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The case for innovation partnerships has never been greater – but getting them right is not always easy

Nathan Brown Guest Author
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Mechanical cogs representing innovation

At ForrestBrown we are passionate about the transformative power of R&D tax relief for businesses of all sizes, which is why we welcome the latest campaign by the CBI to encourage successful collaboration. We asked the CBI’s Principal Policy Adviser (Innovation), Nathan Brown, to share some wider tips for successful innovation partnerships.

The cliches are many; a problem shared is a problem halved; many hands make light work and, of course, teamwork makes the dream work.

Banal and hackneyed? Perhaps. But like all cliches, a kernel of truth lies at the centre of these well-known phrases.

Businesses face a myriad of issues, from the impact of geopolitical upheaval, hangovers from the COVID-19 pandemic, as well as considerations as governments and the private sector grapple with the challenges and opportunities thrown up by the international push towards net-zero.

Facing this environment alone can feel like a daunting task, and that is likely why businesses have told us that innovation partnerships are increasingly a part of their business strategy.

For many large companies, the impact of COVID-19 shone an uncomfortable, but necessary, light on their operational weaknesses. Working with innovative SMEs is seen as a route to plug these gaps and inject greater dynamism into their organisations. And for start-ups and scale-ups, partnerships and contracts with large companies can be vital for their development, providing a robust framework for support and customers for their innovative outputs.

CBI members made clear, however, that these partnerships and relationships are not always easy. Common challenges have hindered some of these partnerships from reaching their full potential and, in some cases have resulted in parties stepping away altogether.  

The consequence of this is that the UK could miss out on the next world-leading innovation. 

Informed by member roundtables, and experts from across the business community, the CBI Big Fish Little Fish campaign has brought together best practice guidance and useful resources to support these partnerships to thrive.  

Overcoming collaboration challenges for successful innovation partnerships

No matter the model of partnership, whether an open innovation programme or an acquisition, one of the biggest challenges, when you dig a little deeper, is the need for both parties to overcome a clash of cultures.
But, for every major barrier to success there is an innovation catalyst; steps that can be taken to avoid points of friction, helping both parties collaborate more effectively.

Barrier #1 Shiny things distract from strategy

For large corporates, it is easy to be led by trends in technology and chase the “next big thing.” For the smaller partner it can be tempting to chase the shiny, best-known companies. These approaches, without a link to a wider strategy, however, can result in frustrations and clashes down the road.

Innovation Catalyst: To be a good partner, first get your house in order

Firms must understand their motivation for partnerships, build a strategy and progress from there. Having a laser focus on the ‘why’ will enable informed strategic decision making on everything from resource commitment to risk appetite.

Barrier #2: Hesitancy based on assumptions and baggage

When it comes to companies innovating together, honesty is truly the best policy. Large corporates may have concerns around the viability or financial stability of the partner, or perhaps the short-term goals and exit strategy of the smaller firm’s leadership team. For the smaller firm, perceived power imbalances can lead to fears of being bulldozed or the loss of IP.

Innovation Catalyst: Focus on transparency and trust

Businesses need to focus on creating a shared framework for success. Both sides must share their vision for what success looks like, be considerate of the hesitations and fears of their partner and set out steps to address these.

Barrier #3 Process trumps progress

Large businesses often have complex compliance and legal procedures in place for due diligence and risk management. When the procedures designed for engagement between companies of a similar size are applied to smaller businesses the volume of documentation and compliance requests can be overwhelming and result in frustrations and missed market opportunities.

Innovation Catalyst: Embrace the need for speed

To maximise the benefits of working with a more agile, innovative partner, larger firms must ensure internal processes are proportionate to partner and situation. Large firms must streamline where possible; appoint a project ‘champion’ who has authority to drive forward progress within the organisation and have a clear plan for continuity if project leads exit the business.

Improving partnerships between large and small firms is part of CBI’s desire to create a dynamic, competitive, future focused economy, driven by innovation, that will support UK prosperity over the coming decade. For more information, please contact nathan.brown@cbi.org.uk.  

Collaboration between companies can take many different forms, often requiring a bespoke R&D tax strategy; read more about tax considerations for contracted out and subsidised R&D.