Working together, companies can become more than the sum of their parts
2015 was a record year of merger activity – $4.9 trillion globally. Dow/DuPont, ABInBev/SABMiller, Charter/TimeWarner, Kraft/Heinz, and Walgreens/RiteAid are noted examples. And while such mergers grab headlines, partnerships and business alliances are quietly at work behind creating daily value.
Open Innovation (OI) has provided important examples of how talent connections produce value greater than either party could achieve alone. One favorite story is that of P&G approaching competitor Clorox to explore transferring unused innovations to Clorox Glad Products. The partnership, together with further collaborations, became successful beyond either company’s hope, with ForceFlex trash bags and Press‘n Seal wrap innovations. It clearly demonstrated how partnerships create new value from idle technology.
Strategic alliances pay off big
Consider strategic alliances: One partner possesses keen understanding of its market space, thereby defining a product that could resolve current product shortcomings, but lacks the capability of commercializing its solution while opportunity awaits. Under Armour provides one such example.
UA forged and now maintains strong partnerships with world-class athletes in a widening arena of sports. That close relationship enabled UA R&D to recognize that runners prefer to go sockless, but complain of heel abrasion resulting from the rub at the shoe heel end seam. Under Armour’s OI director set out to find a stitchless solution to this problem.
The insight led him to Regina Miracle in China. Regina heat-molds products for big brands like Hanes, Bali and Limited. A close partnership, forged between Baltimore and Shenzhen, modified a bra-making process, replacing sewn shoe elements with heat-molded components. Not only were socks eliminated as needed cushioning, but a lighter shoe was invented, permitting faster track speeds.
Similarly, Lipton recognized the opportunity to sell pre-brewed iced teas to the summer market, but lacked any means of bottling. They decided to utilize potential competitor Pepsi to perform the bottling and distribution service and share the value of a new beverage offering.
Partnerships and alliances occur locally as well. A multinational company in South Carolina identified a need for a chemically resistant shrink film, and believed polyester could provide the solution. But limited polyester film expertise and low manufacturing scale jeopardized the opportunity. They approached SKC, who have world-class polyester operations near Atlanta. SKC eagerly took up the challenge and partners developed a new film that exceeded the abilities of any prior offering at much lower thickness than others in that market sector.
Awakening hibernating innovation potential
With all of the technologies in South Carolina, there should be great potential for many important strategic alliances. A recent meeting at the Upstate SC Alliance explored this possible resource. The initial meeting considered several ideas, including repositioning idle, often patented, corporate technologies into external small company settings. With a different risk tolerance, entrepreneurial business culture, and lower market-entry thresholds, hibernating potential may awake and thrive.
A second discussion considered the benefits of forging Communities of Practice within South Carolina to share methods and connect like technologies. Another considered how technology coalitions may attract foreign investors to South Carolina by alerting external entities to the regional innovation landscape and the depth of talent (stay tuned).
Two U.S. examples validate the importance of such discussions. The state of Ohio developed their Ohio Third Frontier program (bit.ly/ohio-third-frontier) to connect and promote regional talent; and then advertised the collective value to the world. That Ohio innovation ecosystem claims more than $2 billion in applied research and commercialization programs that have created more than 2500 new jobs.
The Metro Atlanta Chamber is now two years into its Open Innovation Forum initiative (bit.ly/atlanta-open-innovation). Like Third Frontier, Atlanta’s program promotes the concentrated strength of technologies in the region, and solicits new companies to invest in their success. Both programs use NineSigma as their global billboard and connection resource.
SC needs partnerships, personal relationships
Local businesses and governments in the Upstate could reap the benefits of increased revenue from regional alliances. International institutions and governments, once aware of South Carolina’s potential, are likely to spark even greater regional economic investment and development.
It therefore seems that South Carolina should investigate a formal OI program to enhance and announce its technology hubs. Partnership is indeed the crucial starting place for applying open innovation principles to stimulate local economies, propel business synergies and enable entrepreneurs.
Perhaps strategic alliances will uncover new horizons. Alliances simply stem from partnerships; and all begin with personal relationships.