Across the continent, European companies are embracing a new strategic approach to fuel their business development: open innovation.
This approach breaks down traditional silos, and fosters collaborations instead - between departments, private and public organizations, and even competitors.
In this article, we’ll review several examples of companies in Europe who use open innovation to accelerate their growth, analyze how they are doing so, and present the best practices for implementing this strategy in an organization.
What is Open Innovation?
Open innovation is a business strategy that stands in stark contrast to the traditional, closed model of innovation. In the latter, companies relied exclusively on internal resources and expertise to develop new products, believing that by hiring and retaining the best scientists, engineers and tech professionals available, they’ll be able to stay ahead of their competitors and meet market needs.
In contrast to this approach, open innovation embraces and calls for collaboration with external entities, utilizing synergies, partnerships and resource sharing in order to accelerate innovation and promote growth in a sustainable way.
Companies who apply open innovation foster collaborative ecosystems with other companies, academic institutions in their field, and public institutions such as the European Commission.
The goal of these ecosystems is to benefit from the unique features each partner brings to the table:
Start-ups with their fresh perspectives and agile work systems.
Universities with their experience in leading scientific research and access to scientific talent.
Public institutions with their access to funding and knowledge of navigating regulatory obstacles.
Industry competitors with their expertise in the field and understanding of the challenges of each project.
Significance in Europe’s Current Business Landscape
Over the last 15 years, US, Chinese and South Korean companies have increased their share of global industrial R&D (research & development) - at the expense of Europe. In order to keep pace with ever-changing market demands and technological advancements, and to retain its position as a global industrial leader, Europe’s economy must find a way to ramp up its innovation development efforts.
For this reason, the adoption of open innovation is crucial for the European market. According to Martin Kern, the Interim Director of the European Institute of Innovation & Technology (EIT), “Europe’s power to innovate is the lifeblood of Europe’s economy. Investing effectively in innovation is therefore critical to Europe’s future; we need to do much better at turning our research into new products and services to remain globally competitive.“
Fortunately, things seem to be on the right track: a 2022 report by The Economist found that 90% of surveyed European organizations have either already adopted or are planning to adopt open innovation principles. Clearly, any company who does not attempt to explore a collaborative business strategy faces the risk of being left behind.
With open innovation, European companies can:
Access a wider range of business ideas and expertise.
Minimize implementation time for new products and technologies.
Adapt faster to evolving customer needs and market trends.
All in the efforts of solidifying their position as the world’s leaders in business innovation.
From Agriculture to Construction: Open Innovation Business Case Studies
To demonstrate how open innovation can help companies achieve these ambitious goals, let’s look at five business case studies showcasing the diverse applications and successful outcomes of this collaborative approach to R&D:
1. Bayer
Established in 1863, Bayer is a leading global player in the pharmaceutical, biotechnology, agricultural chemicals and seeds industries.
With a history of over 160 years in agricultural development, Bayer identified the need to keep its AgTech (agricultural technology) arm as an industry leader, and chose to do so by investing and collaborating with AgTech start-ups, rather than solely focusing on developing innovation in-house.
Some of the investments that Bayer made include AgTech accelarators and incubators such as Flagship Ventures, allowing them to have direct access to the most cutting-edge developments in the field, without having to build an additional resource-heavy R&D arm within Bayer.
This approach helped the organization not only stay ahead of their competitors and adapt quicker to market needs, but also solve major food access issues and improve crop resistance.
2. Unilever
Unilever is one of the world’s leading manufacturers of packaged consumer goods, producing and mass-marketing everything from hygiene products to canned tuna. It was founded in 1929 as the merger of a British soap company and a Dutch margarine manufacturer.
To ensure the company can develop new products in alignment with market demands, Unilever established the Unilever Foundry in 2014, a start-up accelerator that has since led to over 400 pilots of product features that were tested by the company across different global markets.
The foundry has produced many success stories over the last decade, such as an AI-powered cooking assistant for its line of Knorr products, or the ability to access target audience insights through automation. None of these features would have been possible for Unilever without heavily investing in an in-house digital development arm.
By collaborating with start-ups, Unilever gains access to cutting-edge technologies and consumer insights, allowing them to stay ahead of industry trends.
3. Volvo
Founded in Gothenburg in 1927, Volvo is a Swedish based, multinational manufacturer of automobiles, marine vessels and construction equipment.
One of Volvo’s key products is its trucks, and in an effort to tap into the potential of electric vehicles, the company initiated the Volvo LIGHTS project, which pooled together other automotive manufacturers, research institutions, and government bodies.
At the end of its three-year run, the project “...provided a blueprint to successfully introduce zero-emission battery electric trucks and equipment into the market at scale”, helping both advance the adoption of electric vehicles in Europe, and position Volvo as an industry leader when it comes to electric trucks.
Having increased its market share of the European electric truck market by 14.9% in 2023, it is safe to say that the Volvo Lights project has been a resounding success.
4. AXA
Since its inception in 1946, the French insurance provider AXA has evolved into a multinational insurance and financial services giant, with a presence in over 50 countries and 94 million customers across the world.
As a leading financial assets management firm, among other things, AXA founded Kamet Ventures in 2016, a start-up venture inventor and builder focusing on InsurTech (insurance technology), HealthTech and mobility. This venture capital fund invests in promising start-ups with innovative solutions relevant to the insurance industry.
Some of the start-ups Kamet has partnered with include Anorak, the world’s first fully-automated, personalized, and regulated life insurance advice platform; and Fixter, a platform for digitalization automobile maintenance.
With an office in Tel Aviv, Kamet allows AXA to not only stay ahead of their competition and potential insurance industry disruptors - but also tap into the massive potential of the Israeli HealthTech market, further fostering crucial Israel-Europe tech collaborations.
5. Skanska
The second Swedish corporation we’ll review is Skanska, the fifth-largest construction company in the world, and an international leader in sustainable construction development.
As part of its efforts to grow its market share, Skanska has utilized an approach that goes beyond simply designing and building projects. They’ve collaborated with Esri, a technological firm that has helped them become industry leaders when it comes to data implementation.
By leveraging Esri’s existing expertise in GIS (Geographic Information Systems) technology, and harnessing it to offer digital solutions to complex planning challenges, Skanska was able to meet strict sustainable construction regulations, and offer contractors better oversight on projects.
Analysis of Success Factors
Now that we’ve seen how open innovation initiatives can both solve specific business challenges and help identify competitive edge opportunities, let’s consider what these case studies have in common - what common features contributed to their success, what were the challenges faced when implementing them, and what these companies did to overcome them.
In all five case studies, companies recognized the need to source solutions externally: that the costs and resources required to develop new technologies are too high for non-tech, manufacturing based corporations.
This led them to invest heavily in start-ups, investment ventures and business accelerators: minimizing risks by spreading the costs of R&D across a wide range of possibilities and harnessing the power of a large number of teams.
In Volvo’s case, an additional challenge was posed by the state of the market and the nature of its products. Electric vehicles require charging stations; to meet the expected requirements of electric vehicle owners by 2030, 2.7 Million new charging stations need to be set up in the EU, at an estimated cost of €1.8 Billion.
To tackle this limiting factor, Volvo harnessed the EU’s initiative to encourage eclectic vehicle purchases, and the fact that its direct competitors faced the same infrastructure challenges, and set up a project that pooled various resources together. By identifying the potential early on, and understanding the necessity of open innovation in order to successfully tackle such a project, Volvo reaped massive rewards.
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But innovation has its fair share of obstacles; above all, most start-ups and new business initiatives tend to fail, with only a small percentage successfully establishing themselves in the global market. AXA’s Kamet Ventures, for instance, achieved the first sale of its partners six full years after its inception. The Unilever Foundry has invested more than $50 Million in start-ups, and launched over 400 pilots, but only some of them have been successful so far.
But by setting up business accelerators, and not focusing on the acquisition of one start-up at a time, these companies are able to both spread their investments and minimize the money they spend on each product, as well as further nurture a collaborative spirit and constantly try out new ideas.
Best Practices for Open Innovation: Lessons from European Successes
Keeping these case studies in mind, let’s outline the key steps to consider when adopting open innovation, and the best practices for a successful strategy.
1. Defining Strategic Objectives
First, the areas where a business could benefit from external expertise need to be identified: is it a specific market or product? Is it the entirety of the R&D work?
Next, open innovation efforts and overall business goals must be aligned, to make sure there are no future roadblocks, communication issues or product developments that do not support growth.
2. Fostering a Collaborative Culture
Internal silos need to be broken down. Knowledge sharing across departments needs to be encouraged by developing an openness to external ideas and a willingness to collaborate with diverse partners.
Organizations face the obstacle of moving from a closed innovation mindset to one that actively seeks external collaboration. To tackle this, employees should be incentivized to participate in open innovation programs and actively engage with external partners.
3. Establishing Clear Collaboration Frameworks
The types of partnerships required should be identified: Start-ups? Universities? Competitors?
Based on that decision, intellectual property (IP) agreements and ownership rights for collaboratively developed solutions will need to be outlined.
4. Measuring and Refining
A clear system to track the outcomes of collaboration initiatives needs to be drawn up, not just through KPI measurement, but also by establishing a dedicated team to oversee them.
It is recommended to design training programs to educate employees on the benefits and processes of open innovation, in order to ensure that a culture of collaboration is developed successfully.
By following these recommendations, companies can effectively integrate open innovation into their business models and cultivate a collaborative culture, and successfully navigate the common pitfalls faced by open innovation projects.
To summarize, remember that open innovation can truly transform a company, with its ability to:
Enhance product innovation.
Reduce launch time for product.
Minimize market research costs.
Shore up development costs.
Increase business efficiency.
Strengthen competitive advantages (even when collaborating with competitors).
By analyzing the open innovation initiatives of five leading European companies, across different industries, we reviewed the best practices for adopting open innovation successfully at the organizational level:
Defining strategic objectives
Fostering a collaborative culture
Establishing clear collaboration frameworks
Measuring and refining
If you are debating whether to adopt an open innovation strategy at your company, consider these benefits and schedule a complimentary session with our innovation expert to understand how this approach can be adapted to the needs of your business.
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