Partnering to innovate: the innovation ecosystem for digital transformation

Investment in UK tech is currently storming ahead post-pandemic, and the unfailing pace of technology innovations continues. As part of its post-Covid recovery response to drive economic growth, the Government launched a new initiative in August, the IPO Access Fund for innovation and monetising IP. Many companies are also undergoing digitalisation programmes, and exploring the use of new technologies, including AI, VR, AR, to develop digital customer strategies and experiences. 

There is increasing pressure on businesses to transform and diversify business models and revenue streams by innovating both within their organisations as well as in their customer offerings. Could tapping into the broader innovation ecosystem by partnering with tech innovators and entrepreneurs help start-ups and corporates bridge the funding, culture and skills gaps that many currently face by fostering and monetising innovation?

Our Comment

Creating an environment to innovate in businesses can be challenging. One way of dealing with this is to share the risk of innovating through partnering with another organisation, enabling the integration of complementary skills and expertise without the need to recruit new talent or force cultural change. For example, Huawei is promoting an Open Ecosystem through its OpenLab partnering venture to develop Smart Healthcare solutions for the future.

Collaboration between partners who share common goals and objectives can create an optimum environment for creativity and innovation. The parameters of any collaboration are best agreed in advance – not just to safeguard the relevant businesses and the project’s outputs, but also to incentivise an ongoing collaborative relationship between those businesses, as our case study below illustrates.

The Three “C’s” for innovation

These three classic business tools for change are some of the precursors that need to be in place to harness creativity and ideas, and promote innovation for strategic growth:

• Cultural Change – creating the internal culture for change to business processes, resources and strategies which inspire innovation and creativity through skills diversity, ideas platforms and internal innovation channels, and strong leadership mentoring innovation programmes. 
• Commercial viability – balancing internal and external decision-making processes involving key stakeholders, such as senior business and leadership teams, customer and user group forums and trials, and R&D functions including prototype testing
• Collaboration – co-creation with internal and external teams and/or bridging skills and expertise gaps through collaborating with industry partners, like corporates in adjacent sectors to explore diversification opportunities.

Commercialisation Risk-Share – Case Study

Sharing the risk of commercialising and monetising innovation with an external partner can be attractive to businesses who may not be able to fully embrace the three “C’s” listed above in the current economic environment. Finding the right partner will be key, as will incentivising both partners to fully contribute to the innovation project. This can be achieved through revenue sharing, resource sharing, and shared funding mechanisms for branding and marketing.

So, what are the dos and don’ts when collaborating with an innovation partner? The short answer is that there is no “one size fits all” approach, but the following from a recent collaboration agreement we have advised on provides a useful overview:

• Joint ownership versus broad licensing rights – if the aim of a collaboration is to create a commercially viable product, then joint ownership of the intellectual property of the innovation project can hamper the commercial exploitation desired by one or both parties. It is worth considering whether commercial objectives can be achieved through ceding ownership for a broad licence to use and exploit the resulting innovation.
• Protection of IP worldwide – When preparing to commercially exploit innovation worldwide, partners need to decide who is responsible for protecting the IP in each jurisdiction as there are different rules for holding and registering IP worldwide. Consideration will also need to be given to where the product is going to be developed into a proof of concept and commercialised for going to market, and local agents may be needed.
• Separate corporate vehicle versus contractual partnership – Contractual joint ventures or partnerships are usually more attractive/cost effective than setting up a separate corporate vehicle, but there are advantages to having the innovation and related terms and conditions for commercialisation ring-fenced from the core business of the parties involved (e.g. identifiable resources, funding and liability) through a separate corporate vehicle.
• The role of funding bodies – There are many different ways of funding innovations, but external funding terms need careful review to ensure that any funder restrictions on commercialising the innovation are factored in including the need to credit funders or restrictions on how the IP can be held, for example in a holding company. Also, consider the obligations that funders may need to bring in return – e.g. coaching, mentoring, access to distribution channels. Clear parameters for any top-up partner funding will also be crucial.
• Collaborating with academic institutions – the UK has some of the most innovative academic institutions in the world who regularly partner with companies to develop new products and proof of concepts. Under the Lambert Working Group toolkit, there are established options for IP ownership and commercial exploitation when partnering with a University or similar that can be helpful.
• Regulatory sandboxes for evolving technologies  – Reliance on sandboxes in particular areas, such as fintech, lawtech, could prove useful in the early stages of development without needing to comply with detailed regulatory requirements.
• Commercial and technical dispute resolution – in any collaboration or partnership alliance there needs to be strong and effective decision-making and dispute resolution processes. Given the likely technical nature of the products/content of innovation collaborations, consideration needs to be given to the need for technical experts to be relied on in specific cases, as well as senior management engagement all levels of a dispute – as this could ultimately impact on the commercialisation value of an innovation if there is a delay to market.