Marisol Menendez is Chief Open Innovation Officer at Spain Startup, a global open innovation platform that connects corporations, startups and investors in the Spanish-speaking world. Until December 2018 she was head of Open Innovation at BBVA. BBVA is an innovative Spanish multinational financial group. BBVA has been embracing open innovation in the last five years and Marisol was one of the leading OI managers driving BBVA to the forefront of open innovation in the banking industry. We had a fruitful conversation about how to manage OI in large firms, and we recount it into two blogs. This blog is the 2nd part. You find the 1st part here.

How to organize your company for open innovation?

Collaboration is not new and has been around forever. The novelty in open innovation is how to collaborate with partners to create new products and how to keep these collaborations working in the long term, so that they add value in a continuous way. We are trained in a world to manage and work for strategic competitiveness and you don’t want to lose your upper hand in the market. However,  if you think about creating new products in collaboration with partners, there is always the problem that you may feel you will loose the upper hand or that you are sharing something that you shouldn’t share.  So, it is important to be well organized, to set the rules of the game at the very beginning. We have a saying in Mexico: “you need to have all the rules clear, so the friendship can be long-term”.

An organization for open innovation means:

1.    To be clear about what kind of support you have from the top management. What is the mandate you have from top management? Open innovation activities should be anchored into the corporate strategy.

2.    To understand your organization: these might be basic questions but it is not always easy to get an answer. In big corporations it is difficult to know what is happening in all parts of the company. I found that it is exceptional that someone in the company knows all the projects in all the divisions of the company. In large corporations, this is simply impossible. But you need to understand at least what are the priorities and strategic plans for each of the units. Try to understand the future they want to create. If you work for instance in consumer goods and the division says it doesn’t want to enter the energy drinks market, then you have to discard open innovation initiatives in that area and move on with the prioritized areas including those that are not productive but may be important to support the performance of the business unit.

3.    You also have to think about the procurement team, engineering teams, etc. that might benefit directly or indirectly from different open innovation initiatives.

Understanding the strategic priorities of the businesses

You have to understand the organization, understand the different parts of the organization, and understand the constraints. The latter is important:  For instance, regulations are important in the banking industry. You shouldn’t put regulations at risk at any cost. In other organizations / industries the constraints may be linked to IP for instance. In introducing open innovation you have to identify who is enthusiast about working with external partners and those that tend to be resistant.

If you understand that priorities then you also understand who is an early adapter / enthusiast and you can start working with those people. You can be successful by connecting to these early adopters and listen carefully to what they really need: technologies may be cool, but the important part is to create value. I discovered that if you create results for the business, the number of enthusiasts grows exponentially, even if you start small.

When I started with our open innovation at BBVA, I was asking the businesses a favor: “I have a cool start-up, can you please have a talk with them?” The businesses met the start-ups but that didn’t result into tangible collaborations. Later on we changed the way of working: we carefully monitored the needs of the business and then were looking for start-ups that could help them. Bringing in the right start-ups and solutions creates considerable support in the business.

So, we asked the enthusiasts to reveal their needs, but we discovered over time that it was not easy to get really good answers. For instance, a business needs block chain technology, but bock chain technology is a very general term. What kind of block chain technology is necessary? What is the specific application targeted with the technology? And what kind of collaboration the business wants to have with the start-up? Is the main objective to be inspired, to learn or to develop a new, well-defined application? We understood over time that the businesses have a difficult time to understand with whom exactly they have to work with and what they could expect from this collaboration. As an open innovation agent in the company you have to help the businesses to understand the real needs and how to translate that into useful collaborations with external partners.

This is important because whenever you have a specific need and you reach out to external partners such as suppliers, vendors, universities, and start-ups, you have to be explicit about the type of collaboration your are looking for. It is a relationship build upon trust and you don’t want to jeopardize trust. Therefore, you have to make the objectives and the type of collaboration crystal clear. You need to make explicit what you want to get out of the collaboration. You have to be clear with your promises and stick to them.

Internal processes and procedures

Processes and procedures have the tendency to kill the joy of work, and therefore you have to manage this potential danger but it is not always easy to do this. You need to work with your internal departments to see how the collaboration will work. Therefore, we worked with procurement, compliance, security, IP and legal.

Because we are talking about innovation, ideally you need an area for experimentation including an area for experimental contracting, experimental relations, etc. We called those sandboxes, not only sandboxes for technologies, but also for experiments with contracts, relationships, and new ways of collaboration. So, you can have a quick and dirty way of testing the experiments whether they will work out or not and if the effort makes sense.

Budgeting for innovation is also important. If you have prioritized an area for collaboration, if you have all the processes in place, but you don’t have the required budget then open innovation remains problematic. Small budgets are necessary for pilots and proof of concepts. It has to be clear whether those costs have to be considered as investments or expenses and how to manage that.  You have to look at the tax implications and regulations in a specific country. You need also an “internal” budget for employees of your company that will be assigned to the team from other units (engineers, designers, etc.) to develop the new product or services together with the partners.

If you ask the financial department for these budgets, typical questions you can expect are: “what will be the return? What is the financial benefit for the company?” Financial people like to ask for business forecasts and revenue models. But in an open innovation team you are working on projects where the technology is not proven and no guarantee that the new offering will be economically viable. In these processes you need to make space for experiments with projects of which the results are uncertain. This is important, because if there is an expectation to have immediate revenues, then you are not into innovation.

Team you need to realize open innovation

Who should work in an open innovation team? And how should a team be organized? There are at least two different ways to organize an open innovation team: an innovation unit can develop a new product, which is subsequently transferred to a business unit for commercialization. Or you can have an open innovation unit who is helping business units to create new things. Those two models are valid and the organization depends on the company strategy and context.

I will elaborate a bit more on the second model, which we implemented in BBVA – that is the open innovation team that supports the business units. It is very difficult to engage the business units into projects if they haven’t been involved from the beginning. If you are working with the business units from the very beginning, then they take ownership and they are committed to bring it to the market. Moreover, if you do that, you are also tapping into the business experience, channels, marketing of a business unit and this is very powerful. You need these pockets of knowledge in the business units to make a project fly. Also the business unit leader should be aware of what you are doing in the innovation area and he should integrate that into his discourse with the business unit. In this way you are building new products without creating silos.

But even when corporations work in this way they still face different challenges. How to work with teams located in different parts of the world? An open innovation team has to play the role of a connector, a facilitator. How do you have to put an open innovation team together? The expertise of these team members should be to find connections, understand multiple variables at the same time, and have the capacity to see the big picture. This presents some challenges / there should be a new profile in the organization.

Whenever I looked for new team members there was no specific training available: for instance, open innovation was fairly new and we couldn’t build on existing training modules. I couldn’t ask anyone to give these training. Team members should also be flexible, as they have to have the capacity to talk with everyone going from the top management to the operational people and technicians. Team members should furthermore make the connection between the partner and the business unit, and generate and maintain trust between them. Basically, open innovation is people management, as you have to build connections between different people based on transparency, care and trust. To achieve, this open innovation team members should be hired from within the company: they should understand the company pretty well, understand the different capabilities and needs, the power structure, the interpersonal networks etc.  Hiring these people is easier when open innovation is a strategic priority for top management. Being part of the open innovation team is also interesting for the team members’ career because they see many parts of the organization and cut across all management layers.

Conclusion

I know we’ve touched many different topics in this conversation, but for me that’s inherent to the nature of Open Innovation.

Open innovation is an meeting point or connection dot where different dimensions come together: it connects the past and future, people and technology, the outside and the inside, the hard numbers and soft qualities of a service / product, the top management and execution, the strategy and real implementation, connectedness and value.

As long as the people involved keep this vision in mind, Open Innovation initiatives and teams can help to strengthen the fabric of organizations and be a relevant strategy to make them resilient and help them grow and thrive, with the positive effect of doing this in a network of collaborations, with this effect multiplied and transmitted to all those involved.