not come easy. It is often slow and incremental, taking a significant amount of time, resources, and financial support to transform an idea into a final product. Individuals, teams, and entire organizations cannot consistently achieve true innovation on their own, which is why innovation networks have become an integral part of technological development.

Innovation networks can be defined as people, institutions, and companies that work cooperatively to provide access to intellectual assets and resources to solve problems and bring new products to the marketplace. Innovation networks offer two critical benefits by operating as an extension of a single organization rather than its parts. Firstly, they provide complementary knowledge on forming relationships with actors that engage in collaborative innovation. Secondly, they focus on the capabilities required to develop and manage relationships for innovation.

However, innovation networks are complex and require careful consideration when selecting partners. This article discusses the characteristics of innovation networks and strategies for forming successful partnerships.

Why Create an Innovative Network?

It’s easy to see why innovation networks are attractive – they offer access to resources and capabilities that people, organizations, and institutions would otherwise be without. Nevertheless, the individual motivations for joining an innovation network are often complex.

From a high-level perspective, the primary objective is to innovate or invent. Innovation consists of five stages: (1) idea generation, (2) project definition, (3) problem solution, (4) design, development, and production, and (5) commercialization. As part of a cooperative network, partners contribute skills, knowledge, and work across one or several of the innovation stages. 

Beyond the desire to innovate, companies are often motivated to enter into an innovative network to gain an individual advantage by using a partner’s resources and capabilities. They might also be seeking to create new resources with a partner that establishes relation-specific assets to gain individual competitive advantages.

That said, the motivation behind innovation can go much further than that, including:

  • Organizational learning
  • Access to assets
  • Access to external knowledge
  • Access to specific market knowledge
  • Joint development of idiosyncratic resources
  • Increase in flexibility
  • Risk reduction

In addition to inter-company motivations, there are also operational factors. Innovation networks may operate in many ways, including R&D-Joint Ventures, technology exchange agreements, licensing, research associations, etc., to satisfy partner aims. The operational model is crucial to an innovation network because it will inform member collaborators on how to develop both business and innovation strategies.

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3 Strategies to Build a Beneficial Partnership

Ideally, all innovative networks should operate synergistically to achieve the broader goals of the extended organization. However, the real challenge of choosing a strategic partner begins with the understanding that co-collaborator goals often differ from each other. Here are three strategies to build beneficial partnerships within an innovation network.

   1. Evaluate Both Individual and Collaborative Attributes of Potential Partners

Innovation networks are more than just having several collaborators under one banner; the aim is to choose the right partners that complement each other. 

When evaluating the collaborative attributes of potential partners, there are four key areas to consider: individual attributes, collaborative attributes, collaborative innovation capabilities, and collaborative knowledge creation skills.

Individual attributes refer to what one partner offers the innovative network. Individual attributes include technological and financial resources, managerial experience, access to markets, etc. From an organizational perspective, individual attributes play a crucial role in the success of the innovation network and are often the first attributes considered.

Collaborative attributes make an organization attractive to the innovation network model. They are attributes such as complementary resources, overlapping knowledge bases, compatible cultures, and long-term orientation. When paired with individual attributes, collaborative attributes are significant drivers of the success of innovation networks.

The final two categories are attributes that could be considered soft skills. Working to achieve business objectives in a single organization is difficult, so bringing together a number of entities with different models, beliefs, and cultures, can add significant barriers to the way innovation is produced.

Collaborative innovation qualities include attributes like the capability to reinforce togetherness and communication, or to ensure equitable value distribution. In addition, collaborative knowledge creation skills usually embody communication skills, professional expertise, critical thinking, openness, and conflict management skills. Although these categories may seem innate or secondary to individual and collaborative attributes, they can have significant impacts if not carefully assessed before entering a strategic partnership.

   2. Consider the Degree of Innovation

An organization not only needs to consider what to innovate, but also how to innovate. The type of innovation impacts both the management and the strategy of the innovation network. There are three main types of innovators: defender, prospector, and analyzer.

Defenders strongly focus on their competencies and product portfolio. They choose stable, niche markets to offer a limited product portfolio and seek to “defend their position in the market through price competition and product quality.”

Prospectors are flexible and have a broad innovation portfolio that changes frequently. As a result, prospectors often try to actively enter new markets and risk high investments to develop innovative projects.

Analyzers mix the strategies of defenders and prospectors to develop a stable portfolio in their core market. Analyzers often learn from the mistakes of prospectors and are fast-followers that create new products based on the analysis of market trends.

How an organization plans to innovate in the market can help inform which strategic partnerships to choose. For example, if the aim is to innovate as a Defender, partnering with a Prospector may create unnecessary difficulties. However, partnering with these two innovators may be incredibly beneficial for innovative networks that aim to innovate as analyzers.

   3. Determine How the Network Will Collaborate

Not all collaborations are created equal, different hierarchies impact how innovative networks function. Therefore, determining the direction that any form of cooperation should take is fundamental to selecting collaborative partners for an innovation network.

There are three main types of cooperation: vertical cooperation, horizontal cooperation, and lateral collaboration. Vertical refers to a top-down approach, such as a manufacturer collaborating with suppliers or customers. Horizontal cooperation is with a company that holds the same position in the value chain. Lastly, lateral cooperation includes organizations across different industries as well as research institutions. 

Although lateral cooperation often comes to mind regarding innovation networks, it is not the only model. Innovation networks can also exist as vertical and horizontal cooperation models, which can benefit the desired business outcomes.

Getting Started as an Innovation Network

After discussing strategies to build a beneficial partnership and select the right partners, the next important question to consider is what the strategic intent of the new innovation network is. What problems is it trying to solve? Only then can a network be designed around the strategic objective.

It is important to understand that innovation networks take time to develop. Solving a problem and determining how potential partners can support a solution is an exploratory process. Likewise, developing relationships with companies and institutions can take years and is often competitive. Still, the payoff can be transformative innovations that can shake up markets, change industries, and even influence the way we interact with each other.

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About the author
Elena Leralta

Working as Foreworth’s Chief Financial Officer, Elena possesses a wealth of knowledge on business management and finance owing to her over 20 years of experience working in the financial sector.

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