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Innovation intermediaries promote open innovation by assisting business leaders in filtering through the wealth of information coming in from many external and internal sources to build a coherent, consolidated innovation plan businesses can then use to create new products, services, and more.
By and large, most new companies have moved from a closed innovation model to an open one. The Internet and exchange of information across large gulfs of space and time have necessitated the use of open innovation intermediaries to help businesses use this information and collaborate with both internal and external partners to innovate intelligently and deliberately.
Innovation Intermediaries Definition
Intermediaries have helped many companies move from a closed to an open form of innovation. Closed innovation relies primarily on internal resources and thought leadership to push new product and service initiatives forward from conception to implementation. While closed innovation can be effective in both producing new iterations of products and services that can lead to huge profits, open innovation has become more in vogue as more startups, particularly in the international FinTech market, cast their search for new ideas and products beyond their own companies.
Intermediaries help source, process, and disseminate information from outside thought leaders, researchers, and others to their company so that this outside knowledge and research can be used to develop new products and services. Many companies use intermediaries to help create new ways to capture their target market or disrupt their sector in some cases.
Different companies engage in open innovation in different ways, of course. With an unprecedented amount of information and ideas available to business leaders today, companies trying to differentiate themselves in their market usually now rely on either an internal innovation and new-product czar or an external innovation intermediary to identify and internalize value from external opportunities. Intermediaries can also help with the deployment of internal and external discoveries to the wider market.
Roles of Intermediaries in Open Innovation
Most companies searching for new technologies or knowledge that will help them develop or improve their products and services try to forge a partnership with other companies or entities in one of three ways. One common form of partnership is called the ‘outside in’ approach, in which a company acquires another to utilize the acquired company’s technology in some way. A good example of this is when Facebook acquired Instagram to improve its own user experience and algorithms.
Another way companies utilize open innovation using intermediaries is called, predictably, an ‘inside out’ approach, in which a company transfers its technology to another company so both entities can share resources and create new, innovative products and services.
The third common way companies collaborate for innovation is called the ‘coupled’ approach, which is a combination of inside-out and outside-in collaboration. Companies essentially share resources so that both sides improve their technology.
Intermediaries utilize these three models of innovation and collaboration depending on the situation and what their clients are looking for. Innovation and collaboration strategies depend greatly on what sector the companies in question are in, but nearly every company that feels it needs to lead an innovation initiative usually directs intermediaries into one of the above innovation models.
What an innovation intermediary has to consider when leading a collaboration initiative is of course the business’s goals, market placement, brand story, and more. Essentially, the identity of a company and its mission drive the mode of open innovation they will need to build new products and services.
In the FinTech sector, the name of the game is technology. In many countries around the world with booming FinTech markets, including the United States and Europe but also countries in Central and South America, regulations have eased and demand has risen for better access to quality financial services providers and hubs. More people around the world want the same access to financial management services like investing, real estate, money management, and more as financial experts have enjoyed for years.
Because of this rising demand, innovation intermediaries and the practice of open innovation, in general, have become much more important in the development and success of FinTech companies. Competition between FinTech companies to build better exchanges and ecosystems for their users has intensified, leading companies to join forces and use each other’s resources to produce more useful features. This increased competition has also motivated FinTech companies to not only improve their technology for users but to make these improvements extremely quickly to avoid getting left behind by the market.
Where does the use of innovation intermediaries and the general shift to open innovation leave investors trying to break into the FinTech sector? While this shift to collaboration and intermediaries can lead to confusion, one of the end results of this shift is improved functionality of FinTech products and services that reach the open market faster than ever. More companies than ever are acquiring each other in this space, and tracking them for investment purposes has become more difficult. Track these companies better by logging onto the Finnovating Platform here.