Economy

Are You Ready for the Global Collaboration Movement?

Turn your company into a micro-multinational by cooperating with foreign firms on new product innovation

Written by Jared Mitchell

When you’re one of the world’s biggest manufacturing and engineering firms, there are a lot of ideas turning up in your labs that you’ll never be able to develop because they’re not central to your business focus. That’s what General Electric Canada found, so last winter it began licensing ideas its scientists have come across to SMEs in Alberta. The SMEs in turn develop the ideas and then commercialize them, paying GE a royalty from eventual sales.

This is being described as part of global collaboration drive that links SMEs with large companies like GE, SMEs with other SMEs and all kinds of companies with research labs at universities. One partnership to emerge in the GE program, brokered by the provincial government’s Alberta Innovates—Technology Futures program, brought together a GE idea on video analytics technology with Vadu Inc. of Edmonton. Video analytics, which can help retailers understand what gets customers’ attention, is not central to GE’s business lines, and Vadu is small and nimble enough to grow the idea.

Such collaborations are happening around the world and the benefits are numerous. It lends a hand in speeding products to market through inter-corporate co-operation. It efficiently pools R&D resources, and it can invite small firms to partake of the deep pockets of big companies’ labs.

It’s a growing phenomenon. A recent global survey found that 64% of corporate respondents increased revenues last year thanks to collaborative innovation.

Working with giant multinationals isn’t the only approach. Another way is for SMEs forming supply-chain links getting together, often in different countries, to work on betters ways of producing sub-contracted products or even just making a series of value-added steps better for a corporate customer. Such chains can stretch around the world.

Read: What Are Your Supply Chain Risks?

A University of Tennessee study in 2010 found that supply-chain collaboration can squeeze out inefficiencies and waste while maintaining margins. Far from supply chain participants scrambling for diminishing revenues, the study found that companies increase revenue and margins by co-operating on eliminating those inefficiencies.

The study also found that the more time companies on a supply chain collaborate the lower their costs get through the establishing of joint routines. “Organizational idiosyncrasies,” as the study described them, get ironed out and reduced in number and after collaborators get comfortable with other SMEs, the process becomes efficient and more profitable.

There are even more radical ideas out there. Quirky is a U.S.-based company that will take your idea, crowdsource it to members of its online “community” who make suggestions on how to improve it, and then help you commercialize it. This kind of collaboration is really only for rank beginners and Quirky takes a very hefty cut of the revenues, but it means that anyone in the world can be a business owner with global sales through Quirky’s website.

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Still, there is obvious resistance to opening the vaults containing your intellectual property to other companies wanting to collaborate. A survey by GE Canada found that 32% of Canadian companies fear a loss of control over their IP and trade secrets. Similarly, only 26% of Canadian respondents have ever tried crowdsourcing their ideas. One solution to their reticence, the survey learned, would be strengthening legal protection for IP by Ottawa.

Other objections involve suspicion among SMEs of large companies’ intentions. Will they get bulldozed by the large company? And once they get a load of the swell laboratories at large companies, will your most talented staff bolt for  the big time? In turn, large corporations may harbour a bias about anything produced by another firm, the so-called “not-made-here” syndrome. And their technical staff may be jealous or condescending of the speed and nimbleness of SMEs they’re told to they have to collaborate.

And if your product is so unique—say fashion and home décor design—there may be little point in collaborating with other companies. But for others, the concept is spreading and it may no longer be a matter of are you collaborating but why aren’t you collaborating. A report by the Politecnico di Torino Department of Management and Production Engineering finds that if SMEs resist collaborating in formal networks they risk being ill-equipped to compete for products, labour and finance. The era of global collaboration has arrived.

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Originally appeared on PROFITguide.com