Collaboration between global corporations and SME innovators must be greatly improved

By Professor Chris Brace, IAAPS Academic Director; first published in the January 2022 edition of Engineering Technology International

“When something bad happens,” wrote the children’s author Dr Seuss, “you have three choices: you can either let it define you, let it destroy you or you can let it strengthen you.” It’s easy to say, but with a growing range of challenges facing our industry, how do we resource the product innovations that will be needed to strengthen our businesses?

Like the road to digital, an important element of this journey is already on the starting grid. Improved collaboration between the global corporations and the SME innovators is a trend that is underway, driven by uncertain technology roadmaps and the need for Tier 1s to slash in-house R&D costs. But there are too many casualties for this to be a robust strategy as it stands today: success rates must be greatly improved.

The theory is compelling. Take a team of brilliant innovators with astonishing depth of expertise in a potentially valuable new field but no idea how to bring it to a high-volume market. Offer them the larger company’s customer relationships, expertise in validation, cost and production engineering, plus its global manufacturing resources and surely you have a perfect solution. So, why does it so often fail?

If the corporate partner is simply using the SME as an extension to its own R&D, in a sector where it is already expert – for example, an established ADAS Tier 1 partnering with a range of lidar developers – it will usually have the understanding needed to partner effectively. The problems occur, with alarming frequency, when the larger company is using the partnership to transform its product portfolio, for example from transmissions to electrified propulsion. Yet, it is these types of relationships that offer the greatest potential to accelerate a Tier 1 into an area of demand that is growing at an astonishing rate.

At the heart of the challenge is not just the different cultures of two very different types of organization, but an inability to recognize and manage those differences. Innovation companies tend to be run by creative risk takers, always on the commercial edge as they strive passionately for what they believe. They often lead teams that work at a frantic pace with minimal constraint from processes. Corporate leaders tend to have one eye on the shareholders and the other on careers, the meteoric pace of which could be brought back to earth by backing the wrong solution.

The groups that they lead are driven by well-established processes designed to mitigate risk. The starting point must be an honest discussion of the strengths and weaknesses of both businesses, including their resources and processes. Keeping them apart is not the solution. And don’t assume that given access to additional expertise and resources, either side can make it work on their own.

The answer is deep collaboration, with a shared mission and genuine sharing of expertise as part of a team. Each business must be honest about its weaknesses, and they must work together at a senior level to create a complete skill set. We also need to increase the number of SMEs that are attractive as partners. This doesn’t mean increasing the number of innovators, although that’s also important.

The key here is for the innovator to structure its business and R&D to make itself well suited to this type of collaboration and to not be so focused on the big idea that it loses sight of the market. The stellar valuations given to some IT start-ups as they develop relationships with the established sector leaders proves the value that can be generated by collaboration. The lesson we need to learn is not how these companies make it work – the big IT players were often startups themselves not long ago, so the cultural challenges are less severe – but that it does work, often with spectacular results.

Back on Earth in the automotive technology sector, we need to learn that lesson and make it work for us, too.

Click here to read the original piece in Engineering Technology International.