How can big companies learn from start-ups?

The future of large corporations hinges on their ability to work with small companies and start-ups. In turn, new entrepreneurs can find a chance to scale up through partnerships with large established companies. The key for companies both large and small is collaborative innovation.

The concept of collaborative innovation explores the ways in which young vibrant firms and established companies can commercialize cutting-edge ideas. Such relationships promote long-term growth and enhanced competitiveness for everyone involved.

These symbiotic relationships are vital to boosting Europe’s economic competitiveness. They are critical in helping entrepreneurs scale up while giving established companies access to innovations. One obtains a superior technology while the other reaps the benefits of co-branding, exposure and access to expanded markets.

The talent war

It goes without saying that more competitive economies are associated with higher incomes. Through their Global Talent Competitiveness Index (GTCI), the Bad Ragaz Group recently identified  that, when it comes to talent competitiveness, Europe is on top. Right now, the global war for talent is dominated by high-income European countries like Switzerland, Denmark, Sweden, Luxembourg and the Netherlands (all in the index’s top 10). But there is also a competitiveness divide on the continent between Northern Europe – all European countries in the GTCI’s top 20 are from here – and places in South Eastern Europe like Bosnia, Serbia and Albania that have the lowest rankings.

At the same time, Europe is also dealing with a talent mismatch challenge. There’s a lack of a required talent pool with a widespread disparity between skills companies need and what local labour markets offer. High youth unemployment remains a pressing issue. Immigration trends are now dominated by low-skilled workers.

Collaborative innovation

In a recent study my firm conducted in Europe, we uncovered high expectations for collaborative innovation that will lead to revenue growth across sectors. Innovation’s relevance is increasing – 66% of the 1,000 respondents in the study expect product and service innovation to be at least 25% of their business revenues by 2015. Further, 62% say they expect 25% of their revenue to result from collaborative product and service innovations in 2015. By 2030, 71% say that collaborative innovation will attribute to more than a quarter of revenues.

Despite the rosy outlook for collaborative innovation, there are still several challenges to address. First, companies must establish business cases by assessing risk and benefits of innovation partnerships. This will require measuring complexity and costs versus benefits. Finding the right networks and partners to collaborate with while evaluating the value of relationships will also be crucial. The partnership structure from a legal, contractual and governance angle will be a critical determinant in the set up of effective collaborations.

We also can’t forget the importance of intellectual property. Intellectual property protection and agreements on its right design are essential to building trust and realizing a true partnership. Finally, there must be cross-organizational and cultural readiness at the heart of every collaborative union.

Collaborative innovation will continue to be top of mind for me as I carry on working with the World Economic Forum. I’m certain this will be at the centre of many conversations to come as more companies find new opportunities through successful partnerships that will benefit both Europe and the rest of the globe.

Author: Kai Engel, Partner and Managing Director, AT Kearney

Image: Facebook employees work in the design studio at the company’s headquarters in Menlo Park, California March 2, 2012. REUTERS/Robert Galbraith