Co-innovation: the concept, its benefits, and why you need to embrace it

March 28, 2018
6 mins

Innovation is the key to gaining and sustaining competitive advantage, especially in today’s fast-paced, tech-fueled business ecosystem. Traditionally, many organizations used their own knowledge monopoly to innovate and deliver dominant technologies and products to the market. However, businesses soon understood that innovation cannot take place in a vacuum and it requires different points of view, diverse skill sets, and collaboration. Open innovation replaces closed innovation to allow businesses to use both internal and external ideas to bring advancements in their technology. This changing mindset in the collective business environment enhances organizations’ ability to innovate better and faster.

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Co-innovation is innovation that goes beyond open innovation. And only in the last few years has it been formally introduced as a structured process that leads firms to collaborate with their customers, partners, and other stakeholders.

What is co-innovation?

Co-Innovation

Source: Inteliment

In their research paper, Henry Chesbrough and his colleague Marcel Bogers defined open innovation as a distributed process of innovation that depends on purposefully managed knowledge flows across the boundaries of an organization using financial and non-financial mechanisms conforming to the company’s business model.

In their terms, co-innovation is coupled open innovation that involves two or more partners using joint invention and commercialization processes to manage their mutual knowledge flows. In simple terms, co-innovation is the cooperation and collaboration to innovate and is a crucial value creation element for any organization.

The advances in technology and connectivity make collective collaboration easier than ever. Even companies located in the remote corners of the world can tap into innovation from wherever they are. Businesses are no longer keeping innovation behind doors. They are working together with their consumers, lead users, vendors, partner organizations, suppliers, and even university labs for new insights and ideas. However, pursuing co-innovation requires finding the right balance between inhibition and recklessness. Most often, teams that work on co-innovation projects share some or the other common capabilities, including technical, organizational, financial, and marketing. The best practice for successful co-innovation and for avoiding future disappointment is to fill the knowledge gaps before the beginning of a project.

Co-Creation Process

Source: Hitachi

Benefits of co-innovation

Making customers, vendors, and other stakeholders a part of the innovation process is a strategy many successful businesses use to stay ahead of the curve. A recent research study commissioned by Hitachi and steered by Longitude Research established that 58 percent of businesses surveyed have conducted co-innovation projects that helped them innovate. The report also found that more than 51 percent of those surveyed witnessed an improvement in their financial performance while 54 percent found an improvement in their social impact. Based on the results of this report, the following are some of the key benefits of co-innovation.

  • It has the potential to create new commercial opportunities.
  • It increases the chances of creating more new products and services that are successful.
  • It can reduce the overall cost of developing new products or services.
  • It can improve a business’s financial performance.
  • It can drive positive social impact.
  • It can change organizations’ overall approach to innovation.

Co-Innovation Labs: Digitization Strategy

Source: Datavard

That’s not all. Co-innovation has many more advantages. Here’s how you can benefit by co-innovating.

1. You can create better customer-centric products

The best thing about co-innovation in terms of product is that you don’t have to wait until designing and launching a new product to find out if your customers actually like it or not. It allows you to send a prototype or beta version of your product to your customers, get their suggestions, experiment more, and create a final product that’s as close to your customers’ requirements as possible. This also means fewer product variants and lesser taken and resources you spend on them.

2. You can get more meaningful insights

Co-creation allows you to learn directly from your customer’s broader behavior patterns and experience by collaborating with them on social media platforms, such as Twitter and Facebook, unlike market research, which helps you gather only specific customer information.

3. Co-innovation helps you mitigate risks

When you collaborate with your customers and all your stakeholders, and all of them contribute ideas for product creation, the chances of your product becoming a flop is averted to a great extent.

4. Co-innovation helps you develop brand loyalty

When you involve your customers and stakeholders right from the ideation stage of a new product, you create a sense of ownership. This helps you build a strong relationship with your product’s user group. It is these brand loyalists that can eventually become your company’s product evangelists.

 

Examples of companies that are leveraging co-innovation

Many companies have, and continue to, challenged conventional thinking and obsolete innovation practices. Co-innovation is one of the sources of high competitive advantage that these companies are tapping into. Some of the organizations around the world that use co-innovation to stay ahead of their game are as follows:

Tata Motors

The production and supply of Tata Motors’ Nano car involved many collaborative partnerships between the company and its suppliers. Supplier involvement started at the conception phase of the car before the components of the car were modularized. However, the overall architectural design was controlled by Tata.

SAP

SAP utilizes the concept of co-creation through its co-innovation labs, which is a global network facilitating project-based co-innovation between the company and its members. The network of co-innovation allows SAP to enhance the capabilities of its customer and partner ecosystem worldwide.

Apple

Apple outsources manufacturing while controlling its pilot run line of production in-house. The company highlights the need for designers and manufacturing units to work together for new products to be more radically innovative. This collaboration also ensures there’s smooth integration between hardware and software.

BMW

The Co-Creation Lab at BMW is a community where the company’s customers share their ideas and design suggestions, and be a part of concept vehicle development. This ensures that the customers are involved in the design process starting from the inception of the idea until the potential completion of the project and, therefore, enhancing their vested interest in the final product.

Hitachi

Hitachi’s IoT platform, Lumada, is another example of co-innovation. It was developed for addressing the challenges related to IoT solutions creation. It features an open and flexible architecture that allows the company, its partners, and its customers to co-innovate to tailor custom solutions. Hitachi spends time with its customers to develop business outcomes that they need and desire.

Fiat

The Italian car company tested Punto’s new design concept by allowing 3,000 prospective customers to visit the company’s website and choosing different features given as options. This survey told Fiat what exactly the customers wanted, hence allowing the company to test multiple design concepts at a relatively lower cost and giving the customers a car of their choice.

Conclusion

Co-innovation isn’t a new concept. Continuous disruption in the world of technology demands that businesses learn to adapt faster than ever. The traditional approach of innovation within closed doors doesn’t work in this era of technological advancements. Collaboration is the key to maintaining a competitive advantage. To get the best of open innovation and, therefore, co-innovation, it’s important to let go of old and obsolete processes and old-school management principles and open your organizational boundaries. Co-innovation is a combination of learning to let go and knowing what to keep. If you haven’t started co-innovating yet, now is the right time to embrace it not only because customers demand it, but because it is among the core elements of modern development methodologies.

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About the Author

Vivek Siva
Learned what not to do as an entrepreneur. An optimist with a love for business, the outdoors, and movies. Superpower: Ability to smile even when all hell breaks loose. Affiliation: World of witchcraft & wizardry

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