8 External Sources of Innovation

Innovation isn't just an inward journey; sometimes, inspiration strikes from the world around us. From emerging market trends to global technological breakthroughs, the external environment is brimming with potential. 

Having looked more closely at a company’s internal innovation sources, we'll explore in this article the most important external sources that can inspire businesses to think bigger, evolve faster, and stay ahead of the curve. Let's dive in!

1. Academics

Academic and research institutions that run innovation programs funded by the company 

Partnerships between companies and universities are one of the key drivers of the innovation economy. As many companies integrate open innovation approaches to expand their internal R&D efforts, universities have become a vital source of innovation. 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.

As of 2017, more than 200 colleges and universities have started dedicated innovation or entrepreneurship centers as members of the Global Consortium of Entrepreneurship Centers. By the end of 2020, Evonik will direct € 100 million worth of funding for the topic of digitalization in strategic partnership with IBM and the University of Duisburg-Essen. By investing in the development and testing of digital technologies and the development of digital skills, the specialty chemicals company has the vision to push forward digitalization in the chemical industry and strengthen its position in the digital world.

2. Startups

Startups as a source for monitoring the corporate ecosystem of your business and fruitful partnership and investment opportunities

One of the fastest-growing sources of innovation for big companies are startups. As the relevance of startups in international economics has increased rapidly in recent years, companies in all industries are more and more concerned with the opportunities and risks these newcomers provide.

Startup scouting and potential future partnerships, therefore, play an important role in creating disruptive products and business models. Startups aggressively experiment with new technologies to come up with transformative ways of providing business value. Understanding these insights by larger companies can play an important role in their own innovation strategy, portfolio, and activities.

The white paper by the World Economic Forum on the collaboration between technology startups and corporates published in 2018 states that a large majority of companies today see the importance of digitizing and entering into contact with the startup world in order to foster innovation. However, more than half of the cooperation attempts still fail because of a conflict between aspiring entrepreneurial newcomers and more structured and risk-averse corporations.

So how can large companies move from confrontation to cooperation with these newcomers? DZ Bank, a central banking institution in Germany, was able to create a transparent and company-wide overview of all innovation activities and fintech cooperations on one central innovation platform. Which startups might disrupt the industry or are relevant to the business model? Who is already connected to which startup within the corporation? The new innovation approach facilitated cross-departmental monitoring of the corporate environment and enabled the identification of gaps and opportunities in the innovation portfolio of DZ Bank.

3. Tech and trend scouts

External scouts that identify and analyze trends and technologies

Today, the survival of many companies is linked to the continuous and automated recognition and analysis of 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 business also works for all other industries. You can address the most pressing questions and gain authentic insights from around the world. This valuable information and inspiration can be used directly as input for your innovation campaigns. Companies will benefit from collective intelligence and can let potential customers evaluate product and business ideas.

4. Software and consulting companies

Software and consulting companies that provide solutions and services for innovation management

Partnerships with software solution providers and consulting companies represent a vigorous source for building innovation management ecosystems and support companies with tools to collect and process data on new trends or technologies purposefully. 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, and thus bring a company’s innovation approach to a whole new level.

By starting with a comprehensive environmental scanning of relevant trends, technologies, and startups and connecting those pieces of information on one platform, companies can detect opportunity spaces to innovate and grow. The integration of all data collected will give a fairly accurate prediction of whether a detected change is a hype that will quickly disappear or a real trend that will maybe stay with us for many years.

A software-supported innovation process combined with a comprehensive methodology and consulting offers will create the necessary framework to develop and execute a sustainable innovation strategy. It is important to cooperate early with external drivers of innovation in order to develop technology leadership continuously.

5. External crowds and communities

Independent experts, innovators, or generally people that are active in crowdsourcing platforms, innovation competitions, or developer networks.

Innovation communities appear to be an attractive approach for many corporations to access the necessary skills for various innovation activities. Competitions and hackathons have contributed quite largely to some companies’ successes.

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 present challenges and needs coming from various business units, and anyone can submit a proposal to solve this problem.

6. Company suppliers

Other firms that fall into the value chain of the company

Among external innovation sources, suppliers have significant innovation potential because they know their customer’s business, its potential challenges, and innovation opportunity spaces. Especially when long-term cooperation is established among customers and suppliers, the latter are usually more involved in the company's businesses. 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 insights on this, check out "Increasing Supplier-Driven Innovation" by John W. Henke Jr. and Chun Zhang, published at MIT Sloan Management Review.

7. External partners

Other medium and large companies that can be partners through collaboration, licensing, joint venture, etc.

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

Customers who give feedback and reviews about the company’s products and services

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

In today's hyper-connected world, boundaries between organizations are more permeable than ever. As companies strive to innovate and stay ahead of the curve, external sources of inspiration play a crucial role. Yet, bridging the gap between these external sources and a company's innovation process requires the right tools. Enter the domain of software, which not only facilitates but amplifies the power of external inputs.

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

1. Scanning the horizon with digital tools

A crucial part of tapping into external innovation sources is being aware of global trends and shifts. 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 the changing external environment.

2. Crowdsourcing and open innovation platforms

Open innovation and crowdsourcing platforms represent a confluence of external creative 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 and identify potential partnerships.

3. Collaborative partnerships and platforms

Strategic partnerships have been turbocharged with software that enables seamless collaboration. Acting as a single source of truth, ITONICS ensures that even when companies form partnerships across different geographies, the flow of ideas and collaboration remains unhindered.

4. APIs and integrations: Connecting 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.

You want to learn more about the features and functionalities of the ITONICS Innovation OS to streamline your innovation activities? Get a free demo today!