Innovation: why companies are choosing higher speed, higher risk collaborations for R&D

In the recent ‘2012 EU Survey on R&D Investment Business Trends’ an intriguing statement is made about R&D in sectors like biopharma, ICT and high- tech. It says

‘Collaboration agreements were a more important way of knowledge sharing than licencing. For companies in high R&D intensity sectors, this is followed by licencing in/out with other companies, and then collaboration agreements with higher educations institutions and other public research organisations.’

The ranking of agreements prior to licencing and partnering with education and public organizations didn’t surprise me. While the survey doesn’t make a distinction between strategic alliances and collaboration agreements there is an undeniable trend towards looser and more flexible forms of collaboration in R&D. Only yesterday, BMW and Boeing announced that they would not only work together on carbon fiber recycling, but that they would also share knowledge on carbon fiber.

As research by Roijakkers and Hagedoorn (Universities of Eindhoven and Maastricht) shows, the numbers of contractual, non-equity alliances far exceed those of equity alliances. I think there are four reasons why CEO’s prefer collaboration agreements to strategic alliances as a trend in R&D.

1. Organise processes instead of structuring an organization

It’s part of a shift in thinking about organizing. Today, companies seem to prefer to organize processes, instead of structuring the organization. There’s undeniably a trend towards a more flexible and pragmatic approach. The question my clients used to ask until about 2010 was: what organizational structure is appropriate for our business? After 2010 my clients reformulated their question into: how can we organize our processes to facilitate our business?

2. Why choose a horse carriage for innovation when there’s a high speed train?

I think many CEO’s don’t care about organizational trends but perceive alliances as a horse carriage instead of a high-speed train. Why install a strategic alliance when a simple agreement is a much faster way to gain results? Speed in innovation and development is a prerequisite to getting a product on the market fast. That’s why increasingly, companies take the risk to not carefully design and align a collaboration approach and install governance measures – no, they simply agree on the goal and initial budget and start collaborating.

3. You don’t forge ‘strategic alliances’ with suppliers – you just work with them

The vast majority (90%) of R&D collaboration is between suppliers and buyers in the industrial value chain of firms. They are called ‘vertical agreements’. When a buyer perceives its relationship with a supplier as a strategic sourcing or purchasing relationship it will not call it a strategic alliance. It will call relationships with competitors or with companies outside the industry an alliance. Calling it ‘collaboration agreements’ scales the relationships with suppliers down to more ordinary ways of doing business. Alliances simply do not match with the other aspects of the connection between the business partners.

4. You trust your partners, becase you’ve known them for ages

Simple agreements are sufficient because there is a basis of acquaintance and trust. The agreements are made with well-known collaboration partners, who have depended on each other for continuous growth of the company and a substantial percentage of their turnover for quite some time. Why even think of fooling or disappointing ‘the hand that feeds’?

In short, the trend is that CEO’s are taking a shortcut to fast innovation by choosing flexible forms like collaboration agreements as their vehicle. It suits these times of being somewhat more pragmatic, taking a bit more risk and experiment not only within the R&D projects but also in structuring the R&D. And why not?

Photo: cristeenq, Flickr

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About the author

Friso Van Abbema

Strategy consultant. Friso van Abbema (founder of NINAPINTA) is a specialist in strategy development, strategic alliances and scenario planning and a strong networker. Always curious and questioning the obvious. He has been working as a consultant for 15 years now, first with PricewaterhouseCoopers, later with Berenschot and Twynstra Gudde and since the start of 2011 participating in several networks. You can find him on LinkedIn and Skype (frisovanabbema).

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