QUINTIJN INNIKEL (PARTNER BEACON)
‘Product innovation is often so complex in the modern economy that partnerships are almost a must. A partnership can help fill in part of the puzzle that is missing within one’s own company. You can see an example at Nespresso, which needs coffee machines to market their coffee cups. That’s why they partnered with Krups. Another great example is the cooperation between Renault and Google, who have formed a partnership where Google provides all the electronics in the cars. The advantages are obvious: both parties combine their strengths, knowledge, position and brand to create a unique product. A product that offers a lot of added value for the consumer. Another important advantage is that the risks, always an aspect of innovation, are shared.’
‘Products are increasingly connected. In the automotive industry, you see that the challenge of a car manufacturer has shifted in ten years from making the most efficient car (in terms of design, engine technology, modular construction and luxurious interior) to an IT challenge. Certainly electric cars have more and more features that are not just hardware driven, but also software and data driven. An important part of the added value is in the user experience, and that’s where IT becomes indispensable. How many more kilometers can I drive? Where can I recharge? How big is my screen? But also the battery pack is new, the capacity, the charging speed, the durability and the cost of course. These are very important features that are not (yet) in a car manufacturer’s DNA. So where you obviously have to enter into a partnership to make that feasible.’
Cooperation and dependence
‘When entering into a partnership in product innovation, there are a number of things to consider. Perhaps the most important is an open door: the collaboration itself. The moment two companies start working together, there is always a struggle to get it right. Within one company it is already difficult to innovate, let alone when two large companies try to innovate together. That can mean considerable headaches.
Another aspect to consider is the dependency and reduced control you have over your innovation. It is not simple to maintain a partnership because it must always serve the interests of both partners. An example of a party that absolutely does not want to be dependent is Tesla. They would rather build their own battery mega-factory than sign a 10-year contract with LG, or enter into a partnership with them. To be able to do everything themselves and keep full control, Tesla makes huge investments and searches the whole world for the very best experts.’
The key question
‘The strategic consideration in partnerships is: how far are you willing to go to have a partner deliver crucial added value to your proposition? That’s something you have to think carefully about. As you put away more roles for the partner, that partner adds more value, and you’re probably going to pay more. The complexity of the partnership is increasing and the control is decreasing. That’s what I’m trying to show in the attached graph.’
Roles of the partner
‘Defining the exact roles of the partners is very crucial for successful partnerships.
What do you need the partner for? It could be anything: manufacturing, the brand, (after)sales, or a sales channel. Renault leans to the right side, opting to outsource the entire electronics long term. A striking move, since cars are increasingly becoming driving computers, and Renault does not see a central role for itself in this for the future. Parties like Nestlé and Tesla are on the other side; they prefer to organize everything themselves, with lots of control and few shared costs. Nestlé has invested massively in its own R&D center for coffee technology with hundreds of specialized technicians to make perfect coffee. As a result, they can now dictate to companies like Krups, Magimix and Siemens under what conditions they can sell a Nespresso machine. But that took Nestlé decades, don’t underestimate that investment.’
‘In summary, entering into a partnership can offer a lot of added value, and can bring unique propositions to the market. However, it always depends on the situation whether, and in what form, a partnership is successful. In recent years BEACON has gained a lot of experience in supporting partnerships. And we are excited to do that again in the future.’
Interested in partnership opportunities? Please contact Quintijn Innikel (06 145 395 49)
Read also: Partnerships in innovatieBack to overview