The search for innovation: opening our doors to SMEs

Here’s the conundrum. Small-to medium-sized enterprises (SMEs) tend to be agile, versatile and dazzlingly creative, but lack funds or a market presence. Large manufacturers have a recognized brand, rich resources and a global presence, but lack agility.

Between them lies a chasm into which great ideas sink and vanish, never to be seen again. And this is the gap which Andrew Nicholson, Head of Open Innovation for Thales UK, is working tirelessly to close.

“Our future success will come from finding, supporting and developing the best, most innovative solutions for our customers,” he said. “We can’t be world experts in everything; no one can. So what we do is to fill the gap by actively identifying and nurturing the talent in SMEs and start-ups.”

The practice of teaming up with third party suppliers to develop new ideas for mutual benefit is commonly known as ‘Open Innovation’, a term first coined by Henry William Chesbrough, its leading international proponent. It is a concept which is rapidly gaining traction, and it’s easy to see why.

Not so long ago, the culture within large manufacturers was to invent everything in-house, rushing to be the first to market. But the inevitable result of this approach is technology which suits the manufacturer’s existing business model, rather than being the product of genuine ‘blue sky’ innovation which benefits the customer and the industry as a whole.
 
Even when millions are spent in research and development – and with one eye on the shareholders - the practical (if unintended) effect is to inhibit rather than encourage truly creative thinking.

“In-house isolationism is simply too restrictive. No matter how big you are, and no matter how specialised your field, it simply isn’t possible to be the leading expert in everything,” said Nicholson. “There will always be someone who comes up with a way of doing things which is better, faster or cheaper.”

Making the difference between success and failure

Nicholson knows that there is no shortage of ideas in the UK. We have always been – and still are – a nation of inventors. But sometimes business gets in the way.

Let’s take, as an example, a large manufacturer who has been contracted to monitor and maintain the track, assets and infrastructure of a national rail company – a project that only the country’s largest contractors could even consider taking on. And then imagine that an SME invents a better, more accurate sensor which could improve passenger safety and save millions of pounds. What happens?

There is a real possibility that the idea could die there and then because the SME simply doesn’t have the resources to break in to the market. The customer may never even hear about the new technology.

In the spirit of Open Innovation, however, the manufacturer could support the development of that sensor, help bring it to market, and incorporate it in the solution it is providing. The SME benefits from the sales, revenue and recognition it so desperately needs; the manufacturer is able to deliver the newest and best technology, for which someone else has done most of the research. And the customer benefits from a better, more cost-efficient solution. Everyone wins.

Making the right connections

So how do the two entities make the all-important connection? Nicholson, suggests three possible ways.

One is for the larger enterprise to approach an SME which has known expertise and a capability for innovating within that field. For example, the requirement is for a new ‘widget’ which performs a specific function in some arcane control subsystem. But unless the SME has the current capacity and resources to deliver that particular project within the required budget and timescales, a partnership is unlikely.

The second is for the SME to independently create the technology only to learn the hard way that it lacks the funding to fully develop it, or the resources to bring it to market. With luck, it may be able to sell the idea to a manufacturer if it can find the right one at the right time.
The third and more fruitful way, which Nicholson calls the ‘Middle Way’ relies, essentially, on word of mouth referral.

“Thales is building an extended professional network,” he said. “A network of networks, really – a range of contacts in chosen industries who can help to spread the word about the particular challenges that we’re working on.”

The advantage of the Middle Way is that it not only spreads the word to a much larger pool of potential partners but it is more likely to tap into situations when an Open Innovation partnership is the right choice at the right time for both parties.
 
The best of all possible solutions is for an SME to be able to communicate, through the Middle Way, something along the lines of: ‘Hey, we’re working on something that will interest you, let’s get together.’

Nicholson also holds that mutual desire is crucial for maximum benefit and for forging long-term relationships.

“Collaboration should be productive and mutually beneficial, not disruptive and edgy,” he said. “The most important thing is to protect and nurture the agility and fresh thinking. That’s the value. Not technology, but ideas and innovation; energy and agility.”

And that, he concludes, is why Thales will continue to maintain its open-door approach to working in partnership with SMEs.