Overview
This research from MIT Sloan revealed that innovating with external partners doesn’t always give companies a competitive advantage. It needs to be balanced with internal efforts.
Many businesses that used to depend only on internal innovation have begun to tap external innovation to quickly acquire the digital capabilities they need to navigate the constant stream of new technologies. However, forging partnerships and investing in startups doesn’t always confer a competitive advantage; often, it only helps incumbents catch up with rivals. The need to acquire capabilities quickly is important, but companies must also continue to invest in developing key capabilities internally, even if that takes more time.
Most companies, the research suggests, should rethink their innovation systems and develop portfolios with a balance of innovation sources. They must treat external innovation as a way of broadening their portfolios, not as a substitute for internal innovation. Only then will they be able to execute the transformations that will allow them to win the digital future.
Research methodology
The research behind this article, conducted in 2018-2019, included companies in seven industries from Australia, China, France, Germany, Japan, South Korea, the U.K., and the U.S.
The authors held in-depth interviews with executives in 30 large corporations across industries and countries to obtain a granular understanding of innovation practices and systems.
They then structured and, through Phronesis Partners, administered a survey to quantify innovation practices and systems, polling innovation leaders at 320 large corporations with revenues of more than $500 million a year and gathering data on 640 innovation projects.
