CONTEXT: WHAT IS GOING ON?
Process industry firms are turning to innovative suppliers that can provide them with the latest solutions to compete in the digital and globalised economy. New collaborative partnerships are emerging between incumbents and small innovative firms to leverage on the opportunities of digital technologies and exploit the complementarities of joint value creation. However, even though the potential for success, the asymmetries between the partners (i.e., size, capacity, skills, culture) can become a steppingstone in their interactions and even lead to the early termination of the collaboration. While partners can plan how to respond to predictable challenges, the uncertainty and novelty of the process represent an increased risk of failure for the asymmetric partnership. At DigiProcess, we have worked closely with incumbents and innovative firms, and we would like to share our latest insights on their collaboration process to shed light on how to best manage asymmetric partnerships.
THE ENGAGEMENT PHASE: ROLE AND RESPONSIBILITY DISTRIBUTION
The engagement phase initiates the collaboration process, setting the bases upon which the partners can develop their first collaborative project. We have observed that this phase is usually characterised by an imbalance of commitment, where large firms tend to fail to prioritise the engagement leading to the reduction of encounters and even the cessation of interactions. Based on our work with incumbents, we understand that such engagements are new for the large firm which usually lacks a specific role that can drive the partnership. Exploring the partner’s point of view, we found that small innovative firms struggle to identify the right stakeholder that has the power and responsibility to approve the development of specific innovative projects. We recommend process industry firms to be transparent and clearly communicate their needs during the engagement to avoid losing promising opportunities, as the risk of small firms walking out is higher during this phase of the collaboration.
THE PROJECT DEVELOPMENT PHASE: WORKING CULTURE AND ROUTINES ALIGNMENT
The project development phase encompasses the design and execution of a time- and resource-bound project agreement that usually aims at testing the value of an innovative solution (i.e., proof of concept, pilot). Interactions and activities during this phase are far from linear, where several iterations are required until successfully proving the match between industry problem and provider’s solution. Our exploration of this phase uncovered many incompatibilities in working cultures and routines, including employees’ mindset, procedures and working cycles, and sense of urgency. In essence, the rigid and traditional background of incumbents collides with the flexibility and fast pace of smaller firms challenging the accomplishment of the project goal. Being able to assess and respond to these challenges is essential for small innovative firms, whose survival is often dependent on achieving market validation of their new digital solutions. Concretely, we advise small firms to assess their internal capacity to ensure their ability to drive the collaboration, while we recommend process industry firms to be open to new ways of working and learning opportunities that can improve their innovation processes.
THE FOLLOW-UP PHASE: EXPECTATION MANAGEMENT
The follow-up phase takes place for those partners who, upon successfully reaching the project delivery, decide to evaluate opportunities for further implementation or commercialisation of the innovative solution. This point of inflection, however, is not always part of the conversation between the partners leading to different levels of satisfaction. For instance, our data shows high levels of discomfort in this phase as many incumbents decide not to pursue the collaboration further, even after the successful validation of the solution, leaving small firms hanging without an actual deal in sight. We argue that expectations regarding the collaboration duration and outcomes must be constantly evaluated to ensure that both partners are on the same page throughout the process.
THE SCALE-UP PHASE: LONG-TERM FINANCIAL PROJECTION
The scale-up phase comprises the design and approval of a contract deal where the partners agree on a long-term collaborative partnership for the joint creation of value. Such deals can involve the implementation of the solution within the large firm or its commercialisation as part of a joint solution. Incumbents have explained the struggles that come with funding this last phase of the process, where strict hierarchies and decision-making procedures can delay the financial approval for months or even years. This phase becomes a game of passing the ball amongst departments in the large firm while trying to figure out a way forward, or in words of an innovative small firm stuck on this cycle, the issue here “it’s who will pay for it”. Defining short- and long-term investment plans before committing to collaborate can lift the load from small firms whose dependency on constant cash flow limits their negotiation power in the collaboration.
WOULD YOU LIKE TO KNOW MORE? CONTACT US!
We have been working closely with process industry firms and suppliers to support and guide partners in their collaboration processes. Among our initiatives, matchmaking sessions where industry problem owners communicate their needs and small suppliers pitch their solutions stand out for their success rate in the engagement and posterior project development phases. At DigiProcess, we are always looking for new ways to enable collaborative innovations that can drive partners’ competitiveness while transforming the Swedish process industry to excel in the digital age. If you would like to know more, please do not hesitate to get in touch with our team to discuss how we can support your business!
Main contact and inquiries:
Jani Sipola, DigiProcess Project Manager, Lapland University of Applied Science, +358 50 316 7677, jani.sipola@lapinamk.fi
