Why B2B Companies Struggle with Collaborative Innovation21 March, 2016 / Articles
Collaborative innovation is a hot topic in the B2C space, where it overlaps with crowdsourcing, but we see B2B players taking an interest as well. Of course, the two contexts are very different: Companies usually engage with few customers at a time, not a large online community; they use traditional face-to-face interactions, rather than a technology platform; and their choice of partners is driven by specific business goals, rather than by engagement and passion for a brand or product category.
Nonetheless, innovating with customers should work well in B2B, as it should give companies a deeper knowledge of their customers and promote a trusting relationship. Unfortunately, it seldom turns out that way. Over and over again we’ve seen resources and time wasted on initiatives that die on the vine, destroying the trust that collaborative innovation ought to deliver while doing little to improve companies’ knowledge and performance.
As we argue in a forthcoming article, in the April issue of Harvard Business Manager (the German edition of HBR), our experience of studying and documenting these failures suggests that nearly all can be traced back to a small set of traps organizations tend to step into.
Trap 1: Acting as an event manager
Treating an innovation project as just an “event” is the most common cause of failure. Managers invest so much effort in presenting their companies in a good light (especially if a key customer is involved) that they forget that the workshop is not a sales workshop.
Innovation workshops are not forums for creating a good impression but processes that require good planning (about what happens before and after the workshop as well as during), a careful selection of ideas (through a jointly agreed process), management of intellectual property, and sound decisions about resource allocation and governance for the parties involved.
Here’s an example. A telecommunications company recently launched an initiative with a business customer. The goal was to jointly reinvent the customer’s data management system. Although the workshop was set up professionally, the two companies didn’t plan for governance and resources to properly follow up on the generated ideas. The key resources were owned by another function that was not involved in the process and had no incentives to lend the resources. The inevitable lack of concrete progress degraded the collaborative innovation back to a short-term sales effort. To no one’s surprise, the experience was not repeated.
Trap 2: Defining the problem statement alone
In the B2B space, companies tend to be driven by specific business goals and priorities. In this context, an agreement on the problems you’re going to work together before the key joint ideation events is critical. This doesn’t always happen.
Consider the case of an innovation initiative run by a company we’ll call WashCorp (not its real name), a global producer of surfactants used by companies like P&G and Clorox in the production of detergents. WashCorp convinced a key customer to participate in an innovation workshop. They had picked an inviting location and both parties sent representatives from multiple functions. A top-flight facilitator was brought in to lead the discussion. Commitment and expectations were high.
But the workshop flopped. The issue, it turned out, was that the problem they were trying to solve was relevant only to WashCorp, so the customer’s people soon disengaged. In an attempt to salvage the event, WashCorp switched to a problem that was important to its customer, but it soon became apparent that this wouldn’t work either because the WashCorp experts had little to contribute, having been selected for to help with the initial problem. Both sides ended up disappointed and will be unlikely to repeat the experiment.
Trap 3: Ignoring divergence in time horizons
Even if companies create alignment on the problem statement, their time horizons for the innovation cycle and expected financial returns can be different. This misalignment can undermine any motivation for allocating resources even after a successful ideation workshop.
For example, a supplier in the packaging industry — we’ll call it EuropePack — wanted to find new applications for its existing materials over a one-to-two-year time horizon in order to drive sales of their latest product line and extend current business. To achieve this, they ran a collaborative innovation initiative with a global multibrand OEM in the FMCG industry to innovate the future of packaging.
But the customer, unaware of the supplier’s agenda, had set its own time horizon at five years. As a result, it was disappointed by its supplier’s down-to-earth, short-term approach. Meanwhile the EuropePack people, many of them with a sales background, were equally frustrated by the customer’s more strategic, less goal-oriented approach. With each side speaking a different language, the initiative flopped.
Trap 4: Speaking different corporate languages
“Walk in the customer’s shoes” is an old saying. An emotional understanding of each other’s challenges is what creates empathy between two companies. It enables intimacy and trust, key ingredients for a sustainable collaboration. Unfortunately, many managers often rely on house jargon and PowerPoint presentations when they communicate, which makes it harder for them to relate to how their innovation partner thinks and feels.
This was the experience of the chemical company BASF and Daimler Buses. The two had teamed up to design the bus of the future. In initial pre-meetings they tried to determine joint challenge areas but soon realized that they had different perceptions of the same issues and spoke different corporate languages. While BASF would start with the essential chemical elements and translate possible solutions into standardized mass production, Daimler Buses took a more traditional, customized engineering approach.
In this case, the project coordinators resolved the communication issue and enabled each side to empathize with the other by organizing a “day in the life of” at the respective organizations. Daimler Buses went first, offering all 70 workshop participants a tour of its production facilities, highlighting the main challenge areas. After that, the participants were bussed to the BASF site, where they toured a typical plastics mass production plant as well as a chemical laboratory to understand, “in the real context,” the strengths, constraints, and perceptions of the supplier. All this led to a fruitful foundation for the eventual collaborative ideation session.
If companies are to succeed in collaborative innovation with a customer they need to avoid these traps by treating the workshop experience as a process, focusing on shared problems, acknowledging each other’s time horizons, and putting themselves in each other’s shoes. That involves, of course, a lot of work, but the payoffs will more than justify the effort.