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Open Innovation | Innovation Culture | Innovation Management

8 External Sources of Innovation

Breakthrough ideas don’t always start in your R&D department. External sources of innovation can illuminate emerging trends, unlock new markets, and deliver faster routes to business growth.

We've already covered internal innovation sources, so let's now look at eight sources of external innovation that can inspire your businesses to think bigger, evolve faster, and stay ahead of the curve. Let's dive in!

 

External Sources of Innovation

 

Summaries and FAQs on external sources of innovation

What are external sources of innovation in business?

External sources of innovation are organizations or individuals outside your company who contribute new ideas, technologies, or insights. These include startups, universities, suppliers, customers, consulting firms, and research labs. They help businesses tap into emerging technologies and access knowledge beyond their internal capabilities.

 

Why are external innovation sources critical for driving business growth?

External innovation helps companies discover emerging technologies, adapt to shifting consumer needs, and react to global trends more quickly. By engaging with external partners, businesses can unlock faster routes to business growth and identify opportunities that may fall outside their current strategic focus.

 

What are some examples of external sources of innovation?

Common examples include partnerships with startups, collaborations with universities, insights from suppliers or distributors, customer feedback loops, industry consortia, and even open innovation platforms or hackathons.

How can companies manage external innovation partnerships effectively?

Success depends on creating visibility, alignment, and trust. Leading companies build innovation radars, define shared objectives, and use centralized platforms to evaluate startups, technologies, and trends. Managing cultural differences, IP expectations, and resource allocation upfront is key to sustainable collaboration.

What’s the difference between internal and external innovation sources?

Internal innovation comes from inside the organization, such as R&D teams, innovation labs, or employee ideas. In contrast, external innovation is sourced from partners outside the organization. The best-performing companies combine both approaches, using external sources to expand their capabilities and accelerate the development of innovative products and services.

 

1. Academic and research institutions 

Universities and public research labs are among the most valuable external sources of innovation because they're often working on emerging technologies well before industry picks them up. From new materials, engineering breakthroughs to synthetic biology, academic institutions help companies stay at the forefront of new technologies. 

It's a symbiotic relationship; companies provide funding for talented faculties and students for industry-relevant research. Meanwhile, universities are including entrepreneurship as part of the academic curriculum to boost innovative thinking among students.

But collaborating with academia isn’t always plug-and-play. Timelines, funding cycles, and incentives can differ significantly. However, a systematic review in Management Review Quarterly points out that academic partnerships don’t have to be grand to be effective:

Collaborative barriers in RD&I may be overcome to some extent by starting with smaller projects and gradually increasing their complexity.”

That means beginning with scoped pilots, such as joint workshops or proof-of-concepts, and then building trust and process maturity before scaling up. This also gives teams time to navigate intellectual property rules and differing academic cultures. A study at the University of Klagenfurt on industry–academia collaboration found that establishing mutual understanding, ensuring effective communication, and aligning expectations are essential for successful collaboration.

Here's a real-world example of universities as an external source of innovation: the Quantum Mobility Challenge. Airbus and BMW Group brought together academia, startups, and internal experts together to tackle aerospace and automotive challenges. The University of Hamburg won the Quantum Solvers category by creating a hybrid quantum-inspired solver. This demonstrates a clear moment where a university served as a source of innovation. 

 

2. Startups as fast-moving allies in disruptive innovation

One of the fastest-growing sources of innovation for big companies are startups. These agile newcomers experiment aggressively with emerging technologies, unbound by legacy systems or rigid structures. For established companies, scouting startups offers a window into new business models, faster ways to deliver customer value, and signals of what might disrupt the industry next.

Startup scouting isn't just about M&A or investment. It's about building partnerships where both parties benefit from each other's knowledge. According to the European Management Journal, collaboration between start-ups and large companies "not only facilitates their exchange of resources and capabilities, thus enhancing their market power and market access, but also fosters the development of knowledge-sharing routines."

Here's a real-world example of how a large organization made sense of their complex startup ecosystem: DZ Bank, Germany’s second-largest financial institution. To navigate the rapidly evolving fintech landscape, the bank adopted ITONICS's innovation platform to track emerging startups, technologies, and trends. Using a fintech radar, they curated and evaluated external startups based on criteria like customer benefit, earnings potential, and mass-market readiness. These insights were then mapped against internal innovation activities to uncover white spaces and align on strategic priorities. The outcome was a company-wide radar that acted as a single source of truth to help teams monitor existing partnerships and make more informed decisions.

3. Tech and trend scouts

Today, the survival of many companies depends on recognizing the opportunities and risks of new technologies and trends. If there is not enough manpower available in your innovation team, it makes sense to get external help. In addition to software that automatically evaluates and clusters all trend and technology information, a dedicated team of external trend and tech scouts can deliver a continuous flood of data.

Time-consuming innovation activities, such as scouting and monitoring startups or new technologies, can be outsourced to third parties. These actors can deal intensively with what is happening in an industry and summarize the results, e.g., trend agencies, technology institutes, market research companies or consulting firms. External trend scouts can identify, describe, and report upcoming trends usually related to certain domains or industries. Technology scouts provide scientists and engineers in R&D divisions with information regarding emerging technologies.

What is already a common approach in the fashion industry can also benefit your business. You can address the most pressing questions and gain current insights from around the world. These valuable inspirations can be used directly as input for your innovation projects. 

4. Software and consulting companies specializing in innovation management

Working with software solution providers and consulting companies can help in building innovation management ecosystems and support you with tools to make the process more efficient. It is key to use the services of companies that offer solutions for the entire innovation landscape, not just a system for an idea or trend collection. We recommend and end-to-end approach to innovation management, from foresight, to ideation to portfolio management and project execution. 

Instead of scattered tools or isolated processes, a comprehensive innovation management platform enables you to continuously scan for relevant trends, technologies, and startups—and connect that data to real business needs. With all insights centralized, teams can identify meaningful opportunity spaces, track signals over time, and separate short-term hype from long-term trends.

Pairing powerful software with expert consulting gives your organization the structure and guidance needed to execute a sustainable innovation strategy. By engaging with external innovation experts early, you can accelerate your learning curve, build internal capabilities, and stay ahead of market change.

5. External crowds and communities

Innovation communities are an attractive source of diverse perspectives from passionate people. Competitions and hackathons often contribute to breakthroughs and new product ideas at major companies.

Fortune 500 corporations such as AT&T and American Express frequently fund online creativity competitions to trigger innovation among their customers and the public in general. Kickstarter and other crowdfunding platforms let ideas compete for sponsorship. Many more companies started using competitions to foster efforts to innovate more. However, it can also be a very cost-efficient way to source innovation from people with useful skills outside the company. An example of crowdsourcing is P&G’s “Connect + Development” platform, where P&G shares its challenges, and anyone can submit a proposal to solve it.

6. Company suppliers as innovation partners

Among external innovation sources, suppliers are invaluable because they know their customer’s business, its potential challenges, and innovation opportunity spaces. As suppliers become more engaged in and informed about companies' plans and strategies, they will be more qualified to contribute to the innovation efforts of the organization and strengthen future business relationships with the company.

In the automotive industry, for example, the willingness of suppliers to invest in technology is known to be a key differentiator of successful customer-supplier cooperation. Such innovations can provide customers with the superior manufacturing capacity, improved product performance and adaptability required for long-term market competitiveness. For more depth on this, read "Increasing Supplier-Driven Innovation" by John W. Henke Jr. and Chun Zhang, published in MIT Sloan Management Review.

7. External partners

Companies look for strategic partnerships with external companies in order to bring innovation into their ecosystem more efficiently. Such cooperation is often a cornerstone of innovation in a continuously transforming environment.

Let’s look at the partnership between Ford and Google: They partnered up in 2021 to accelerate Ford's transformation and reinvent aspects of its business through data-driven innovation. The collaboration focused on multiple areas:

  • Modernizing product development, manufacturing, and customer experiences: Ford planned to leverage Google's AI, machine learning, and data analysis technologies to improve everything from manufacturing efficiencies to customer experiences.
  • Improving connectivity: Ford aimed to enhance the functionality of its cars by integrating Google services, including Google Assistant, Google Maps, and Google Play, into its vehicles.
  • Creating new business models: Ford and Google established a collaborative group called "Team Upshift" to explore and develop new data-driven opportunities and business models.

While this is just one instance, such collaborations are increasingly common in the modern business world. Partnerships between technology giants and companies from more traditional sectors can help both sides innovate, with tech firms providing the digital tools and data expertise, while their partners offer industry-specific insights and experience.

8. The customer

Every company strives to offer its customers what they ask for. In recent years, companies have been looking for customer input that focuses on results rather than solutions. By gathering data, they try to find out what the customer intends to achieve by using a certain product or service. Moreover, due to decreased trust, companies let their customer segment groups test their products or services before purchasing them.

Customer expectations pressure firms to regularly innovate to meet consumer needs. In today’s e-commerce, if your online store does not deliver within a day, your business is at risk. Do you know how Amazon got into the cloud computing business? Amazon's retail customers, the thousands of small businesses using Amazon's eCommerce platform, were not mature enough to take advantage of cheap computing and storage in the cloud. This gave Amazon the idea of starting a new company that enabled small retailers to reduce their IT costs with a simple cloud computing service.

Some may rightfully argue that asking customers for solutions might as well limit the innovation process. The reason is that most customers have quite incomplete scope of reference and knowledge about the business. Thus, some precautions need to be considered when ‘’listening to your customer’’.

How software connects businesses to external sources of innovation

External sources of knowledge and inspiration can be quite valuable to companies that strive to stay ahead of the curve. Yet, bridging the gap between these external sources and a company's innovation process requires the right tools. 

The ITONICS Innovation OS is an end-to-end innovation management solution designed to systemize all activities from strategy to execution. It offers a variety of tools and features for different use cases that help companies weave these external sources into their innovation process.

1. Scanning the horizon with automated tools

A crucial part of tapping into external innovation sources is being aware of emerging technologies and trends. ITONICS offers comprehensive tools for scanning, scouting, and monitoring drivers of change in the business environment. By using data visualization tools such as trend and technology radars, businesses can extract meaningful insights from vast amounts of data, ensuring they remain responsive to their changing external environment.

2. Crowdsourcing and open innovation platforms

Open innovation and crowdsourcing platforms let you to tap into external minds. Such platforms leverage the collective intelligence of global communities and experts, allowing companies to source solutions, ideas, or even new product designs from external participants. ITONICS Open Innovation helps organizations easily collect, evaluate, and select external contributions for potential partnerships.

3. Collaborative partnerships 

Strategic partnerships will benefit from software that enable efficient collaboration between organizations, big and small. Acting as a single source of truth, ITONICS ensures that even when companies form partnerships across different geographies, the flow of ideas remains unhindered.

4. APIs and integrations to connect to external databases

Application Programming Interfaces (APIs) have revolutionized the way software communicates. By using APIs, companies can integrate external databases, tools, or platforms into their innovation management systems. Whether it's integrating a market research database or a tool that tracks patent filings, the right software integrations ensure that external sources of innovation are always at a company's fingertips.

If you want to see how the ITONICS Innovation OS can streamline your innovation activities, book a free demo today!