Co-create or die? The future landscape of innovation

The 20th century saw a continuous stream of innovation – a culture of robust research and development resulted in a cornucopia of products with real longevity.

From the vacuum cleaner to the jet engine, the ballpoint pen to the nuclear power reactor – topped off with ever-more powerful computing technology that culminated in the birth of the internet – every decade saw inventions that are still having a direct material impact on our lives today.

Almost two decades in, and on paper the 21st century can’t celebrate the same run-rate of inventions. Yet the pace of change is arguably faster than at any time in history, and the way we live and work certainly feels very different.

That’s down to one thing – digitalisation. We may all be growing tired of hearing about it, but its impact is far-reaching, and nowhere more so than in manufacturing.

Henry Ford would surely turn in his grave at today’s motorists, who expect not only to choose the colour and finish of their vehicle (not always black), but the colour of different panels and the exact specification of every aspect of the interior.

And the demands of business buyers go beyond price and credit terms, now encompassing alignment on ethical and environmental factors, with ever-deeper engagement required in previously routine purchasing decisions.

It’s no longer enough to develop a product in isolation, in a behind-closed- doors innovation lab, or on the promise of an order. It’s almost impossible to succeed in 21st century manufacturing without getting up close, and at times very personal, with a diverse eco-system that includes consumers, customers, suppliers, distributors, technology providers and supply chain partners.

The breakneck speed of digitalisation means that genuine firsts in product development, distribution or consumption are a much more regular occurrence. Even those not at the forefront of innovation are finding that technology and consumer expectations have moved on enough to make their experiences genuinely new.

And with only a continuously moving target to aim for, the need to joint forces, to collaborate to survive, is clear – and here’s why. 

Disparate data

An absolute pre-requisite for innovation in the digital age is the availability of reliable data and the ability to transform that data into insight. Servitization is almost entirely dependent on being able to collect, analyse and interpret data on a continuous basis, and that task is growing in importance every day.

By 2020, technology company Cisco predicts that more than 50 billion things with IP addresses will be connected to the internet, while analyst IDC finds that one million devices will go online every hour until 2020, and 200,000 new apps and services will be available by 2018.

However, in most cases, no one link in the value chain will have access to all this rich pool of data. And so, companies will have to find a way to co-operate, negotiating what in many cases is a commercial minefield, so that they can innovate together based on the full picture, rather than innovating in a silo, with only half the story to work with.

In grocery, retailers including Tesco and Asda have driven significant waste reductions by introducing information sharing platforms (260,000 tonnes reduction in the amount of food and drink waste in the UK in 2010).

While GlobalNetXchange, a consortium of 30 companies including Unilever, Procter and Gamble and KimberlyClark saw up to 20% reduction in inventory costs coupled with increased off-the-shelf availability of up to 12% following a data sharing initiative.

Yet for manufacturers in sectors where intellectual property is rightly guarded, sharing data freely in this way would be unthinkable, when value chain partners are engaged with the competition. So, can forward-thinking manufacturers overcome this data-sharing and cooperation paradox?

Ideate to accumulate

Of course, it is people who have ideas, not businesses, and not always people from research and development or with innovation in their job description. Recent years have seen break-throughs from start-ups who have embraced concepts such as re-distributed manufacturing, or the subscription economy, leaving established brands trailing awkwardly in their wake.

Entrepreneurs are unencumbered by existing structures, and so encouraging employees to think and act more like entrepreneurs can establish a culture of innovation and co-creation within the company itself.

You don’t need to build a skateboard ramp in the boardroom to instil a spirit of innovation. But it is necessary to dedicate some thought, effort and resource into breaking down barriers of business unit silos. It requires commitment and belief to bring together employees from across functions and engage with them.

But game-changing ideas can come from anywhere and anyone, and encouraging a spirit of innovation in big and small companies alike can help to unleash the full potential and talent of employees.

Many businesses now have formalised internal innovation programs. Whirlpool, for example, runs structured ideation sessions, enabling employees to follow a specific ideation process and submit ideas. Cemex is one of many companies that runs a formalised supplier innovation program, encouraging the submission of ideas by its global supplier base.

And the UK government has already established ten ‘Catapults’ focusing on areas with specific potential, such as high-value manufacturing, resulting in manufacturing giants like GE Aviation working closely with academia, and other, often smaller businesses, to achieve step changes.

Disruption waits for no-one

The many and varied market disruptions already seen since the rise of the digital economy are well-documented. It’s understandable therefore, that manufacturers are seeking to disrupt themselves before somebody does it for them.

Post-Airbnb and Uber, a desire to create game-changing solutions rather than incremental improvements has been ignited in many boardrooms that were previously more commonly hosts to cost-cutting discussions.

Yet game-changing is hard, if not impossible, to achieve in a vacuum. DHL, for example, collaborates closely with customers, technology experts and think tanks to actively drive digitalisation into its supply chains.

A current project involves DHL Supply Chain working with Cisco and start-up Conduce to launch IoT cockpits at three smart warehouses in Germany, the Netherlands and Poland.

Co-innovation between DHL and technology specialists large and small is changing the way data is analysed and used at the pilot sites, and is expected to contribute to operational efficiencies and improve employee safety.

It could be argued that DHL, Cisco and Conduce could have achieved the same results individually eventually. However, the process would undoubtedly have taken much longer, been much more expensive, and resulted in a less innovative solution.

Co-creating accelerated the process and each party benefited from a richer end-result. This is precisely the point of co-innovation – the sum is greater than the individual parts. 

The journey

However, the path to successful co-innovation is not necessarily a straightforward one, and it’s certainly more about the journey than the final (often unknown) destination. There are the very real commercial sensitivities around ensuring that the co-creation project is ring-fenced, and that information is not shared beyond the joint team(s).

This involves a combination of trust, contractual agreements, information security policies and common sense. The middle two can prove problematic for both the smaller co-creation partners, who may not have ready access to in-depth legal counsel and a well-staffed IT function. They can also prove even more problematic to large organisations which are somewhat rigid in their own approach.

Cultural differences can also be quite distinct. In his book, Collective Disruption, Michael Docherty highlights the ever-present struggle, or polarity, between big-company discipline and risk aversion versus entrepreneurial speed and risk taking.

Shoe-horning start-up traits into an established culture is unlikely to work, while imposing the larger partner’s culture on others is a recipe for disaster. Each party must find a way to work together, while not destroying their existing culture, which after all has been behind their success to date.

The recent announcement by Rolls- Royce Marine that it will work closely with Google on artificial intelligence projects raised some eyebrows across the industry.

Both companies are industry giants, but with very different public personas and distinct cultures. However, they are taking a phased approach to establishing their co-innovation relationship.

Initially, Rolls-Royce will use Google Cloud’s software to create machine learning models capable of interpreting vast marine data sets, with the two companies then planning joint research over the longer term on unsupervised and multimodal learning.

Another issue is that co-innovation in general looks and feels very different to traditional product or process development. Hierarchy becomes irrelevant, with everyone expected to roll up their sleeves, and the pace is much faster than many are used to.

Rapid prototyping cycles are reliant on constant and near-immediate feedback, with all parties integral to the process. For companies used to beta testing at the end of the development process, it is quite a shift in mind-set. (See the box below for five top tips on successful co-innovation)

Beyond the initial light-bulb moment, successful innovation requires a great deal of work. Co-innovation in particular is far from easy, but done right, the rewards are definitely worth the effort.

As consumer expectations and macro-environmental factors continue to challenge manufacturers, it seems that increasingly there is safety and inspiration in numbers. Co-innovation is here to stay, but it will require effort to perfect, along with an acceptance and understanding that in the digital economy of the future, size does not guarantee success or dominance, and that nobody has all the answers any longer.