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Images of particles made from a promising battery cathode material called NMC

Open Innovation and the Search for Digital Solutions: Strategic Differentiation

2018
Bits & Watts Initiative

PI: Stephen Comello, Graduate School of Business; CO-PIs, Ann-Kristin Zobel (ETH Zurich & University of St. Gallen) and Lukas Falcke (ETH Zurich)

Critical Need

Digitalization presents multi-dimensional opportunities for corporations looking to innovate current business models in the search for new ways to create and capture value. Such opportunities span the entire business model allowing for incremental improvements, radical changes and everything in between. All types of firms, irrespective of industry and size, could identify opportunities for which digitalization could enable and support. However, large firms with legacy systems which operate within established industries that traditionally do not extensively rely on digital processes could discover digitalization ostensibly offers compelling opportunities. One key example is utilities within the electricity industry; these firms are increasingly searching for – and deploying – digital solutions across various dimensions of their business models.

Open innovation (OI), especially formations that leverage the agility and specialization of start-ups, is a notable approach for corporations to search for new digital solutions and gain capabilities in the process. All things being equal, collaborating with start-ups offers advantages to most large companies and especially those which are not “digital native”. Start-ups as a group are typically plentiful, often full of promising ideas and exhibit organizational agility, the willingness to take risk, and aspirations of rapid growth (Weiblen & Chesbrough, 2015; Bumpus & Comello, 2017, Bogers, Zobel et al. 2017). Combined with the resources, scale, power, and the routines needed to run a proven business model efficiently offered by the larger firm. Search through OI usually takes the form of a proof-of-concept (PoC) or pilot, which a small-scale project to test assumptions of technical, business and organization fit and function. OI PoC/pilots ought to be informed by the intended solution focus (cost minimization vs. revenue generation) and the complexity (presence of digital elements). Provided the variation across focus and complexity, the OI process needs to be designed to accommodate the different kinds of digital solutions.

Project Innovation

In this work we offer process design recommendations for corporations pursuing digital solution within an open innovation setting. We show that collaborative intensity, knowledge exchange, development workload and pilot completion time – among other dimensions – are differentially affected by the interaction of solution focus and complexity, for both the corporation and its collaborating start-up(s). We offer a working framework for the pathway a corporation may take to pursue increasingly ambitious/disruptive digital solutions within an OI setting.

FY19 Accomplishments and Results

Completion of data collection (qualitative and quantitative) as of October 2019; data collection began in March 2018. Initial qualitative and quantitative analysis completed, producing sets of propositions to produce sets of propositions to be explored with deeper analytical approaches, scheduled for Q1 2020.

Potential Impact

As utilities intensify their capability search strategies with respect to digital solutions, efficient collaborative processes will increase the absorptive capacity of these firms to assess, deploy and scale such solutions. At the same time, such efficient collaborative processes will benefit the start-ups with which they co-develop solutions, by right-sizing the pilot/PoC through matching expectations, resources and business and technical requirements, among others.

Publications: 

Preliminary findings were presented at the World Open Innovation Conference, December 12-13 in Rome, Italy. Publication submission to the California Management Review is scheduled for Q3 2020.