wef collaborative innovation report 2015

7/24/2019 WEF Collaborative Innovation Report 2015

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Regional Agenda

August 2015

Collaborative InnovationTransforming Business,

Driving Growth


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World Economic Forum 2015 All rights reserved.No part of this publication may be reproduced or

Transmitted in any form or by any means, includingPhotocopying and recording, or by any informationStorage and retrieval system.

REF 200515

Contents

Preface

Executive Summary

Section 1 The Value of Collaborative InnovationSection 2 Successfully Managing CollaborativeInnovation

Section 3 A Public Policy Model for CollaborativeInnovation

Section 4 Conclusions and Reflections on the Future ofCollaborative Innovation

Appendix Cases of Collaborative Innovation

Endnotes

Acknowledgements

In collaboration with A.T. Kearney and IMProve

European Innovation Management Academy

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3Transforming Business, Driving Growth

Europes economies, firms and citizens urgently need the economic growth that flows fromincreased regional competitiveness. The European Commissions recent Spring Economic Forecaststruck a positive and very welcome note by highlighting a number of economic tailwinds that are

expected to support lending, consumption and investment across Europe. In the context of the highunemployment levels and concerns over rising inequality, it is critical that European leaders acrossthe private and public sectors capitalize on these improving conditions to deliver broad-basedgrowth.

This report, part of the World Economic Forums work on Enhancing European Competitiveness,suggests that European firms and political leaders could help achieve this growth by investing time,energy and capital in new forms of innovation, in particular by increasing the number and successrate of innovation-focused collaborations between young, dynamic firms and large, establishedcompanies.

Innovation can sustainably contribute to economic growth in two primary ways: first, by expandingthe number and value of new products and services that people in Europe and around the world

are willing to buy; and second, by commercializing productivity-enhancing inventions and processesthat make better use of the regions labour and capital.

To be able to reap the full benefits of innovation, Europe needs to overcome two challenges

First, although Europe includes within its borders six of the worlds 10 most innovative economies,the region as a whole is fragmented in terms of its innovation capabilities and contains manyeconomies that remain far below potential in their ability to translate new ideas into valuableproducts and services. Europe has an increasingly vibrant set of entrepreneurship hubs, but asdetailed in our previous report, Fostering Innovation-Driven Entrepreneurship in Europe, young firmsface a wide range of barriers when it comes to scaling up their great ideas. The region thereforeneeds to invest in both the framework conditions for commercialization within a large number ofcountries as well as in the cross-country links that enable firms, research centres and governmentsto take advantage of Europes regional markets and assets.

Second, the traditional models of innovation that characterize the most successful and innovativeEuropean firms to date may not be sufficient to deliver the growth that is needed in the future.As we have seen in the digital and mobile revolutions of the last two decades, in-house, captiveresearch and development (R&D) models managed by large incumbent firms are extremely goodat delivering incremental and sometimes even radical innovation within a specific product categoryto an established set of customers, but are not so good at creating disruptive products and entirelynew markets.

This report therefore focuses on one rapidly-emerging and highly promising innovation approach:collaborative innovation between young, dynamic firms and large, established businesses,

leveraging the resources of both to create value that spills over from firms to customers to entireeconomies. Based on extensive firm-level research as well as interviews with leading policy-makers from across the region, the report identifies common challenges and recommends specificstrategies for improving the quality and quantity of successful collaborations that can contribute toEuropes competitiveness.

True to the Forums identity as an international institution for public-private cooperation, the reporthighlights the critical role that policy-makers and political leaders play in supporting collaborativeinnovation, looking beyond requests for more supportive regulation or subsidies to the awareness-raising power, networking opportunities and skills support that public-sector leaders can provide. Inaddition, it draws on the direct experience of five of Europes current political leaders in highlightinghow national governments are focusing on widening and deepening the regions innovationcapabilities.

As with all of our reports, this document is meant to spur debate and catalyse new activity acrossbusiness, government and civil society. The World Economic Forum and I welcome your feedbackand input for this work as we continue to support innovative individuals, firms and economies, notjust in Europe, but around the world.

Preface

Philipp Rsler,Member of theManaging Board,World EconomicForum


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4 Collaborative Innovation

This report seeks to support European competitiveness and growth by addressing the challenges thatboth young, dynamic firms and established businesses face when they seek to collaborate with oneanother to commercialize innovative products, services, processes and business models. It suggests

firm-level strategies and opportunities for public-private cooperation to increase the success rate andimpact of such collaborations.

This particular form of collaborative innovation where a young firm and an established firm sharecomplementary resources and combine efforts to support innovative ideas can create significantvalue for both parties as well as for the economies in which such collaborations take place. Giventhe urgent need for economic growth in Europe and the challenges faced by innovative Europeanentrepreneurs who seek to scale across fragmented markets characterized by limited access toventure financing, the potential of these partnerships to contribute to innovation and growth isparticularly high for European firms and countries.

Based on more than 140 structured interviews and 20 multistakeholder workshops involving morethan 450 participants, this report highlights the main challenges faced by young and established firmswhen they seek to collaborate, and discusses leading practices and strategies employed by both firmsand policy-makers to improve the success rate of such collaborations. Although every partnership isunique and varies according to the specific goal, characteristics of the different firms and the marketcontext, this research reveals a number of important challenges which are similar across geographies,sectors and industries and which can be managed by stakeholders across business and government.

These common challenges and suggested response strategies for firms can be grouped into threelayers Prepare, Partner and Pioneer. World Economic Forum research suggests that often themost significant challenge and the greatest positive impact springs from how well firms prepare tocollaborate: having well-defined objectives, a carefully-designed business case, suitable organizationalprocesses. A supportive culture and links to relevant networks are important predictors of success, yetare commonly underappreciated by both young and large firms.

While many of the strategies discussed here can be executed by firms themselves, policy-makers andpublic-sector champions can support collaborative innovation via three categories of activities that gowell beyond the traditional policy levers of regulation and subsidies Empower, Educate and Enable.For example, political leaders play important roles in empowering and even linking firms looking tocollaborate; in educating firms and individuals and helping provide the capabilities required to partnerwell; and in directly enabling collaborations through supportive regulation and relevant infrastructureinvestments.

Accordingly, the first section of this report discusses the relevance and benefits of collaborativeinnovation, with a particular focus on its value to European economies. The second section presentsa range of firm-level challenges and strategies that can be employed by both young and established

enterprises and highlights a number of examples. The third section provides perspectives fromEuropean policy-makers who are championing approaches to collaborative innovation and the fourthsection concludes and provides reflections on the future of collaborative innovation.

Both this research and the academic literature indicate significant benefits of increasing the numberand quality of cross-firm and cross-sector collaborations aimed at novel products, processes, servicesand business models, as well as a range of concrete, low-cost steps that firms can take to improvetheir probability of success. European entrepreneurs, firms and policy-makers all have the incentiveand opportunity to benefit from collaborative innovation, in turn supporting the scaling up of youngfirms, the innovative output of established firms, and the competitiveness of European economies.

Executive Summary


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Section 1

The Value of Collaborative

Innovation


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Innovation as a Driver of Growth

Innovation defined in this report as the successfulcommercialization of novel ideas, including products,services, processes and business models is a criticalcomponent of economic growth. Across Europe,1theimportance of innovation as a driver of growth andcompetitiveness has and will continue to increase,2thanks to the slow rate of population growth in the region,

diminishing returns on additional capital investment andincreasing competition from other regions.

Innovation drives growth in two connected andcomplementary ways: by introducing new or improvedproducts or services that tap into existing or latent demandin the market, thereby creating additional value for firmsand consumers; and by increasing the productivity of firmsemploying such innovations.

In Europes relatively mature economies, incrementalimprovements to products and services what disruptiveinnovation expert Clayton Christensen terms sustaininginnovations enable firms to maintain global relevance

in existing market segments.3

They do not generatesignificantly more value or enable companies to competewith entirely new offerings or business models. Collaborativeinnovation can, however, foster new growth through newproducts and non-market considerations that enable theevolution of entire systems what Christensen refers to asmarket-creating innovations.4

Europes competitiveness and

innovation challenges

The European Union (EU) includes six of the 10 mostinnovative economies in the world, but also many countriesthat urgently and significantly need to improve theirinnovation capability (see Figure 1).5

Europe as a region varies greatly in terms of bothcompetitiveness and innovation. The large differencesbetween European countries are driven by factors suchas the number and quality of linkages between firms andentrepreneurial ventures, and between the private andpublic sectors. This fragmentation impacts the ability offirms to turn R&D investments into intellectual property (IP)and commercialized products, and it hampers Europeancompetitiveness in comparison with other regions.

This gap is detrimental to Europes economic performanceas a whole, especially when it comes to competing withother global economies such as the United States (seeFigure 2) where scientific collaboration between the privateand public sectors is almost double that in the EU and newtechnologies are commercialized with 17% more license andpatent revenues from abroad.6

Figure 1: EU Member States Innovation Performance6

Source: European Union Innovation Scoreboard 2015

Figure 2: Comparison of Competitiveness: EU28 versus USA7

Source: Global Competitiveness Index 2014-2015

Comparison EU-28 versus U.S. basedon CGI 2014-2015

o est nnovators

0.0%

.

.

0.3%

.

.

0.6%

.

.

o erate nnovators nnovat on o owers nnovat on ea ers

0

1

2

3

4

5

6

7Institutions

Infrastructure

Macroeconomicenvironemnt

Health and primaryeducation

Higher education andtraining

Goods marketefficiency

Labor marketefficiency

Financial marketdevelopment

Technologicalreadiness

Market size

BusinessSophistication

Innovation

EU 28 US


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Indeed, the European Commissions assessments ofEuropes own innovation capabilities illustrate that emergingeconomies are rapidly catching up with Europe. Chinasinnovation performance, for example, was measured atbeing 49% of the EU level in 2015, up from 35% in 2006.8Even considering that Chinas progress springs from arelatively low level, the country is continually entering highervalue-added segments of global production and employingits enviable economies of scale to better compete with

European production.

What an increasingly competitivelandscape means for Europesinnovation approach

The shifting external context for firms and economiesand the increasingly competitive global environmentcreate pressure on the traditional research, developmentand innovation models from which European firms have

benefited. Firms regardless of their location report thatin the past the majority of R&D spending was focusedon incremental innovations, and only 14% on radicalinnovations.9Furthermore, firms have traditionally focusedon developing their internal R&D capabilities, rarely sharingoutcomes with partners to foster mutual competitiveadvantage.10

When asked about their investment plans for the nextdecade, most large multinational companies expect thefocus of their innovation investments to change significantly,moving towards riskier initiatives and breakthrough ordisruptive innovations. Due to a lack of internal capacity

in this regard, firms are increasingly collaborating withexternal parties,11moving to more open forms of innovation,leveraging partners discoveries, and commercializinginnovations with other parties whose business models arebetter suited to bring new goods or services to market.12

Such a shift towards collaborative approaches seems tomake business sense there is emerging evidence thatsuch collaborations enable firms to accelerate innovation

and create more competitive market positions, whereasfirms that remain internally focused face slower time-to-market, higher development costs, and loss of competitiveposition.13 Furthermore, such a shift mirrors expectationsof a change in revenue sources: a recent A.T. Kearneystudy on Collaborative Innovation in Digital Europe foundthat 71% of respondents expected more than a quarter ofrevenues to be generated through collaborative innovationby 2030 (see Figure 3).

Collaborative innovation also makes sense at themacroeconomic level when it contributes to firm growth. TheScale-up Reportfrom the United Kingdom (UK) suggests

that were a mere 1% of the countrys businesses to moveinto a high growth mode, they could create 238,000 jobsand almost 39 billion ($61 billion) in additional turnover overthree years.14

Figure 3:Expectation of the Revenue Generated from Collaborative Innovation, 2015 and 203015

The clear implication is that Europe should look atcollaborative innovation as a means of taking advantage ofa number of otherwise threatening global trends, includingthe increasing innovativeness of other regions, rapidtechnological changes, rising demand for novel productsand services, falling transaction costs, and shorter productlife cycles driven by digitization.

nnovat on e evance o a orat on w t r art es

2015

2%

8%

id term

uture

9%

1%

62% f respondentsexpect the share ofevenue resulting from

collaborative productand service innovation2

o be at least 25% in2015

71% xpects this to behe case in near future

6%

4%

Mid term

uture

6%

4%

015

6% of respondentsxpect the share ofroduct and service

nnovation2to be ateast 25% of businessevenues in 2015

6%expects this to behe case in near future

Source: A.T. Kearney Survey

Competitive advantage doesnt go to thenations that focus on creating companies,it goes to nations that focus on scalingcompanies.

Sherry Coutu,CBE, Entrepreneur, Non-Exec Director, Investor andAdvisor to Companies, Universities and Charities

Europe is good at transforming euros intoknowledge. It is not good at transformingknowledge into euros.

Carlos Moedas, Commissioner, Research, Science and Innovation,European Commission


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Collaborative innovation as a wayfor young firms and incumbentplayers to complement oneanother for mutual benefit

As discussed in the Forums report Fostering Innovation-Driven Entrepreneurship in Europe,16an important andvaluable strategy for young firms to scale within Europeis to collaborate with larger, established firms to access avariety of financial and organizational resources. Similarly,established firms seeking to improve their externalinnovation capabilities can take advantage of the differentperspectives, approaches and risk outlooks of youngfirms. Young, dynamic firms are often structured aroundthe development of truly novel and potentially disruptiveproducts and services, while established firms have deep-rooted processes and value networks. Collaborativeinnovation partnerships can exploit these complementarycapabilities.

In particular, young firms bring fresh perspectives onnascent markets, and are unencumbered by complexprocesses, the demands of large, influential customers,or the burden of fixed capital and human costs.17Youngbusinesses are often closer to those users and customerswho represent growth-oriented markets, and can be moreflexible than larger firms in experimenting with differentapproaches, enabling themselves to respond more nimbly toshifting needs.18Young firms can therefore develop, test andlaunch novel products and services faster than large firms,as the processes and structures that enable large firms to

successfully operate and manage risk (as well as deliver ameaningful contribution to their bottom line) can also slow orhalt innovation processes which are not directly in line with alarge firms core business or customer needs.

Meanwhile, the size, resources and experience of largeand established firms endow different, though equallyimportant, advantages. Larger firms possess financialresources lacking in almost all young firms, as well as thenetworks, experience and regulatory knowledge neededto successfully commercialize new offerings, giving them aparticular advantage where knowledge is cumulative (seeTable 1).This capital and expertise means they are better

able to afford and manage IP protection, hire the mostqualified and relevant human resources, and rapidly scalesuccessful experiments across multiple markets.

Amid a wide array of different relationships between youngand established firms, five main types of partnerships canbe termed collaborative innovation: smart procurement,collaborative innovation projects, smart direct investments,joint ventures, and strategic innovation partnerships, whichare discussed in detail in the following section.

Collaborative innovation is the nextbig idea that needs to shape up withactionable items, allowing players acrossthe value chains to participate in theemergence of new collaborative business

models. Anchored in solid foundationsof intrapreneurship, collaborativeinnovation is the engine of modern, agileorganizations capable of creating newcapacity, which can pioneer radical newideas while testing the limits of markets.A true best friend for growth.

Mark Esposito, Professor of Business and Economics, Harvard

University Extension School, Grenoble Ecole de Management

DuPont has been applying scienceand innovation to address the worldsmost difficult challenges for over twocenturies. Today, these challenges areof increasing complexity and scale. One

company cannot solve these challengesalone. Our global partnerships and ourcollaboration with other companies,governments, universities, NGOs, andothers are the key to meeting customerand consumer needs in critical areassuch as food security, an improvedenergy mix and the protection of peopleand the environment.

Ellen Kullman, Chair of the Board and Chief Executive Officer, DuPont


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Table 1: Challenges and Capabilities: Young, Dynamic Firms and Established Companies

oung, ynam c rms s a s e compan es

Scarcit o s at anksf r psources, fe etcan use ite r f uca licollateral), and

Lack p rertise o e of cutsi f rin Lack gs haale, di tion cstrib ls e, and mar

know-h w Compet t roon, pmarket entr e s, a oord

infrastruc ure Insufficient u e g of innrs a i t s f

applicability and potential

Challenges

Closer to sources of technological knowledge, such asunvers t es an researc centers

Higher degree of flexibility

m er response to mar et s gna s Proficiency in a specific niche

Capa

bilities

ertia, leading tondPossible bureaucracyslower information flo exibility and less, lesscreative thinking

e logies andew tess access teringstate-of-the-art e ne

i e c rek-a rse ltu

e c exp ience and knowledge to successfullyou s, ew oco merc a ne r ngs

ver an extensive and diversifiedSpre &D costs

sa es ase Sophisticated IP n and management due toectiprocesexper ence an resou

ntiLess threatened by litig ert sece expe n comp aatory Market reac

Source: Project team


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10 Col laborative Innovat ion

Section 2Successfully Managing

Collaborative Innovation


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The Prepare, Partner andPioneer Model

Collaborative innovation relationships are highly sensitiveto the unique situation of each participating company andstakeholder. There are, nevertheless, a number of commonchallenges that both young and established firms aroundthe world experience when collaborating, and a set of

corresponding principles and strategies to improve thechances of success.

Based on interviews and workshops, this report proposes amodel for managing collaborative innovation that consists ofthree layers: Prepare, Partnerand Pioneer(see Figure 4). Prepare:The preparation layer lays the critically-

important and often overlooked foundation forcollaboration, and involves defining objectives, findingthe right partners, preparing both organizations culturallyand through incentives to support collaborations, andconnecting with the right potential partners.

Partner:The partnering layer focuses on negotiatingand tailoring the projects with partners to ensurethat the benefits, risks and governance aspects areadequately defined.

Pioneer: Finally, the pioneer layer ensures thatpartnerships adapt and thrive for the mutual andsustained benefit of all parties as they are executed andas the context changes.

Discussions around the globe with business leaders andentrepreneurs who have experience with these typesof collaborations indicate that the steps highlighted inFigure 4 are the most important shared layers for buildingsuccessful partnerships focused on innovation. The degreeof relevance and importance of these layers will be driven

by technology type, sector practices and capital intensity

While we have seen a lot of innovationfrom young upstarts on the Africancontinent, the next step in the cycleof innovation for these upstarts is topartner with and collaborate with larger

and more established corporates andmultinationals in order to see thoseinnovations reach the scale many of themmiss out on.

Rapelang Rabana, Chief Executive Officer and Founder, RekindleLearning

Figure 4:Collaborative Innovation Model


Idea/project

nterna

xterna&D

Internal resourcesCollaborationExternal resources

. repare

. ar ner

Definition of search fieldsand idea generation

Market launch, break even,continuous improvement

Idea selection andpro ec aunc

Leverage networks to scout and attract appropriate partners

Achieve organizational and cultural readiness

e ne o ect ves an assess t e us ness case

et up a wn-w n partners p

c. Pioneer

ont nuous y a apt or athriving and rewarding partnership

2

3

5

of the collaboration. In IP-intensive industries where thepurpose of the partnership is actively developing and testing

new products, negotiating IP agreements and ensuring allparties are adequately protected will be highly significant,particularly compared with cases where IP clearly resideswith one party. Similarly, in asset-intensive industries,negotiations will require clear rules regarding capital flowsand timing, and may favour standalone structures such as ajoint venture vehicle.

While the model described in Figure 4 suggests that thepreparation layer is a valuable precondition for partnership,the approach to collaborative innovation described here isrelevant for all firms, including those currently engaged ininnovation-driven partnerships, as it is often necessary toreassess and redefine objectives and tweak partnership

models along the way to ensure alignment between parties.


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A. Prepare

Dimension 1: Define objectivesand assess the business case

Introduction and definition

Firms routinely underestimate the need to define clearobjectives around partnerships. Collaborations have a farhigher chance of success when both parties have clear,communicable objectives for collaboration that are acceptedacross organizations, and linked to a carefully thought out,well-designed business case that shows how value can becaptured and delivered to relevant partners.

Establishing clear objectives requires carefully scoping theinnovation area, identifying desired outcomes for variousstakeholders within the firm, and assessing how these

support the organizations overall strategy. Without thisclarity, there is a far higher risk of failure to find a suitablepartner, misalignment between parties in the event of apartnership, lack of organizational support within the firmor friction around how costs and benefits are shared.One strategic decision that must be taken is whether tocollaborate instead of acquiring know-how and capabilitiesto address the innovation need. The business case is acomplementary assessment of whether the objectives arerealizable and whether the expected benefits exceed thedirect and indirect costs and risks of collaboration. Thebusiness case is also important to examine how thesebenefits and risks might be shared between prospectiveparties.

Common challenges and pitfalls when designing

objectives and business case

In interviews and workshops, established firms particularlyhighlighted the following challenges: Ensuring alignment between all levels of the firm

required to support a collaboration particularly

between top management and executing teams Acknowledging the risk of collaboration failure whilesimultaneously making the strategic and indirect valueof collaborative innovation visible

Enunciating clearly the exact need or pain point that acollaborative approach is intended to address

Young firms cited the following challenges: Shifting their partnership mentality from a sales or

investment focus to one of solving a challenge for thelarger firm

Appreciating the complexity of and the transaction costs

involved in collaborative innovation, particularly in termsof dealing with the internal processes and responsetimes of a large organization

Assessing the opportunity cost of partnership in termsof time and resources invested this is particularlyrelevant for exclusive innovation partnerships

Leading practices

Companies leading collaborative innovation projects createvalue by: Assessing and acknowledging the value of a potential

collaboration at a strategic level within the firm anddefining objectives to ensure executive commitment atmultiple levels

Transparently articulating the intent and business casefor collaboration both internally and externally, definingthe value and resources to be contributed by andbrought to partners

Being open about the perceived likelihood of failure andthe risks that could result, and, if possible, incorporatingthese into broader corporate risk assessments

Identifying in advance at which stages and with whichprotections sensitive commercial information could berevealed to a partner

Taking the time to understand the constraints andconsidering the costs and benefits of partnering fromthe perspective of potential partners, to ensure thatcollaboration objectives and processes are aligned formaximum mutual gain

In collaborative innovation one of thekey success factors is to define a clearproposition that creates value for yourpartner instead of selling an idea orinnovation: for example we do not sell

carpet, but well-being of employees.

Alexander Collot dEscury, Chief Executive Officer (2012-2015), DessoHolding

Be very specific about how you arehelping a large, established business toaddress an innovation challenge theycurrently have.

Amine Chouaieb, Chief Executive Officer and Founder, CHIFCO19

Delegating collaboration within theorganization if the chief executive officeris not interested means it is dead.

Paul-Bernhard Kallen, Chief Executive Officer, Burda Media


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A key benefit of building a careful business case is that bothfirms are able to consider the level of dependency that maybe reached in the relationship. Research indicates that forsmall and medium-sized enterprises (SMEs), collaboratingon innovation often means a significant shift in their businessmodel as they orient towards the needs of a large partner.20If the partnerships importance diminishes for the larger firmwhile being the primary driver of growth for the younger firm,the risks are very high and can negatively affect both parties.

As an example of good practice, ASML, the largest supplierof photolithography systems for the semiconductor industry,ensures that its stake does not exceed 25% of its partnersrevenues.

Although some innovation leaders clearly define theirobjective for collaboration, research and experiences oflarge intermediaries indicate that this is often a step thatcompanies fail to address, intentionally or otherwise.Startupbootcamp, a European accelerator that matcheslarge, established firms with young, dynamic businesses,indicates that the biggest question to address beforeengaging in any collaboration is the purpose of partnering.

After a young start-up is identified as having the disruptivetechnology or business model that a corporate is looking for,the large firm needs to have an explicit path of engagement.Large corporates often still need to address questions suchas Do we have the internal resources with the bandwidthand know-how to engage with this start-up?; Is there anidentified road map and budget to support the process?;and Is there a preferred mode of engagement (licensing,co-development, equity investment)? after the partner hasbeen identified.21

Dimension 2: Achieve

organizational and culturalreadiness


Cultural acceptance and organizational preparation hasa significant impact on the outcome of any collaboration.For a successful collaboration, organizational structuresmust encourage and enable dialogue and the rapid flow ofinformation between two parties with very different ways ofworking, different incentives and different perceptions of thevalue of the collaboration.

Common challenges and pitfalls when aiming fororganizational and cultural readiness

Established firms have highlighted the following challengesto guard against: The risk that ideas coming from outside the firm will

evoke a defensive reaction from employees Incentive schemes and promotion tracks may dissuade

employees from taking risks by increasing the personalcost of failure

Existing functional silos and a lack of intra-firm

collaboration may hamper any external partnership Complex, consensus-driven or otherwise slow

decision-making process may frustrate entrepreneurialpartners and reduce the ability to grasp time-sensitivecollaboration opportunities

The focus may shift to inbound innovation rather thanon tapping the full potential of inbound and outboundinnovation 22

Young firms, on their part, face challenges to: Accept constructive feedback on an idea that could be

central to their identity Bear the cost of resources needed to set up and

maintain a partnership with an established firm,particularly given the need to navigate complex legaland compliance processes

Speak the same language as large corporate partners

Leading practices

Companies leading collaborative innovation projects createvalue by: Building on their diverse cultural and organizational

strengths, creating mutual understanding, andharnessing complementary resources in partnershiprather than mimicking one another or seeking cultural

convergence Using highly visible senior managers as champions of

external collaboration Setting up employee exchanges with partnering firms Rewarding collaborative activities, entrepreneurial

mindsets, trial-and-error methods and rational risk-taking through incentive schemes and performancemetrics, building into these the probability of failure

Employing both physical and digital collaboration toolsto facilitate knowledge sharing

Setting up cross-functional and cross-organizationalteams to make the most of capabilities

Speeding up collaboration processes by decreasingresistance from employees through organizationalalignment

Hospitality company Marriott International works in smallcross-functional and cross-cultural teams with a globalmindset and a focus on unlocking the entrepreneurial spiritby inviting entrepreneurs to come and have conversationswith its innovation professionals.


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Biotechnology company Novozymes applies the cross-functional team approach in its innovation teams byincluding professionals from the R&D department, technicalservice managers and business developers from marketingto ensure that business units have an influx of ideas andthere is communication among the various innovationteams. In addition, the company has developed a digitalplatform to use social algorithms to connect people and

ideas across business units, thereby fostering cross-enterprise innovation. Professionals across differentfunctions join innovation teams to share knowledge andensure fast diffusion of innovation. To date, 25% of theentire employee pool has participated and contributed tosupporting and democratizing innovation. The capabilitiesdeveloped as a result of cross-functional collaboration willserve a valuable function when Novozymes seeks to partnerwith young firms.

Chemicals- and drug-maker Bayer has strategicpartnerships with the Broad Institute of MIT and Harvardin the field of Oncology. To foster scientific exchange and

to build a common understanding between the partners,respective governance boards consisting of a strategic anda scientific committee have been installed. Furthermore,personnel are being exchanged between the parties to allowa better understanding of each others culture, broadenindividuals horizons and promote different thinking. Thevalue of the collaboration for Bayer lies in the opportunity forthe partners to gain mutual benefit by bringing in differentperspectives and complementary skills. To leverage thefull potential of such partnerships, the alliance is activelysteered and managed to build the foundation of a trustfulrelationship.23

Dimension 3: Leverage networksto scout and attract appropriatepartners


The preparation layer also includes finding and becoming

part of networks that can help identify potential partnersfor collaboration as well as developing the companysreputation as an attractive innovation partner. Networksin this sense include both structured and self-organizedgroups, including industry clusters and associations, onlinecommunities, informal business connections, researchcommunities and links that can be provided by specializedadvisers, intermediaries and capital providers. Suchnetworks are invaluable for identifying and connecting withfirms to collaborate with, but vary in terms of how focusedthey are on supporting innovation-driven collaborations. Atone extreme, informal business networks tend to operateserendipitously, while specialized intermediaries such asthe Startup Europe Partnership actively seek, match andcoach prospective partners to increase the success ofcollaborations.

Common challenges when scouting for partners andentering collaboration

The challenges that large firms face when joining and usingcollaboration networks include: Ensuring that the employees who are networking have

a deep understanding of the collaboration needs ofthe firm, as well as the authority and ability to internally

support negotiation and partnership structures Balancing the need to invest in a specialized partnering

division with the danger that resulting collaborationswill become confined to corporate venturing,procurement or other adjacent departments

Young firms face challenges in: Balancing the need to spend time networking across

multiple networks with the time and resource demandsof a dynamic firm

Finding the suitable operational entry point and the rightcounterparts in established organizations

Leading practices

Companies with a strategic intention to partner forinnovation pull different levers to ensure they are visible tointerested parties. These companies: Map different available networks for suitability, letting

collaboration objectives, business case and partnercriteria influence their choice of networks, whileassessing the expected costs and benefits of investingtime and resources in different approaches

Broadcast their specific collaboration needs to trustedinfluencers within these networks, and invest in

understanding what other network participants arelooking for

More and more large organizations arelearning to work with innovative start-ups, and it is clear that corporates arenow much better connected in thisregard than a decade ago. Those whocreate such links derive strategic valueas they tap into an efficient and growingreservoir of ideas and technologies.

Luis Alvarez, Chief Executive Officer, Global Services, BT


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Young, dynamic entrepreneurs mayperceive networking as a waste of time,but it may be your biggest asset toaccess companies and hence scale-up.Especially when you apply a focusedapproach by joining industry associationsfor example.

Maxim Nohroudi, Chief Executive Officer, Allryder

Seek to develop a unique and consistent valueproposition for partners so as to come acrossas a sought-after collaborator, highlighting corecompetencies and success in innovation

Apply a two-sided strategy to actively search forpotential partners while building a reputation as acollaborative innovator

Engage in both structured and unstructured networks,

employing specialized support where relevant whilealso being open to chance encounters beyond whatmay seem obvious matches in terms of geography andindustry profile

Companies interested in collaborative innovation will joinnetwork events and conferences and even publish theirinnovation needs in targeted business and industry mediato attract the most promising prospects. For example,Heineken features its intent to collaborate with young,dynamic firms on the innovation section of its corporatewebsite. Siemens takes a similar approach through itsTechnology to Business (TTB) unit. Young firms can directly

apply through the website by answering a questionnaireand submitting their proposal. Moreover, TTB scouts for thebest-suited partners globally not just within their homecountry or in Europe. Beyond obvious geography, TTBsearches outside their industry using Big Data technologiesor web databases to monitor potential partners.24Onceestablished firms have initial partners on board, they can usetheir connections to tap into a larger pool of entrepreneurs.

There are several upcoming matching platforms thatprovide companies the opportunity to effectively search andpartner. Spotfolio is a next-generation technology solution

addressing networking challenges of both young firms andestablished businesses. It bridges the gap between thesestakeholders through a unique technology radar which isbased on a semantic web search, providing transparencyand a plethora of opportunity for collaborative innovation. OnSpotfolios platform, businesses can select the technologies,products and services to be monitored on an ongoing basis,and access information on companies matching thesecriteria. Firms can keep track of corporations which showinterest in their activities and monitor them, can save theirsearches and can get notified when a new firms meetingtheir criteria registers.25


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B. Partner

Dimension 4: Set up a win-winpartnership


The partnership layer includes negotiation and consequentestablishment of a collaboration structure, including bothformal and informal agreements that set the tone andlegal framework for two different firms to work together.Establishing an effective partnership structure requirescarefully aligning the business case for both parties with theterms of the partnership agreement, while also acceptingsignificant uncertainty and allowing for evolution of thepartnership with time.

Collaboration structures vary widely from informalknowledge-sharing arrangements to carefully-stagedacquisitions. The exact structure will depend on the uniquecircumstances of the firms and the goal of the collaboration,but common patterns can be discerned given the specificindustry, technology, resource allocation and characteristicsof the firms involved. Typical negotiations include contractualobligations, governance and dispute resolution structures,benefit-sharing plans and termination clauses.

Partnering for innovation differs from other types ofpartnership by embracing higher levels of uncertainty andby being future-focused. When young firms partner withestablished businesses, there is naturally the additionalchallenge of varying levels of power and resources that can

complicate negotiations and create the need for specialattention when agreeing upon structures.

Resource availability and know-how differences are inparticular evident in IP-intensive negotiations. Intellectualproperty rights are at the heart of collaborative innovationin some industries, where they form an integral part ofnegotiations during the structuring process. Very oftencompanies will bring existing IP to the partnership or willdevelop new IP through the collaboration. Consequently, itis important to have agreement in advance about the correctuse and protection of IP in order to build a trust-based

relationship and realize the full benefits of collaboration.

Common challenges and pitfalls when negotiating

partnerships

The challenges that established firms face when setting up awin-win partnership include: Balancing the desire for maximum control over the

partnership with the needs and motivation of theyounger firm

Working with in-house legal and compliance teams tocreate the necessary flexibility in partnership contractsand structures while still managing appropriate risklevels

Moving quickly enough through the negotiation phaseto keep younger partners interested and ensure that theopportunity is not lost due to internal friction

Large companies should understandhow collaboration interactions affectthe pipeline for innovation. If they tryto circumvent innovators IP or notappropriately share value, they sacrificeshort-term for long-term value as theirindustries will not see significant externalinnovation. Innovators will shy away fromindustries where their human capitaland financial investments will not be

rewarded.

Raffi Mardirosian, President, Midori

Being careful not to overwhelm the smaller firm with duediligence and legal requirements that they may not beable to meet or afford to obtain expert advice on

In relation to intellectual property: Breaking with the tradition of owning and controlling

IP and signing IP agreements without full-ownershipprovisions

Valuing alternative IP ownership structures and

developing and implementing KPIs that appraisedifferent IP plans

Young firms in turn find it challenging to: Balance between giving up control and gaining access

to capital, particularly when it relates to a core productor service central to the young firms identity

Afford expert advice on a par with larger firms andcomply with all legal requirements

Stretch time frames and negotiations over the longertime-period it takes for large, established firms to makeand implement decisions

Finance relatively large amounts of IP protection and

negotiation costs upfront, or any renegotiation duringthe collaboration

Manage requests to share competitive information priorto the signing of any contractual agreements (which isnot advised without the protection of appropriate non-disclosure or confidentiality instruments)


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Goodwill to collaborate is present onboth the corporate and start-up side.However, there are also barriers on bothsides. The most common one we observeis the enormous difference in timelines.Start-ups expect deals to be madewithin a few weeks, whereas it oftentakes over a year to sign contracts withincorporates. The ratio between follow-updiscussion and closed deal is still low,not because there is no interest, butcause they need time to finalize: a weekin the start-up world is a month in thecorporate world. So, there needs to beeducation on both sides on expectations,

processes and how to talk to each other.

Alberto Onetti, Chairman, Mind the Bridge Foundation, and ValerieMocker, Senior Researcher, Nesta

Young firms are a great source ofinnovation. But effective collaborationrequires established corporations to befaster and more agile as young firmshave neither the time nor the patienceto wait for the process that is typical forestablished corporations. Only then willthe elephant and the mouse be able to

dance together.

Thijs Jurgens, Vice-President, Innovation, Royal Dutch Shell

Leading practices

In preparation for establishing a partnership, it isimportant to: Set up lean governance structures that offer

flexibility while also maximizing informal channels ofcommunication

Draw on standardized partnering agreements to speed

up the process and draw on the true strengths of eachparty Acknowledge the uncertainty inherent in the partnership

and have a well-thought out plan in the event of failure Develop new, flexible IP schemes to meet the needs of

collaborative innovation partnerships where both partiesbelieve that they share a balanced and fair arrangementand the benefits of collectively developed IP

Set a positive precedent for IP-intensive collaborationsto enable trust-based negotiations in future

Common types of collaborative partnerships highlightedduring research can be categorized in four groups (see

Figure 5): smart procurement, collaborative innovationprojects, strategic innovation partnerships and jointventures, and smart direct investment, which are describedin more detail in Table 2. These partnership structures canbe differentiated according to how broad they are in termsof the life cycle of a particular innovative product or service,and how hungry they are for resources, particularly thefinancial and human resources required from the partners.

On the horizontal axis of Figure 5, which broadly situateseach partnership type by its resource intensity, smartprocurement (where the partnership is based on a specific

need of the larger firm), and project-based collaborations(which are narrowly-focused, time-limited engagements)are commonly limited in terms of their draw on large firmresources. Smart direct investments can vary in theirfinancial intensity but may consume large amounts ofcapital, while strategic partnerships often require moresignificant human resources and/or capital engagement overlong periods.

The vertical axis indicates how broadly and deeply engagedthe partnership is with the innovation life cycle from ideationto commercialization (see Figure 4 on page 11). Smartprocurement and smart investment approaches tend to berather hands off and involve the larger partner in specificphases of the innovation process, while collaborativeinnovation projects, strategic partnerships and joint venturesimply close engagement across the multiple phases of theinnovation process.

Figure 5: Collaborative Innovation Partnership Types


Limited Resource intensity Significant

Collaborative

nnovat on

ro ect

mart

Procurement

Strategic

nnovat on

artners p

an

mart rect

nvestment

nnovationycle

Focused

Complet


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Different partnership contexts, firm needs and innovationcharacteristics will imply different partnership formsand models, which may differ substantively from thosedescribed in Table 2. There is some evidence, however,that collaborative innovations focusing on disruptive

technologies or nascent markets do better in the form ofjoint ventures or smart investments, as such forms insulateexperimental activities from complex processes or resourcecannibalization that can occur when larger firms evaluaterisky ventures on the basis of their existing core business.25

To minimize risks and maintain the advantages of actingquickly, there is significant value for both young andestablished firms in having a set of clearly establishedgates for progressively negotiating and opening up dataand opportunities to one another. To ease the negotiationprocess with young, dynamic firms, Royal Dutch Shell has

simplified the governance structure for collaborations bydecentralizing the decision-making for corporate approvaland changing procedural requirements. It also appliesdifferent partnership structures to meet various objectives approximately 80% of R&D programmes are based onpre-defined business needs, whereas 20% are more futurefocused. In this category, Royal Dutch Shell provides angelgrants, but also engages in partnerships with non-disclosureagreements. A major determinant in their partnershipstructure is the fit of innovation with the firms systems.

Table 2: Collaborative Innovation Partnership Types


Smart

Procurement


ProjectSmart Direct Investment

Strategic Innovation

artnership and JV

Collaboration based on

an existing innovation

Collaboration for a specific

innovation need

Collaborative innovation to

scale innovations

Collaboration to co-develop

and advance innovations

Characteristics In kind investmenteve opmen un ngPurchasing agreement

Potentially new IP

development

Defined scope within

he innovation lifecycle

Requires limited

additional resource or

management attention

In kind investmenteve opmen un ng

Purchasing agreement

Potentially new IP

development

Covers a specific part of the

innovation lifecycle

Requires allocation is

limited to project scope

In kind investmentap a nves men

Provides more control on

the partner

Potential synergies

Potential for equity and

nves men ups e

Covers a specific part of the


Requires management

attention due to capital

investment and proximity to

the organization

In kind investmentran or cap a nves men

Provides more control on

the partner

Co-branding

Potential for equity and

nves men ups e

Relates to the entire


Requires management

attention due to capital

investment and reputation

risk

Selectedypes

- Incubator

cce era or

- Supplier collaboration

- Supplier collaboration

ar ner n g w non-

disclosure or exclusivity

agreemen

- Partnering with market

ready idea firms

- IP investment

- oint development and

sca e up

- Co-marketing and/ or co-

distribution

As a young, dynamic firm in thenegotiation phase it is important toknow the value you bring on table andaim high, to be categorized in the rightbucket, even if it is to get on the radar oftop management. If the large, establishedcompany can seal the deal with youwithout need to get board approval, youwill be one of the many partners in a lowcategory.

Maxim Nohroudi, Chief Executive Officer, Allryder

DigitalGlobes Geospatial Big Dataplatform is enabling a growing ecosystemof innovative firms to bring their expertiseto our data to create new products thatwe can jointly monetize. Its not justabout collecting more satellite data, it isabout enabling new applications that canscale like never before through innovativetechnology platforms and collaborativebusiness models.

Jeffrey R. Tarr, President & CEO


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Collaborations are crucial for a LifeScience company and a key layer of ourInnovation Strategy.

Marijn Dekkers, Chief Executive Officer, Bayer

Addressing complex societal issues canbe best realized through collaborativeinnovation. At DSM, we strive to becomea magnet for innovation with a purpose.Partnering with large and/or small firmswill become increasingly importantfor us in order to develop successfulinnovations that deliver triple-P impact(People, Planet and Profit).

Rob van Leen, Chief Innovation Officer, Royal DSM

The attitude of large companies keen toengage in collaborative innovation withyoung, dynamic firms is a key componentof trust building. The large, establishedbusinesses should be selective in whothey appoint to manage the negotiationsand relationship the primary driverof this person should be to foster thepartnership and not come across as apotential competitor of the entrepreneur.

Peter C. Bhni, Managing Director, EPFL Innovation Satellite, Bhler

C. Pioneer

Dimension 5: Continuously adaptfor a thriving and rewardingpartnershipIntroduction and definition

Once the partnership is structured and set up, subsequentefforts should be invested in attaining measurable results,managing uncertainty and searching for additional value togain from the collaboration.

As with the preparation layer, this aspect of collaborativeinnovation is often undervalued, although all the valueof collaborative innovation comes from solid, ongoingmanagement of a complex relationship once the partnershipis successfully established. In the words of one interviewee,collaborative, innovation-focused partnerships requireconstant care and feeding, particularly in volatile businessand organizational environments. On the one hand, shifts inorganizational structures, rapid firm growth or new prioritiescan threaten resource allocation or firm commitment on bothsides of the relationship. On the other hand, opportunitiesto capitalize on and contribute to collaborations throughthe introduction of new partners, ideas or resources willcontinuously arise and should be harnessed wheneverpossible and appropriate.

Common challenges and pitfalls when strivingto pioneer

Large, established businesses find particular challenges in: Maintaining internal commitment to collaborations once

they are no longer the new, sexy project Breaking down internal silos and progressively opening

other teams and groups to the collaboration in order torealize additional value

Creating effective incentives for managers tocontinuously support the collaboration, rather thandefaulting to a risk-averse approach to their time andresources

Young, dynamic firms in particular find it challenging to: Invest the necessary senior management time to

manage the ongoing relationship Balance dependence on the ongoing partnership with

opportunities to develop relationships externally Create resilience and a plan B to cope with the failure

of a collaboration

Leading practices

Firms successful in collaborative innovation continuouslydevelop partnerships and focus on measurable results by:

Sharing knowledge and integrating the results ofcollaborative innovation systematically across otherproduct lines or activities within their business

Continuing to search for additional benefits and mutualgain from the partnership

Adapting to partners needs, developing ongoing mutual

benefits and openly safeguarding incremental IP in atransparent manner

Incentivizing team and employee support across bothorganizations

Clearly managing expectations and emphasizingproactive communication

Being frank and transparent about challenges, risks andthe possibility of failure

Pioneering partnerships therefore ensure that lines ofcommunication remain open, that discontinuities are viewedas opportunities rather than threats, and that all partiescontinuously assess, adapt, realign, commit to and reinvest

in the collaboration. For example, Novozymes and spaceimagery provider DigitalGlobe keep their partnerships out ofthe sales and commercially-driven departments to enablethe collaborative innovation to flourish before exposing it tocorporate pressures. DigitalGlobe places these in the R&Ddepartment in order not to stifle the team and have thefocus on innovation rather than on next quarters figures.


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Section 3

A Public Policy Model for



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Empower, Educate and Enable

Governments and policy-makers can have a markedinfluence on the success of collaborative innovation inEurope. As can be seen from the policy-maker contributionsin this section, political and policy leaders are increasinglyinterested in promoting innovation in general and

collaborative approaches to innovation in particular. Thissection draws on interviews and workshops to highlightthe supporting strategies that policy-makers can deploy tolower the costs and increase the benefits of collaborativeinnovation for firms, as well as ensure that societies captureas much of the benefits of such partnerships as possible.

Discussions with and public recommendations fromentrepreneurs, business leaders and policy-makers reveala tendency to focus on the power of the public sectorto deliver long-term, regulation-based interventions thatcreate new incentives or overcome barriers to collaboration

between firms. However, the research for this reportindicates that policy-makers and public figures can supportcompanies looking to partner and innovate through a widerrange of activities, in particular by using their networks andsoft power to highlight the benefits of collaboration andconvene leaders from different sectors and geographies.

Figure 6 outlines three broad strategies that policy-makers

can pursue:

Empowermentby signalling government commitmentand establishing an economic strategy that supportscollaborative innovation

Educationthat highlights opportunities for firm learningand incentivizes increasing proficiency in innovationmanagement

Enablementvia ensuring supportive legal and regulatoryframeworks as well as appropriate infrastructure

Policy-makers can use the checklist below to assesswhere they stand and what more can be done to foster

collaborative innovation (see Table 3).

Figure 6: Policy Model for Collaborative Innovation


Highlight opportunities

for firm learning and

incentivize increasing

proficiency in innovation

management

Ensure supportive

egal and regulatory

framework as well as

appropriate

infrastructure

Signal government commitment and set economic

strategy to support collaborative innovation

1. Empower

3.Enab

le.

ucate

oneer

Partner

repare


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Figure 7:Project workshop break-out group discussion during the World Economic Forum Annual Meeting 2015


Table 3: Empower, Educate and Enable: A Vision, Actions and Measurements for Policies to Address CollaborativeInnovation Challenges

Empower Educate Enable

Action Measure impact Action Measure impact Action Measure impact

Pioneer onsiderollaborative

nnovation on atrategic level

Analyze and

ighlight successactors of

artnerships

Award the

evelopment of

nnovative andcalable practices

hat share ofcountries and

regions addressescollaborative

innovation on a

strategic level?hat share of

businesses

continuously

consider potential

partnerships?hat is the

outreach and media

attention of

lighthouse events,

e.g., an award forinspiring and

scalable innovation

management

practices?

reate mentorshiprogrammes

evelop knowledgeharing platforms

or management of

ollaborativennovation to

rovide specific

xpertise relevant

or pioneering

hat is the scale ofhe mentorship

rogram andbtained feedback?

hat is the number

f visitors andctive users of the

nowledge sharing

latform?

rovide taxncentives for

collaborativennovation

hat is the numberof partnerships

claiming taxincentives?

hat is the

aggregated profitsgenerated by

collaborative

nnovation

artnerships?

Partner nhanceroficiency in

ollaborative

nnovation

n practice

n the educationsystem

lose I knowledge

ap for young,ynamic firms to

trengthen theiregotiation position

elative to large

firms

ow manyollaborative

nnovation

anagement

rograms are

aunched? ow many

ompanies

articipate inducation

rograms?hat is the level of

roficiency gained

n collaborative

nnovation?

uild digital dataases to match

otential partners

nhance standardi-

zation and

armonization ofegulatory

frameworks related

o I

ow manycollaborative

innovation

partnerships are

established through

digital or physicalplatforms?

Prepare Establish freeollaborative

nnovation zoneswith clear exitequirements

hat is the numberof firms and the

speed they get out

of free collaboration

zones

s on: reg ona strategy orco a orat ve nnovat on etween

young, ynam c rms an

established companieswhere all business representativeare aware of such partnership

s on: a aca em c nst tut onsof er master program on

nnovat on management, nc .

collaborative innovation; anybusiness representative hasaccess to suitable trainings

sion: achieve nearly zeroransact on cost n co a orat onand recover any related tax

ncent ves w t n mont s ue tostrong economic growth of thesepartners ps



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1. Empowering collaborative

innovation

Empowerment refers to ways in which political leaders andpolicy-makers can signal commitment and link collaborativeinnovation to a countrys economic strategy, as well as usethe convening power of government to bring diverse groupsof business leaders together.

Policy-makers have an important role in raising awarenessof the value that collaboration across firms and sectorscan bring. The business opportunities represented bycollaborative innovation may not always be evident to thecorporate leaders who most need it, preoccupied as theyare with the daily demands of business. Championinginnovation and the value created by collaborative effortscan help make businesses more open and receptive toexternal ideas. The long-term ambition should be to havea generation of government leaders who see their roleas linking large firms and entrepreneurs to the economic

strategies of their cities, regions and countries.

Empowering strategies that policy-makers should considerstart with their networks they can bring together keystakeholders through personal engagement. Both PrimeMinister Mark Rutte of the Netherlands and his specialenvoy for start-ups Neelie Kroes are using their personalnetworks to support increased innovative activity amongyoung and established firms in their country.

Another important approach is to recognize the importanceof collaborative approaches to innovation in national

economic strategies, which gives an important signal tobusinesses to explore the value that lies in experimentingwith innovation-focused partnerships. This approach hasbeen taken by Prime Minister Stefan Lfven of Sweden,who has placed innovation at the heart of his countrys neweconomic strategy.

Mark Rutte, Prime Minister of the Netherlands

Stories of ground-breaking innovations often begin with acreative individual working away in the attic or garage. Weall know the examples of Steve Jobs and Bill Gates. Butfew of those brilliant minds actually become CEO of Appleor Microsoft. Fortunately, we are capable of organising ourown creative setting. Because the brainpower of creativeindividuals only really bears fruit when combined with theknowledge, creativity and capital of others. Other scientists,certainly, but also companies, research institutions andgovernment bodies.

In my country weve organised a creative setting of this kind.Its in Eindhoven, and we call it the Brainport. Its one of thesmartest locations in the world. Its the innovation hotspot inEurope. It attracts 24 per cent of all private R&D investmentin my country. And its the European region that registersthe most patents. Brainport Eindhoven is successfulbecause it focuses on building strong relationships betweenindustry (both SMEs and multinationals), top scientists fromall kinds of disciplines, and government.

Brainport is an excellent example of the new innovationnetworks and districts that we see emerging in manyplaces. Its a trend we welcome and want to encourage.Innovation networks should be accessible to creativeindividuals across the globe.

One of the barriers to further growth of Brainport Eindhovenis access to capital for young businesses and start-ups.In the US we see more and more corporations gettinginvolved in venture capital. We can do the same in Europe.Corporate venture capital needs to get bigger all overEurope. This is another area where innovation hubs likeBrainport Eindhoven can play a role. And the good newsis the first foreign venture capitalists have already found

their way to Brainport Eindhoven and have announced theyintend to invest in various start-ups located there.

Business angels and venture capitalists help entrepreneurscross the so-called valley of death between productdevelopment and commercial viability. When it comes toventure capital, a striking example is the corporate venturingfrom large companies like Bayer, which plays a vital role infostering collaborative research. Corporate venture capitalis a hybrid model to spur innovation outside the company.More corporations are doing venture capital deals andwe see a small group of hyperactive corporate ventureinvestors such as Google and Intel. They play a moreimportant role in the venture capital ecosystem. In Europe

too, the big corporations can play a larger role.

Recent research by the OECD shows that young firms,mostly SMEs, are responsible for at least 50% of jobgrowth. Due to their easy adaption to new technologies,start-ups play a crucial role in the collaborative innovationapproach in which is central to Brainport Eindhovenssuccess. Closer and better networks are essential ifwe want to strengthen the position of start-ups in theNetherlands and help persuade innovative foreign start-ups to establish their businesses in the Netherlands. Forthat reason we have recently appointed former EuropeanCommissioner Ms Neelie Kroes as a special Start-up envoyfor The Netherlands. And I am confident she will guide the

Netherlands in the direction of an ever more successfulstart-up Delta where Dutch innovation can flourish in andbetween companies, laboratories, campuses and manyattics and garages.


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Stefan Lfven, Prime Minister of Sweden

One of the first promises I made when I was in therunning to become Prime Minister of Sweden was thatI would set up a National Innovation Council. Somethought this was a bit odd, as innovation is not anissue that voters care much about. But the fact is thatthey should.

A successful innovation policy is key to creating anenvironment that will support business start-ups,encourage companies to grow and enable growthof the economy. In the global economy, Swedenwill never be able to compete on low wages or lowtaxes. Instead, we need to continue to increase ourcompetitiveness by developing new and attractiveproducts, services and business methods.

The hands-off view that markets will manage this bythemselves belongs to the past. In todays high-tech

and knowledge-based economy, all sectors of societyneed to be involved.

In my view, it is governments responsibility to supportinnovators and entrepreneurs by providing the bestpossible innovation environment. By establishingthe National Innovation Council, we have elevatedinnovation to the highest political level. This will simplifydecision-making, especially seeing that several policyareas are often involved in innovation-related issues.

Within the framework of the Innovation Council,

government and business will be able to initiate jointresearch and development projects when costs aretoo high for individual companies. Swedens innovativeedge will be sharpened through closer cooperationbetween academia and both large and smallenterprises and through the impetus this generates.

If we want to maintain and enhance our standardof living, then creativity, partnerships and increasedproductivity is the only way to go.


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2. Educating for collaborative

innovation

The role of policy in education should not be limited toprimary, secondary and tertiary education, but include thedevelopment of collaborative innovation capabilities in thebusiness community and among policy-making agencies.Indeed, it is at the firm level that skills and capabilitiesfor collaboration are most needed, and where policy-makers can tangibly contribute. Firms keen to engage incollaborative innovation acknowledge the capability deficitthat exists at present to engage in and effectively managecollaborations. The long-term goal should be to createa generation of business leaders who value and supportcorporate cultures where taking carefully calculated riskslinked to innovation is seen in a positive light. Such a visionrequires developing businesses capabilities for innovationmanagement across and beyond Europe, focusing onthose skills, capabilities and mindsets that are necessary forcreating value from resources beyond the direct control of

the firm.

Exposing business leaders to different innovationmodels, instilling entrepreneurial mindsets in firms andlinking business leaders to external sources of advicecan be achieved through training seminars, coachingand mentorship programmes for both young firms andestablished businesses.

A specific area where education and direct support couldbe provided is intellectual property, particularly for young,dynamic firms. Most young, innovation-intensive companies

lack the resources for expert legal advice to assist themin registering their intellectual property or engaging innegotiation with large, established businesses. Nor dothey have the time or specialized knowledge themselves.Policy-makers could therefore develop relevant intellectualproperty guides for young, dynamic firms to increase theirunderstanding of this complex regulatory field.

Policy-makers can and do also play an important role indeveloping knowledge-sharing platforms for managementof innovation, and could disseminate knowledge resourcesspecific to building collaborative partnerships. Knowledgesharing is one important approach taken by the EuropeanCommission, as described by Commissioner CarlosMoedas below.

Carlos Moedas, Commissioner, Research,Science and Innovation, European Commission

Heads of state and government across Europerecognize that innovation creates jobs and helpstackle societal challenges. That is why it was placedat the core of the Europe 2020 strategy for smart,sustainable and inclusive growth and why it playsa central role in the new political orientation of theEuropean Commission.

Many types of innovation take place at many levels.But whatever the scale and scope, faster progressis made through effective collaboration. In fact thelions share of the 80 billion ($89.9 billion) budgetfor Horizon 2020, the biggest EU programme to datefor research and innovation, will support collaborativeactivities including major public-private partnerships.The goal is to ensure Europe produces world-classscience, removes barriers to innovation and makes

it easier for the public and private sectors to worktogether to stimulate growth and competitiveness.

Many EU Member States implement measures tostimulate innovation but arguably much needs to bedone to share the experience more broadly acrossthe Union, which is why the Commission is looking atways to help circulate knowledge and know-how.

At the EU level, specific measures in Horizon 2020will enable more effective collaborative innovationby supporting pilot actions, demonstrations and

closer-to-market activities. A key focus is on businessengagement through targeted support for SMEs andmid-caps. The recent Commission proposal for a315 billion Investment Plan ($354 billion) is a veryhighly leveraged strategy to stimulate investment inlarge-scale infrastructure projects in areas such astransport and energy technologies where research,innovation and international collaborations areexpected to play a significant role.

Innovation is not an end in itself but a process. Itsabout doing things better, doing things differently,doing new things and, increasingly, its about doing

things together. But at the end of the day we haveto ask who benefits. Jean-Claude Juncker at thestart of his mandate as President of the EuropeanCommission was very clear on this point: it is eachand every EU citizen who should benefit from thefruits of innovation, and all Member States and theirprivate and public sectors need to work together tomake this a reality.


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3. Enabling collaborative

innovation

To enable collaborative innovation, the focus should beon providing a legal and regulatory framework that lowersthe costs of cross-firm collaboration and on developingthe necessary infrastructure. At the national level, thisimplies the existence of fiscal, licensing and intellectualproperty regimes that support, or at least do not penalize,collaboration across firms. At the European level, initiativessuch as the Digital Single Market and investments in cross-sector innovation are important enabling factors that reducetransaction costs for firms seeking partners and innovatingtogether.

World Economic Forum research indicates that tax, tradeand procurement regulations often impact the willingnessand ability of young and established firms to explorepartnership opportunities. As German Vice-ChancellorSigmar Gabriel writes below, public-sector funds that

support innovation can also be instrumental in encouragingcollaborations, while policies around data security anddata privacy are critical regulatory elements for buildingcollaborative efforts in the digital economy.

In Europe with countries of differentsizes, we need to get to more European

initiatives which bridge country borders.Especially scaling up in smallercountries is a bigger hurdle than in largercountries due to language, legal andother barriers. Therefore a Europeanaward on best practices in collaborativeinnovation supported by heads ofstate, highly recognized businessleaders, representatives from academiaand media would be a great initiative

to accelerate the speed of buildingcross-border capabilities along thepillars Prepare, Partner and Pioneer oncollaborative innovation.

Kai Engel, Managing Director, A.T. Kearney Germany, and Head,Global Innovation Practice

Governments can foster innovation-driven entrepreneurship through enablingnorms in institutions, values in peoplesmindsets and open spaces for co-creation.

Jose Manuel Leceta, Outgoing Director, EITeu, and Visiting Fellow,

Robert Schuman Centre for Advanced Studies, European Institute ofInnovation and Technology

Pier Carlo Padoan, Italys Finance Minister, outlines how taxpolicy is being used to support innovation investment in hiscountry, while the government is also directly investing instart-ups through a venture fund. Both of these strategiesare part of an ecosystem approach by the governmentto create an innovation hub in Italy, creating numerousopportunities for cross-firm interaction and collaboration.

Finally, Antonio Pires de Lima, Portugals Minister ofEconomy, describes how a range of public-sectorinstruments have supported horizontal collaboration modelsand practices, helping Portugal achieve a 16-place gain inits competitiveness ranking. These include financial grantsfor collaborative projects, support for large companies todevelop networks of partners and create new companies,and increased effectiveness of the European InnovationSystem through enhanced alignment between theinnovation policies of the EU and its Member States.


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Sigmar Gabriel, Vice-Chancellor and FederalMinister of Economic Affairs and Energy forGermany

In todays world, innovation is more important thanever. Digitization is spawning disruptive innovations,which is resulting not only in much lower costs butin entirely new business models: ideas are realized

in cooperation with customers, business partnersand freelance inventors with whom the companiescommunicate in virtual networks. These openinnovative processes are becoming increasinglycommon and are resulting in shorter and shortercycles of innovation. Given the increasingly importantrole that information technology plays in our life,governments need to put in place the right rules andregulations concerning data security, data privacy,standards and secure cloud solutions. In additionto regulatory infrastructure, Germany and Europeneed better IT network infrastructure. The German

governments Digital Agenda strategy gives activesupport to the digital changes taking place in theprivate sector, and foresees a nationwide roll-out ofhigh-speed networks.

In addition to promoting innovation in the digitalworld, the German government is also supportinginnovation in small and medium-sized enterprises byproviding them access to funds. The Federal Ministryfor Economic Affairs and Energy supports R&Dprojects of small and medium-sized firms. The CentralSME Innovation Programme is especially effectiveas it helps the relevant companies and researchestablishments with tailored and easy-access grants.This programme also acts as a bridge between manyinventors from the research community and thebusiness world.

Innovation is driven by some large, well-knowncompanies like Volkswagen, Bosch and Siemens, andalso by a host of small and medium-sized enterprises the German Mittelstand which are pioneersof technological progress in many fields. Most ofthese firms work in large or small associations withmarket-oriented research establishments, such as

the Fraunhofer Society. Just recently, Apple head TimCook visited a small glass-making firm in Bavaria. Hewas amazed by what he saw, and said: Theyre aworld champion in unusual glass-making technology.This hidden champion company has worked onsophisticated glass designs for numerous high-profileconstruction projects around the world. That is typicalof these world-beating small and medium-sized firms:no one knows them, but everyone wants them. It isimportant for companies to have an innovative in-house culture: flexibility, flat hierarchies, openness todebate and cooperation all of this fosters creativity,

new ideas and innovation. After all, we must alwaysremember that innovations are made by people, notmachines.

Pier Carlo Padoan, Minister of Economy andFinance of Italy

Innovation will shape the future economy of Italyand Europe. In recent years, Italian companies havebeen able to become increasingly innovative andacquire a standing in the global economy specificallycompanies involved in mechanical engineering,

nanotechnology, healthcare and aerospace. Thesecompanies often act as gazelles, autonomously andquickly responding to markets needs, leading the waythrough innovation. Embedding innovation in Made inItaly is not just a new narrative but is about actions.

The government has approved and implementeda series of actions concerning the Italian businessenvironment in order to let more companies participatein the new Made in Italy revolution and to support arace to innovation while striving for excellence. Wehave pushed this change through specific measureswithin the Finance for Growth framework, whichfocuses on improving access to credit and developing

new financing tools, in order to create a betterbusiness environment able to attract private capital.

How does our race to innovation work? We havedesigned a bold tax credit strategy, which incentivizesincremental investment in R&D during the period2015-2019 and the acquisition of new patents.Additional measures have been taken aimed atfostering investment in new machinery, as well asin ultra-broadband so as to fulfil the governmentsdigital agenda. Furthermore, the government hasimplemented the following measures to enhance aninnovation ecosystem: the creation of a crowdfundingplatform to help start-ups find liquidity (the first in

Europe to be regulated) and a Welcome Talentsand Startup Visa initiative to attract talented peoplethrough tax incentives and the fast-track processing ofvisas and permits for setting up business. As a resultof these new policies and regulations, last year almost100 start-ups registered each month, with a 33%increase in the sectors labour force. Moreover, 8,400applications for investment financing booked almostall the earmarked funds in just eight months.

SMEs are the backbone of the Italian economyand we are firmly committed to helping themachieve innovation-based growth. Thanks to ournew Investment Compact, innovative SMEsinvesting in R&D projects get the same benefitsas innovative start-ups. Working together withbusiness associations, digital companies and otherstakeholders, the government aims at building anationwide ecosystem of innovating companiesand start-ups, fostering new entrepreneurial ideas.Introducing public incentives for companies atdifferent stages of their life cycles is part of the job.A new Atlas of Italian Innovation will foster a cultureof research and development, where technologicalprogress becomes a natural challenge. This is whatwe expect for the future of Italy, as we believe thatinnovation lays the foundation for lasting growth and a

sustainable future.


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Antonio Pires de Lima, Minister of Economy of Portugal

Globalization, rapid technological advances, heightened competition and the development of newmarkets for goods and services have forced companies, industries and regions to find sustainableadvantages to compete within global value chains. This competitive pressure forces stakeholdersto pool innovation resources and share risks with others. Collaborative innovation has played amajor role in the recent financial and economic adjustment period, contributing decisively to astructural shift in the Portuguese economy, and driving a significant gain in competitiveness.

Portugal climbed 16 positions in this years World Economic Forums Global CompetitivenessReportto its best-ever standing at 36. We are more competitive because we are more innovative our best performances are in the innovation and technological readiness areas. We alsocollaborate more in the last seven years, the number of companies involved in collaborativeR&D projects has quadrupled and the associated public funding increased five-and-a-half times.Portugal is a remarkable example of the impact that collaborative innovation can have acrossdifferent sectors, indust

wef collaborative innovation report 2015

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