3 Ways to Determine If You Need External Innovation

External Innovation is the process of augmenting your internal innovation efforts by collaborating with independent startups developing new products, services and technologies. Through these collaborations, you get to work directly with world-class founders who are rapidly attacking the niche challenges and opportunities that may rapidly disrupt your business. 

Here are 3 telltale signs that you need to consider external innovation.

You are an industry leader with the lion’s share of the market, but new entrants are quickly eroding your share.  

Are a bunch of new competitors entering your industry? Are they each taking small bites out of your business, winning over your customers? Did they once seem like a distraction, but now they’re the top priority at every performance discussion? 

You need disruption insurance. You should be partnering and collaborating with your potential disruptors. They are following a playbook to take you down. See Blockbuster (disrupted), AirBnB (disruptor) and others for how this story might end if you do not.

Internal teams are focused on incremental innovation – line extensions, format updates, etc., but required rates of return won’t allow you to pursue exponential opportunities. 

You need to deliver ROI to move the needle and do it fast (read: quarterly). Your teams are focused on innovations that feel less risky and have the potential to deliver sizeable returns from a familiar source in the short term. Seems safe, smart, and sustainable. But what opportunities and threats are outside the focus of your headlights? Are there exponential, game-changing moves just out of sight?  

Innovation Focused on Products Only

You are future-facing on the products you sell, but notice your other departments (Marketing, HR, Sales, Customer Service, Supply Chain) aren’t trying new things to disrupt their status quo suppliers or processes. They are rinsing and repeating from year to year against self-created benchmarks. What if there was a startup that could make your marketing 20% more effective, a solution to increase employee engagement or a new technology to automate customer service entirely? Those are big wins and big savings for your bottom line.

External Innovation has the potential to deliver outsized results by opening your teams to new ways of working, new products, services, and technologies that have the potential to transform your business. It insulates your company’s core business from competitors by anticipating how your industry will be disrupted and enables you to pilot growth solutions. Founders move on faster timelines with greater proximity to your end-consumers and because you are partnering with them, you are taking on less risk with the potential to gain great benefit.

To learn more about how to build an External Innovation practice, contact

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