How to Build and Manage Effective External Innovation Partnerships

External innovation partnerships provide a competitive advantage to MNCs and large enterprises and promote their strategic growth. 

These partnerships can result in groundbreaking innovations and new economic opportunities. You can develop better products and services faster and access your partner’s market rightfully. 

This is probably why 94% of executives in the tech industry consider external innovation partnerships a crucial strategy for success. 

Now, the challenge: finding the right partner is tough, but managing them is tougher. 

Let’s discuss how to effectively build and manage external innovation partnerships. 

Identify Potential Partners

Look for common ground between your company and the partners, especially when there are high financial risks or differences in locations or cultures. Identify potential partners in terms of:

• Capabilities and expertise: Assess the external source’s capabilities and expertise for innovation and the ability to occupy market share.  
• Value and goal alignment: Operating in the same industry is not enough to get both parties on the same page. Differences in goals and values may create tension later, impacting success. Look for partners with aligned goals, values, innovative trajectories, and market aspirations. 
• Reputation and track record: Consider the external source’s proven track record and reputation in your industry. This ensures the project’s successful, on-time completion while your efforts pay off.

You can also use business intelligence or advanced analytics solutions to evaluate potential partners and their strategic directions. 

Structure External Innovation Partnership Agreements

Structure the partnership while being flexible and result-oriented in your agreement.

• Define objectives clearly: Clarity in objectives is helpful for both parties, keeping them focused and avoiding tensions. Set your priorities and timelines right based on what’s best for the project. 
• Adaptability: New challenges can emerge at any time, like changing market dynamics and evolving user demands. So, be flexible, adaptable, and ready to accept and navigate swiftly through the challenges. 
• Conflict resolution: Have the means to resolve conflicts peacefully, avoiding operational delays or financial setbacks. 

Nurture Trust and Relationships 

New partnerships need trust-building, so a solid, mutually beneficial business relationship can flourish upon them. Personal biases, collaboration issues, and communication gaps impact trust. Consider avoiding them. 

• Transparency: Be realistic and transparent about your processes, deliverables, and expectations. It will ensure the workflow goes as per the plan and increases the odds of success. 
• Strengthen personal relationships: Connect with key stakeholders on a personal level, not just mere networking. Try to understand them more and look for opportunities to communicate and collaborate. Discuss challenges and resolve them together.
• Effective communication: Enable effective communication within your team and with your partner. Keep them updated with the latest developments and granular details. Also, conduct regular meetings, take feedback, and improve; make them feel valuable. 
• Use technology: Leverage the power of technology not only in workflow and processes but also in communication and collaboration. Google Meet, Zoom, Doc, Trello, Notion, and Slack are some of the best tools for this. 

Leverage Resources and Expertise 

Joining forces for innovation offers 2x advantages in terms of knowledge, resources, skills, expertise, experiences, and market share. Leverage each other’s strengths and work on weaknesses, maximizing outputs and minimizing risks. 

This requires you to determine who’s best in which area. For example, if one company is great at sales and marketing and the other is great at production, delegate work accordingly. 

• Share knowledge and resources: Based on the project requirements, share knowledge and resources and collaborate on research and development (R&D). Experiment to determine if the outcomes are mutually beneficial. 
• Result-driven decisions: Make decisions based on the result. 

Example: Initially, you agreed that Partner 1 would manage financial reporting. After recognizing the expertise in reporting, analytics, and budgeting, Partner 2 was given the responsibility. Result-oriented decisions like these are crucial for long-term benefits. 

Ensure Compliance in External Innovation Partnerships

Growing security and data privacy risks worldwide require companies to adhere to certain laws and regulations like GDPR, HIPAA, etc. 

• Strict Adherence: Spread awareness about legal and ethical standards concerning data security and privacy. Make your company and the partner adhere strictly to applicable regulations.
• Establish protocols: Set clear data privacy and security protocols for both parties. Align your tools, technologies, and people with the protocols. 

Leverage tools like Resolver, HIPAA360, and Netwrix to conduct regular audits, generate reports, and adhere to compliance needs. 

Improve Partnership Performance

Set up a partnership management team comprising senior executives from both parties to determine partnership progress and performance.

• Measure and improve: Measure metrics like attained goals, quality of deliverables, revenue generated, key performers, tools and technologies performance, etc., and find ways to improve them.
• Celebrate wins: Celebrate wins, however small or big, together. If you encounter failure, find out the root causes and fix them. 

Successful External Partnerships 

1. Airbus with FPT Software: FPT Software leveraged data science to build a strategic workflow to enhance Airbus’ operational efficiency and prevent delays. 
2. Siemens and Bosch: The two tech giants developed BSH Hausgeräte GmbH to manufacture and market home appliances. 
3. BioNTech and Pfizer: Together, these companies created a vaccine for COVID-19.

Conclusion

Building effective external innovation partnerships requires solid strategies. It will help you unlock a larger market share and enable you to continuously adapt, innovate, and grow together.

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