Open Innovation: Theory Meets Expertise Meetup

At Fintechlab, we believe in the power of open innovation and this is why we launched a new meetup series called “Open Innovation: Theory Meets Expertise.” Our first session explored the topic “Perspective from big corporates.” Experts from across industries joined us for a frank and open discussion about how they cooperate with startups to innovate their companies. In this post, you can read our key takeaways and learn from the best to build your knowledge in this topic.

Open Innovation is a topic that is very near and dear to us at Fintechlab. We believe it’s beneficial for large companies to open their doors to startups, universities, and government players to accelerate, complement, and become more successful in their own innovation activities.

Up until this point, we have been focusing most closely on the financial sector, for what I hope are obvious reasons :) but this year, in light of PSD2 coming online, we are expanding our scope to include other industries and players that we see can have connections to the financial sector through Open Banking. What can we learn from our partners and counterparts in other sectors about innovation? How are the digital leaders developing new experiences for their customers? How can incumbents and disruptors work together to create value?

The panel was facilitated by János Pereczes, Managing Director of Fintechlab. Speakers included Szabolcs Malomsoky, Hungarian Research Branch and Sector Manager at Ericsson, Dan Moldovan, Head of Digital Fintech Dept at Banca Transilvania, Tamas Keiger, Senior Sales Manager focusing on the financial sector at T-Systems Hungary Ltd., and Attila Bolla, Director of Component Plant at Knorr-Bremse Rail Systems Budapest.

Below you can find a longer transcript of the event but those who are following the tl;dr: trend:

• Speed and mindset are two key motivators for corporates to work with startups
• The “fail fast” phenomena is not yet accepted inside the average corporate. Corporates need to adapt the VC mindset to innovation — hitting 1 out of 10 is ok instead of wanting to hit 10 out of 10 every time.
• P.S.: another great post regarding this by Alexander Osterwalder on Why Every Company Needs A Chief Entrepreneur
• Involve customers early on in your product development or you will pay the price — see real life examples below.
• Without C-level support, your uninnovative walls will never be broken.
• Build strong support for your innovation initiatives amongst the middle managers, as they are the ones who actually do the dirty work at the end of the day.
• Corporate execs read startup books and listen to innovative podcasts — a good sign that the world is changing. Check out the list of the best resources at the bottom of the post!

How the leaders approach open innovation

Each speaker kicked off with a short intro of the innovation activities they are involved in:

• Ericsson One (formerly Ericsson Garage) is a network of hubs designed to research and create MVPs that may someday become Ericsson products. The program started 3 years ago, locations include Sweden, Silicon Valley, and Budapest. Szabolcs runs the Budapest location.
• Dan from Banca Transilvania’s digital and innovation department is in charge of the bank’s scouting and recruiting efforts to find startups and solutions that can bring added value to the bank’s customers.
• Tamas is a key account manager at T-Systems, owned by Magyar Telekom, and participates in innovation programs such as Kitchen Budapest and Mission Telekom by gathering feedback from customers in the field and informing the strategy of these programs.
• At Knorr-Bremse, Attila is creating mixed project teams with internal employees, startup entrepreneurs, and agile coaches to develop new solutions. He conducted a lengthy selection process to identify their first startup partners. 80 startups applied from around the globe, 10 were selected for a bootcamp, and now 4 project teams have been formed. In parallel, he organized an internal roadshow with 70 employees, which resulted in 14 passionate intrapreneurs who are volunteering their time to participate in these projects.

Though it’s immediately apparent that each organization has quite different goals in what they are doing, some common themes emerged, such as the importance of CEO-level support, and the challenges of dealing with failure in a corporate setting. Read on for some of the main questions we asked our panelists and their responses and insights!

Key trends motivating corporates to work with startups

Attila Bolla, director of the Budapest mission components plant at Knorr-Bremse, sees the world is changing. Knorr-Bremse recognizes it has customers with different demands — they want new products faster, with shorter lead times. They want plug and play systems that can be easily integrated.

To continue to lead in a market like this, Knorr-Bremse must be quicker and smarter. And rather than hiring thousands of new people, Attila’s work focuses on inspiring and activating current employees to serve as intrapreneurs, who work with startups, pick up the mindset, and assimilate it into the wider company culture.

Dealing with failure in a corporate environment

Szabolcs highlights the tension between the way startups and corporates handle failure: in the startup world, failure is a good thing. Slogans like “fail fast” are commonplace, and there is a tendency to almost glorify failure. However in the corporate world, there is a perception that projects are always successful, or at least must be communicated as successful.

He argues that the notion of “technology leadership” should be broken down. There is pride at Ericsson at being market leaders with certain products, and they should continue to own that. But in exploring new product concepts, it’s much harder to maintain this position, simply by the nature of new product development and exploration. A success rate of 1 in a 100, for example, is not regarded by most corporates as successful enough.

So far, Ericsson One has produced 5 global projects approved by the Ericsson CTO. Of these, 2 were pursued more seriously, but as of yet, none have become part of the Ericsson product suite. It’s difficult to define success for this reason.

The importance of talking to customers from day 1

Tamas told a story about a failed smart home offering developed by Kitchen Budapest, the innovation and prototyping lab owned by Telekom. They were working with a leading insurer to develop a smart home product that could be sold across both companies’ customer bases. After spending more than a year on the concept, they finally realized it wouldn’t work because no one was willing to pay extra for the service (the perception customers had was they were already spending enough on regular premiums).

Now, they’ve learned from this experience and build customer feedback into product development much earlier on; it’s become a major component of the new Mission Telekom program and they plan to involve the sales team in identifying customer pain points, feature requests and new product ideas.

C-level support makes all the difference

All of the panelists had high praise for their CEOs and recognized their roles in driving change and investing in such activities with a longer-term view. Ericsson’s CEO Sandor Albrecht started the Ericsson Garage program 4 years ago. He and the Head of Emerging Business both come from a startup investing background, and this mindset really shows, according to Szabolcs.

Dan also highlights the foresight of the CEO of Banca Transilvania, who created the digital transformation and innovation office he’s part of. The department reports directly to the CEO, who is not only accessible to them but extremely knowledgeable on blockchain and other cutting edge topics. He recognizes the value that startups can provide, excelling at one small thing but doing it very well. His goal in working with startups is to deliver better solutions for their customers.

But you still need to manage the middle management

Tamas points out that even if the CEOs or top managers are on board, if it’s not made a priority for middle management too, the project can fail. Middle managers are the resource and business owners; they need to be devoted to the project for it to succeed.

Attila supported this notion and shares that he is serving as the project champion at Knorr-Bremse, collaborating with colleagues working across departments to keep things on track and running smoothly. Perhaps the perfect recipe for change is to have a CEO on board, and an operative champion who does the dirty work. :)

What the experts read and listen to

We closed the discussion by asking our panelists what are their favorite books or podcasts they go to for inspiration. Here’s the full list:

• “Zero to One: Notes on Startups, or How to Build the Future” by Peter Thiel
• “Start With Why: How Great Leaders Inspire Everyone to Take Action” by Simon Sinek
• “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” by Eric Ries
• “Zone to Win: Organizing to Compete in an Age of Disruption” by Geoffrey Moore
• Podcast — The Tim Ferris Show
• And don’t forget to also listen to your own instincts and go with your gut!

Join us for our next session March 28 on “Academia’s Role in Innovation”!